Chairman's Statement

Dear Valued Shareholder,

While the Boustead Group experienced the profound consequences of the COVID-19 pandemic which impacted the world in 2020, it was also a year that demonstrated the immense need for adaptability and resilience, bringing about an opportunity to reinvent.

Our diversified nature enabled us to push through the volatile period, as the Group’s Plantation and Pharmaceutical Divisions were the key drivers of our corporate earnings. Hence, while the Group posted a lower revenue for the financial year, we also saw an improvement, recording a lower deficit. This was despite the adverse conditions which resulted in weak consumer demand, subsequently affecting our Trading, Finance & Investment Division, as well as the slowdown in property and tourism-related sectors which affected the Property & Industrial Division and lacklustre shipyard operations for the Heavy Industries Division.

Movement restrictions and other COVID-19 linked economic and social hurdles did not dampen our commitment and spirit, but instead strengthened our resolve to adapt and change for the long-term health of the Group. Various operational enhancement measures introduced during the year also propelled us to make strides in restrategising our core businesses to improve efficiencies and optimise value, while laying the groundwork to pave the way forward for the Group.

The capacity for change often begins during times of adversity, when limitations drive imagination. Notwithstanding the challenging environment, the pandemic provided an opportunity to course-correct and redouble our efforts to revitalise and reinvent the Group.

Rethinking how the Group does business with a renewed focus will allow us to tap opportunities for growth and deeper value creation. Digitalisation is also a key aspect of how we are reshaping ourselves. By building greater resilience in our operations with more sustainable business models adapting to new norms, we will be better equipped to weather the hardships and face future disruptions.

In all that we do, we are driven by our commitment to deliver sustainable returns to all shareholders, particularly our majority shareholder Lembaga Tabung Angkatan Tentera (LTAT) to contribute to improving the livelihoods of the members of the Armed Forces and their families.

The crisis-ridden year due to COVID-19 saw the global economy contracting by 3.5%. If not for smaller contractions in developed countries and China’s rebound, the world economy would have been more harshly hit. Nevertheless, it was mainly the emerging markets and developing economies that received the brunt of the slowdown.

This included Malaysia whose economy contracted by 5.6% in 2020 as a result of the virus severely affecting trade and the expected economic recovery dampened by the third wave of the COVID-19 pandemic, targeted lockdowns and business activity disruption. Various Government stimulus initiatives prevented the economy from shrinking further but despite this, numerous sectors including construction, manufacturing and services, were negatively affected.

The pandemic and movement restrictions left their mark on the financial standing of companies and the Boustead Group was not spared. Testament to our resilience and unwavering commitment to push through the difficulties, we recorded a loss of RM420 million, on the back of a revenue of RM7.9 billion for the financial year. EBITDA also stood higher at RM585 million. Among the factors that contributed to this were the profitable Plantation and Pharmaceutical Divisions, which helped to cushion the weaker results from our other Divisions that were affected by the pandemic by varying degrees. However, due to the unprecedented impact to our businesses, the Group will not be declaring dividend.

With plans already underway to enhance the Divisions’ value creation in keeping with our Reinventing Boustead strategy, we expect to see the fruits of our labour within the current financial year.

The financial year under review saw net assets per share of RM1.54, while shareholders’ funds stood at RM3.1 billion.

In an especially trying year, our talent pool continued to be the heartbeat of our company. I am honoured to have worked alongside Bousteadors who rose to the challenge, with many displaying tenacity and resolve that enabled them to flexibly navigate through the uncertainties.

A key aspect was working remotely and as it became ingrained into corporate culture, the Group strategically upskilled our talent with relevant abilities, particularly in keeping with the acceleration of digital adoption. In tandem with this, providing a safe environment when they returned to the workplace was also a key priority with the virus in our midst.

Our efforts to build talent capability and capacity were sustained with streamlined knowledge-building and training programmes, to not only help them adjust to movement restrictions and related standard operating procedures during the year under review, but in the post pandemic time ahead.

We are committed to cultivating an organisational culture anchored in corporate governance best practices. To inculcate a strong ethical code and instil the highest standards of integrity, transparency and accountability amongst all our employees, we established the Anti-Bribery and Corruption Policy across the Group.

Driving this, we have established a Group Integrity & Governance department (GIG) which reports to the Board. Guided by the ISO 37001:2016 Anti-Bribery Management System, which is in development, GIG’s purview extends to overseeing governance and assessing the effectiveness of existing policies and procedures, managing potential misconduct and ensuring appropriate corrective action is taken, and implementing programmes to continuously enhance integrity within the Group.

The sustainability strategy of our operations was thoroughly reevaluated to ensure that the Group remained resilient during the financial year under review. This resulted in the establishment of our refreshed sustainability theme, Replanting the Seeds of Sustainability, reflecting a revitalised approach in line with our Reinventing Boustead strategy.

Focusing on the fundamentals, we are persistent in our ongoing efforts to strengthen corporate governance. We also reviewed our social responsibility in a way that will enable long-term sustainability.

Reducing our environmental footprint and striving for positive social contribution continued to be key drivers, with new solutions introduced to keep us on track with our sustainability agenda.

Realising that the pandemic would lead to certain communities becoming more vulnerable, we took measures to alleviate livelihoods and provide support through contributions and donations of essential products to those in need.

In addition, the Group reaffirmed our commitment to the United Nations’ Sustainable Development Goals, while ensuring sustainability was reflected in our financial reporting. Complete details can be found in our stand alone Sustainability Report.

Vaccine distribution will undoubtedly have a significant impact on controlling the spread of COVID-19 in 2021, however global economic recovery will not be swift. According to the World Bank, a 4% growth is expected this year but achieving pre-pandemic levels of economic output is likely to take time as the world continues to grapple with the disruptions to global value chains, rise in debt risks, and slowdown in trade and tourism.

On the home front, Malaysia is likely to continue dealing with uncertainties, although the tide is expected to turn in the second half of 2021 as a result of a more measured rollout of the National COVID-19 Immunisation Programme. The forecast by Bank Negara Malaysia which sets the national Gross Domestic Product (GDP) to grow between 6% and 7.5% provides the much-needed prospect of brighter days ahead.

With global trade and supply chains expected to reshape and rebound this year as more advanced economies recover following widespread vaccination, this should contribute positively to Malaysia’s trade performance. Additional Government stimulus measures like the Malaysian Economic and Rakyat’s Protection Assistance Package (PERMAI) play a pivotal role in boosting economic recovery, as will the anticipated rise in private investments, infrastructure projects and consumer spending.

Within the Group, following a series of discussions on the possible privatisation of Boustead involving our major shareholder LTAT, a decision was reached to not move forward with the exercise. The Board of Directors and Management of Boustead have welcomed this decision as a means to forge ahead with the Reinventing Boustead strategy.

We are encouraged by the announcement issued by the Ministry of Defence on the approval to continue the Littoral Combat Ship (LCS) project this year and we are committed to ensuring that the project is completed successfully in strict adherence with the conditions outlined by the Government.

Leveraging on the vast opportunities of digitalisation and focusing on improving prospects for our core businesses, we are confident that this strategy will propel us forward to emerge as a fundamentally stronger organisation that maximises shareholder value.

Acknowledgement

It is also my pleasure to welcome Dato’ Sri Mohammed Shazalli Ramly as the Group Managing Director. Without a doubt, his notable capabilities, extensive experience and track record will commendably steer the Group forward in our journey to reinvent Boustead.

In addition, several new directors were appointed to the Board, namely Tan Sri Abu Bakar Abdullah as Independent Non-Executive Director, Datuk Seri Hajjah Zurainah Musa as Non-Independent Non-Executive Director and Encik Izaddeen Daud as Deputy Group Managing Director. Their illustrious backgrounds will certainly strengthen the Board’s role.

On behalf of the Board, I would like to record our gratitude and sincere appreciation to our former Managing Director, Dato’ Sri Amrin Awaluddin, for his astute leadership and commitment to leading the Group through one of our most trying periods. We wish him the very best in his new endeavour.

The Board also bid farewell to Puan Nik Amlizan Mohamed as well as Dato’ Abdul Hamid Sh Mohamad who resigned in 2020 and 2021, respectively. The year 2020 also saw Mr Abraham Verghese A/L TV Abraham and Mr Loong Caesar retire from the Board. We would like to express our sincere gratitude for their contributions to the Board and wish them well.

To the Management Team and our valued employees, the Board thanks you for remaining steadfast and rising up to meet the challenges of the year. There is much work to be done as we move forward and we are relying on your continued
loyalty and commitment to build a brighter future for the Group.

We are also grateful for the trust bestowed on the Group by our major shareholder, LTAT, as we continue to strive to enhance value to benefit Armed Forces members and their families.

Last but not the least, we would like to express our gratitude to other shareholders, financiers, business associates, vendors, consultants and the regulatory authorities for their continued support.

Dato’ Seri Mohamed Khaled Nordin
Chairman
31 May 2021

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