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| ECONOMIC REVIEW |
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| Economies across the world rebounded in 2010, with most major economies showing positive Gross Domestic Product
(“GDP”) growth. This worldwide recovery ensued after the world had witnessed one of the worst recessions in decades inflicted by the US Sub-Prime crisis. The recovery had begun with most economies recording healthy growth rates in the second half of 2009, particularly in the Asian region, and the momentum carried on well throughout 2010. Amidst
global concerns that could seriously hamper economic activities, such as natural catastrophes in Japan, the rising oil
prices resulting from political unrest in the Middle East and the weakening of the US Dollar, economic growth in 2011
is still expected to continue, albeit at a more moderate pace. |
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| Elsewhere, there is a worrying sovereign debt crisis looming in the European region, most notably in Portugal, Ireland, Italy, Greece and Spain. This is expected to have a contagion effect on the entire European region, compounded by political instability and the growing unemployment rate in some of the countries in the region. Concern about rising government deficits and debts levels across the globe together with a wave of downgrading of European government debt caused alarm in global financial markets. Although Malaysia has so far remained largely unaffected by the events that have unfurled in Europe, we remain wary but will be ready to cope if the ill-effects of the debt crisis in Europe spill over to the Asian region. |
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| Back home, the Malaysian economy had significantly outperformed its forecasted GDP growth rate of 4.5% to 5.5% by registering a GDP growth of 7.2% at the end of 2010, fuelled by strong domestic demand and sustained private
sector activity, supported by the Government’s proactive stimulus packages and accommodative monetary policies. |
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| Following the strong performance in 2010, and amidst the global uncertainties, a slightly slower growth of 5-6% is
projected for the Malaysian economy in 2011, with domestic demand being the key growth driver. |
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| To ensure that the Malaysian economy is always on a strong footing, the Government has initiated several plans to
boost economic activity, such as the Economic Transformation Plan, a 10-year plan revealed in September 2010 to
restructure the economy and elevate Malaysia to developed-nation status through investments in selected sectors,
and the 10th Malaysia Plan (“10MP”), which is a five-year roadmap that aims to make Malaysia a high-income economy.
The 10MP targets a GDP growth rate of 6% per annum and also identities 12 key economic areas with potential to raise
per capita income. These Government initiatives are expected to bring some further upside to growth via a surge in
private investments. |
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| PERFORMANCE REVIEW |
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| Riding on the wave of economic recovery in 2010, the Group continued its growth momentum by registering healthy
growth rates in the financial year ended 31 March 2011. Although our loans and receivables declined 4.6% from RM1.14
billion to RM1.09 billion, pre-tax profit rose 27.4% from RM110.0 million to RM140.1 million, mainly contributed by
higher revenue of 5.5% from RM255.6 million to RM269.6 million and a 23.7% reduction in other expenses from RM72.4
million to RM55.3 million. |
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| Basic earnings per share posted positive growth of 24.3% from 10.72sen to 13.33sen as a result of the Group’s continued
improvement in performance. |
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| The Group expects that it will be able to maintain its profitability in the next financial year. The Group will also look into other value added services to complement its existing products and services. As part of its continuous efforts to improve its financial performance, the Group has recently streamlined its business by divesting its investment in the Am First Real Estate Investment Trust (“Am First REIT”), proceeds from which will be injected as working capital for the Group. |
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| Consumer Financing |
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| The consumer financing business under RCE Marketing Sdn Bhd (“RCEM”) continues to be the major contributor of the Group’s growth in revenue and earnings. Despite an increasingly competitive environment, operating profit from consumer financing grew from RM114.2 million to RM136.5 million, representing a 19.5% growth. The growth is mainly driven by the introduction of the Syariah-based financing products and continued enhancement to the sales network. |
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| This growth is despite the recent changes in industry regulations that had temporarily affected our consumer financing business. Although the Group has coped well with the changes, it will continue to explore other areas earmarked for potential growth to complement its existing consumer financing business. |
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| Commercial Financing |
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| The Group’s commercial financing business under RCE Factoring Sdn Bhd posted a commendable financial performance in tandem with the recovering economic fundamentals. With higher turnover, receivables increased by 14.7% from RM35.9 million to RM41.2 million. This has contributed to higher revenue of RM6.5 million compared to RM4.7 million in the last financial year. |
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| Net profit climbed 394.0% year-on-year to RM2.4 million due to higher net interest income and commission income, coupled with lower allowance for impairment on advances and financing. |
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Chairman’s Statement |
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| Moving towards 2012, the Group expects emerging headwinds such as further normalization in monetary policy and inflation threats to slow down business growth. However, Malaysia’s strategic transformation programs are expected to open up opportunities to the financial sector and would spur business activities for the Group’s commercial financing division. |
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| CORPORATE DEVELOPMENT |
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| The Group has so far issued nine tranches of bonds totalling RM900 million under its AAA-rated RM1.5 billion Asset- Backed Securities Programme through Tresor Assets Berhad, a trust-owned special purpose vehicle. This programme was set up in late 2007 to fund the expansion of the Group’s loan financing business. |
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| During the year, the Group has successfully undertaken two corporate exercises, namely the share placement of up to 10% of the Group's issued and paid-up capital ("Placement") and the establishment of an ESOS. The Placement was completed in August 2009, strengthening the Group's capital base from RM71.1 million to RM78.2 million. The ESOS was implemented in September 2009. As at 31 March 2010, a total of 17.8 million share options have been granted to eligible directors and employees under this 10-year scheme. |
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| INVESTOR RELATIONS ("IR") |
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| The Group’s Financial results and corporate developments have been promptly announced in line with the objectives of ensuring transparency and good corporate governance practices. Further updates of the Group’s businesses and operations are also actively communicated with analysts, fund managers and potential investors via one-on-one meetings as well as teleconferences. |
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| In addition to the above, the timely dissemination of information on the Group is made available through our website (http://www.rce.com.my). Meanwhile, a dedicated e-mail address (IR@rce.com.my) is also available, providing contact point on any issue of concern. |
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| The Group’s commitment to IR is evidenced by the growth in its shareholder base from 9,442 shareholders in 2009 to more than 9,900 shareholders currently. |
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| CORPORATE SOCIAL RESPONSIBILITY ("CSR") |
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| In undertaking its CSR initiatives, the Group has continued to strive for a balanced approach in achieving its business profitability and the expectation of its stakeholders and the community. |
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| The Group has partnered with National Kidney Foundation (“NKF”) since 2007 and actively provides financial and other assistance towards NKF’s various events, campaigns and activities. The Group, jointly with NKF, had organized a free health screening campaign from 12 to 14 April 2010 in Kota Kinabalu to promote a healthier lifestyle among the people. Another free health screening campaign was held in partnership with NKF on 25 March 2011, this time at the Department of Civil Aviation in Putrajaya. |
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| In keeping to its commitment to create awareness among the public on health and social issues, the Group, in partnership with Koperasi Wawasan Pekerja-Pekerja (KOWAJA) Berhad, had organized a blood donation campaign in Kuching on 24 July 2010. The Group has also donated RM5,000 to Persatuan Bekas Polis Malaysia (PBPM) for the purchase of an automatic wheelchair. |
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| These activities have enabled the Group to continuously reach out to the community as a part of our responsibility in giving back to the community that we live in. |
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| DIVIDENDS |
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| In view of the Group’s strong performance, the Board is pleased to recommend a final dividend of 15% on ordinary shares, tax exempt under the single-tier tax system. This amounts to a net payment of approximately RM11.7 million, representing approximately 11.3% payout of the net profit of RM104.3 million which is in line with the Group’s policy to strike a balance between delivering sustainable returns to shareholders and maintaining capital strength for future growth. |
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| LOOKING AHEAD |
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| The cooperative financing sector has seen many new entries eager to serve this segment that has often been described as “niche” market segment. In addition to existing major players, new entries have created significant impact on the operating environment for the Group. |
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| We will continue to work closely with the relevant authorities to provide and equip our business partners with technical, technological, financial and management skills required to fulfill regulatory compliance. |
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| The Group will also be identifying and assisting other small and new cooperatives to enable them to build viable business models and sustainable income levels to boost community development and contribute towards building more progressive and productive cooperatives. |
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| In commercial financing, the Group will be looking at expanding our products to provide leasing facilities, mortgages and floor stock facilities. |
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| The environment ahead will no doubt be challenging, but this only serves as a motivating factor for the Group to further capitalize on its strengths and gain new ground. |
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| ACKNOWLEDGMENT |
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| I would like to express my appreciation to my fellow Board members for their dedication and guidance, and to our
management team and staff for their hard work and commitment to the Group. |
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| I also wish to convey my gratitude to our shareholders, business associates and the regulatory authorities for their
continued support extended to the Group and such confidence is very much appreciated. |
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| TAN SRI AZMAN HASHIM |
| Chairman |
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| 4 August 2011 |
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