Extracted from Annual Report 2018
On behalf of the Board of Directors of HOCK SENG LEE BERHAD (HSL), I am pleased to present our Annual Report and the Audited Financial Statements for the year ended 31 December 2018.
It has been a year of considerable political and economic upheaval for the nation. However, HSL has emerged as resilient as ever. We have been competitive in bidding, irrespective of the mode of award. Given the fiscal and industry conditions, our financial outcomes are all the more commendable with notable growth in revenue as our major contracts progress.
– Dato’ Haji Idris bin Buang
Results for the financial year ended 31 December 2018 saw HSL Group revenue soar to RM610.36 million, again surpassing the previous year which stood atRM420.0 million (as restated in line with new accounting policies).
Net profit before tax for the Group has also risen to RM72.15 million, up from RM64.05 million(restated) for the financial year ended 31 December 2017.
The upward trend in our financial outcomes has continued which is particularly pleasing given the economic downturn. Margins are also recovering and well into the double digits, while gearing has been modest.
We always look after our shareholders and nothing gives us greater satisfaction than sharing our success with those who have invested in our business. The Board has recommended a final single-tier tax-exempt dividend of 1.4 sen per ordinary share pending approval at the Annual General Meeting (AGM).
Added to the interim single-tier tax-exempt dividend of 1 sen per share paid in October 2018, the cash dividend for 2018 will total 2.4 sen per share; the same as for 2017. The final dividend shall be payable on 26 June 2019 with the entitlement date set for 12 June 2019, pending approval at the AGM.
HSL stock remains a solid investment.
HSL strives to be an industry leader when it comes to corporate governance standards, believing that ethical conduct, transparency and accountability are essential to business sustainability. We measure success not only in bottom-line returns, but in how all our stakeholders and the community in which we operate benefit from what we do. The Board of Directors ensures governance frameworks are effective and drive Group performance as described in the Malaysian Code of Corporate Governance.
The Board also has the key task of monitoring the approved Annual Business Plan. They review the plan at least quarterly and update or amend it as they deem necessary. The Board makes sure optimum internal controls and risk management systems are in place to safeguard assets and mitigate the challenges inherent in the industry.
HSL’s Charter, Code of Ethics and Sustainability statements are key to our business reputation. Our Corporate Governance Overview Statement on pages 25 to 29 of our 2018 Annual Report provides information on how we effectively manage our operations, finances, risks, resources, accountability and communication.
HSL’s Board comprises individuals with a broad range of experience and with different fields of expertise. This makes for well-considered strategies and decision-making. Moreover, by separating the role of the Chairman (I am an independent non-executive director) and the Managing Director, there is a balance of power on HSL’s Board. Our team of nine members includes three executive directors and six non-executive directors, four of whom are independent directors.
To maximise efficiency, HSL Group Board has several sub-committees reporting to it. These are the Audit Committee, Management Committee, Remuneration Committee and Nomination Committee.
At this juncture, the Board would like to record its deepest appreciation to our popular long-serving Executive Director Mr. Yii Chee Sing. For the past 25 years, Mr. Yii has contributed significantly in the areas of business development, investor relationship management and our group’s information technology transformation initiative. Mr. Yii was the visionary force behind the innovative modern living concepts that have become the hallmark of our successful property development sector. He strategized the award-winning master-planning and iconic landscaping for our flagship 200-acre La Promenade mixed development. He pioneered the much-lauded electric-fenced, guarded and gated boutique development known as the Leaf. He was also instrumental in the establishment of the Samariang Aman community in Kuching’s north which won the best residential estate in Sarawak (SHEDA awards). The Group’s top-selling development now boasts almost 1,000 houses. Mr. Yii resigned as an Executive Director in February 2019 to pursue his own business interests and we wish him all the best in his future undertakings.
In line with corporate governance best practices, we are pleased to welcome Mr. Wong Siu Hieng who joined the Board on 26 February 2019 as an Independent Director. Mr. Wong is an engineer by profession and has had a stellar career with the public sector having retired from the position of Director of Jabatan Pengairan Dan Saliran Sarawak in 2015.
AGM / Investor relations
HSL encourages enquiries and visits from analysts and fund managers, prioritizing investor relations. Major investment banks have tracked our stock since its listing, remaining steadfast supporters. They appreciate our niche market expertise across the spectrum of marine engineering and infrastructure activities in Sarawak, our continuous profitability and our strong order book.
HSL’s Annual General Meeting (AGM), which was held on 24 May 2018, is also an opportunity for Directors and senior management to engage with our valued shareholders.
This Annual Report is a further means of communicating with investors, offering an overview of the year’s activities and the outlook going forward. We also provide information on our website at www.hsl.com.my.
Despite federal government changes, infrastructure development has remained a top priority in Sarawak and the key to raising our living standards. Although the competing tenderers have increased, our marine and civil engineering expertise, experience and machinery portfolio, continue to give us a competitive edge.
HSL staff at every level are vital to our enduring success. Nurturing their talents and rewarding their dedication are crucial to our business prosperity. We have a management retention rate that is the envy of our peers and are constantly innovating our staff programmes to promote well-being, exciting career paths and a satisfying work-life balance. I cannot speak too highly of HSL staff.
Similarly, my fellow Board members must be acknowledged for their endeavours and commitment over the year.
I also wish to record appreciation to our various consultants and associates, sub-contractors, suppliers, bankers and advisors; all of whom are pivotal to our efficient project execution. This gratitude also extends to the government departments, councils and agencies who provide us essential guidance and services.
Finally, I sincerely thank our shareholders. Your loyalty and support are what motivate us to strive for excellence. We pledge to continue to offer sound returns on your investment in HSL.
We still have a substantial order book of RM2.9 billion as at 31 December 2018. Of this, RM2.2 billion is unbilled, so there is ample work to be done. Our mega projects are progressing well now with extensions of time already granted for the Kuching City Wastewater Management System (Package 2) and our section of the Pan-Borneo Highway. Miri Wastewater project is running on schedule for a mid-2021 completion date.
We garnered some RM200 million in new works during 2018 and are continuing to throw our hat into the ring for a number of tenders; our quantity surveyors and estimators have been working long hours of late. We always prioritize bids for projects utilizing our specialist marine and civil engineering capabilities.
The property sector continues to perform creditably, with stable margins being achieved. However, there has been some softening of the market as interest rates rise to control inflationary pressures. The team will have to ramp up their marketing efforts this year to clear remaining stocks. Staff are looking forward to moving into the HSL office tower this year and seeing the adjacent Mall tenanted.
The uncertainty arising from the historic regime change reverberated across our industry. With volatile commodity prices, changes in fiscal policies, wage hikes and the inflow of inexperienced competitors to the open tender exercises, there remain challenges ahead. Our home state of Sarawak has maintained stable governance and there appears renewed recognition of the need to modernize our infrastructure. The multiplier effects of the Pan-Borneo highway will soon be felt. Contracts such as those for the many kilometres of guard rails along the highway are already being tendered out.
We are hopeful that after a period of adjustment, the public sector will recognize the value of pre-qualifying contractors for major projects to avoid the pitfalls of new players over committing and important infrastructure being delayed. Irrespective of the outcome of our recent and upcoming bids, HSL’s existing projects will keep the group busy through to the end of 2021. Water supply, wastewater systems, bridges and roads are among the projects that remain vital to Sarawak’s development and offer ongoing work for HSL.
– Dato’ Haji Idris bin Buang