Extracted from Annual Report 2017
On behalf of the Board of Directors of HOCK SENG LEE BERHAD (HSL), it is my pleasure to present our Annual Report and the Audited Financial Statements for the year ended 31 December 2017.
This year has seen us us continue our unbroken run of profitable quarterly financial reports which dates back to our listing in 1996. Our order book is at an historical high and we are rising to the challenge of executing our mega-projects.
– Dato’ Haji Idris bin Buang
Results for the financial year ended 31 December 2017, saw HSL Group revenue surpass the previous year and reach RM505.91 million with net profit before tax at RM62.63 million. For the financial year ended 31 December 2016, HSL Group revenue stood at RM498.55 million with net profit before tax at RM75.17 million.
The fourth quarter in particular has seen an uptick in earnings and signals an improved trajectory going into 2018 as issues beyond our control which hindered the start-up of our mega projects are addressed. The said delays and upfront mobilisation, materials and site establishment costs of the major new projects have had some impact on margins, but this should recover as the works progress to more billable stages.
At HSL, we value our loyal shareholders and although we do not have a fixed dividend policy, we consistently reward them with attractive returns. 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 ordinary share paid in October 2017, the cash dividend for 2017 will total 2.4 sen per ordinary share; the same as for 2016. The final dividend shall be payable on 25 June 2018 with the entitlement date set for 11 June 2018, pending approval at the AGM.
Maintaining dividends at sound levels and increasing our pay-out ratio over the previous year indicates our confidence going forward.
Impeccable standards of corporate governance are a hallmark of HSL Group as we are of the view that business longevity and prosperity are built on ethical conduct. Moreover, our ongoing success is far more rewarding when it can have a positive flow on effect to our investors and our community. The Malaysian Code of Corporate Governance is at the core of all that we do, with transparency and accountability requisite at every level. The Board of Directors ensures governance frameworks are effective and drive Group performance.
Another key task of the Board is to, at least quarterly, undertake a review, and if necessary update or amend, the approved Annual Business Plan. It 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 central to all our operations and key to our business reputation. Our Corporate Governance statement on pages 24 to 28 includes details on how we manage our operations, finances, risks, resources, accountability and communication to benefit all our stakeholders. 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 four executive directors and five non-executive directors, three 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, I would like to mention the recent retirement of YBhg. Dato’ Mohd Nadzir Bin Mahmud who has served on HSL Board as the non-executive nominee
director of Permodalan Nasional Berhad (PNB) for some 17 years. The Board records its deepest appreciation to YBhg. Dato’ Mohd Nadzir for his invaluable service. YBhg. Dato’s diligence, sharp analyses and vast corporate governance experience have been enormously insightful and he will be missed. We wish him the very best in retirement.
To replace YBhg. Dato’ Nadzir, PNB have nominated YBhg. Dato’ Ir. Jamaludin bin Osman and I warmly welcome him to our Board. YBhg. Dato’ Jamaludin is an engineer by profession and has an illustrious resume, which includes having been the Group Managing Director of property development firm Island & Peninsular Berhad. YBhg. Dato’ currently also serves as a non-executive director on the Board of MMC Corporation Berhad. I very much look forward to his input.
AGM / Investor relations
HSL places a high priority on investor relations and welcomes enquiries and visits from analysts and fund managers. In January 2018, HSL was invited to present its merits at Invest Malaysia in Kuala Lumpur and also liaised with many of its long term investors. Major investment banks have tracked our stock since its listing and have been unwavering in their support. As a proxy to the rapid development of Sarawak, we are lauded for our niche market expertise across the spectrum of marine engineering and infrastructure activities, our continuous profitability and significant recent procurement successes.
HSL’s Annual General Meeting (AGM), which was held on 25 May 2017, is also an opportunity for directors and senior management to engage with our valued shareholders and provide feedback on any enquiries.
This Annual Report is a further means of communicating with investors. In it we review the year’s activities and indicate the direction and prospects for the future. We also provide information on our website.
HSL’s business is very much tied to the progress of Sarawak and hence we follow the government’s development agenda to play our modest part in bringing about progress to the rakyat. Despite changes at the top, the state leadership has ensured ongoing stability and wise stewardship that is conducive to industry. We are grateful for this.
At HSL we are cognizant that it is our people who are the key to our success. It is their talents, skills, dedication and persistence, that have enabled HSL to grow so much over the past two decades. From the Board down, there is a palpable camaraderie and an exceptional work ethic. All the staff and my fellow Board members deserve to be acknowledged for their tireless efforts and commitment over the year.
I also want to thank our professional consultants and associates, sub-contractors, specialist suppliers, bankers and advisors; all of whom are integral to our success. This gratitude also extends to the various government departments, councils and agencies who provide us valuable guidance and efficient services. Finally, I wish to record my appreciation to our stakeholders, who have shared our procurement triumphs and stayed with us during challenging times. Rest assured we will continue to reward the faith you have in us.
An order book of RM3 billion with some 90 percent unbilled as at 31 December 2017, means busy times ahead. Our section of the Pan-Borneo Highway, the second package of Kuching’s Centralised Sewerage project and a similar project in Miri all have a few years to run and most of their revenue is yet to be recognised. At the same time, we have a dozen other contracts progressing, our property sector is going from strength to strength and we are still selectively bidding for contracts that leverage on our core strengths. As momentum builds in the aforementioned mega-projects, we anticipate improvements across all our financial measures.
Our home state of Sarawak is wisely governed and propelling itself towards a new era of industrialisation, urbanisation and modernisation. The SCORE region and the implementation of the Pan-Borneo highway mega- project are two of the key drivers. Sarawak’s managed growth and the focus on improving infrastructure has created vast opportunities for local construction players.
With increasingly sophisticated expertise in marine engineering technology and proven capabilities across the full range of construction activities, HSL’s potential in the Sarawak context is considerable.