Boustead Holdings Berhad · 2020. 4. 15. · Boustead Holdings Berhad AGM 2019_Summary Key Matters...

Boustead Holdings Berhad AGM 2019_Summary Key Matters Page 1 of 5

BOUSTEAD HOLDINGS BERHAD

Summary of Key Matters Discussed at the Fifty-Seventh Annual General Meeting (“57th AGM”) of Boustead Holdings Berhad

(“BHB” or “the Company”) held at Mutiara Ballroom, Ground Floor, Royale Chulan Damansara, 2 Jalan PJU 7/3, Mutiara Damansara, 47810 Petaling Jaya

on Wednesday, 24 April 2019 at 2.30 p.m. ____________________________________________________________________________ PRESENT Board of Directors: YBhg. Gen. Tan Sri’ Dato’ Seri Panglima Mohd Ghazali Hj. Che Mat (R) (Chairman) YBhg. Dato’ Wira (Dr.) Megat Abdul Rahman Megat Ahmad (Senior Independent Non-Executive Director) YBhg. Datuk Azzat Kamaludin (Non-Independent Non-Executive Director) YBhg. Dato’ Sri Ghazali Mohd Ali (Executive Director) YBhg. Datuk Francis Tan Leh Kiah (Independent Non-Executive Director) YBhg. Datuk Zainun Aishah Ahmad (Independent Non-Executive Director) Puan Nik Amlizan Mohamed (Non-Independent Non-Executive Director) Shareholders: As per the Attendance List Proxies: As per the Attendance List IN ATTENDANCE Company Secretary: Tasneem Mohd Dahalan External Auditors: Messrs. Ernst & Young Poll Administrator: Tricor Investor & Issuing House Services Sdn Bhd Scrutineers: Asia Securities Sdn Bhd

Secretarial Copy


1.0 Opening Address by Chairman

The Chairman highlighted to the Shareholders the Group’s performance for the financial year ended 31 December 2018. The Group achieved a solid revenue of RM10.2 billion for the year, however, the Group was weighed down by two particular Divisions, namely the Heavy Industries and Plantation which led the Group recording a loss before tax of RM388 million. The Heavy Industries Division was impacted by provisions and impairments whilst the Plantation Division’s financial performance was significantly affected by lower palm oil prices. Other Divisions of the Group also registered moderately earnings as a result of trying economic conditions, which further affected the Group’s bottom line.

The Chairman also informed that the Group had declared and paid a total dividend of 5 sen per share for 2018, representing a 3.5% yield based on the closing stock price for the financial year.

2.0 Presentation by the Executive Director

The Executive Director (ED) briefed on the financial performance of BHB and its group of companies (“Group”) for the financial year ended 31 December 2018. The presentation slides covered explanation on the following areas:

- Group Financial Performance; - Revenue; - Revenue by Division; - Revenue Segmental Contribution for 2018; - Profit Before Tax; - (Loss)/Profit Before Tax by Division; - Shareholders’ Equity; - Net Assets Per Share vs Share Price; and - Net Dividend Per Share vs Dividend Yield.

3.0 Matters raised by the Minority Shareholder Watchdog Group (MSWG)

MSWG via a Letter dated 18 April 2019 raised several questions, which were replied by the Company via a letter dated 22 April 2019 and shared with the members of the Company during the AGM. Among the issues highlighted were the following: Strategic / Financial Matters 1. Business Strategies

a) In the light of the losses incurred by the Heavy Industries and Plantation Divisions,

the Group posted a loss of RM388.0 million, the measures taken or intend to take by the Group to address the losses incurred by these two Divisions.


b) The Trading & Industrial Division reported a profit of RM119.0 million as BHPetrol achieved solid growth in its key business segments. However, the Division’s results were impacted by stockholding losses due to reduced oil prices and higher finance costs. The Group’s plan to address the stockholding losses due to reduced oil prices and higher finance costs.

2. Property Division

On the lower profit of RM2.0 million compared to a profit of RM54.0 million in FY2017, mainly as a result of weaker contributions from the hotel segment as well as weaker occupancy rates and losses from MyTOWN Shopping Centre. a) The measures taken by the Group to improve the occupancy rate and returns for the

hotel segment. b) The status on the disposal of Royale Chulan Bukit Bintang and the Group’s long

term plans for the hotel segment. c) The Group’s expectation to turnaround MyTOWN Shopping Centre.

3. Property Division

On the status of each development, take-up rates and unsold units for the Group’s projects in Bukit Raja, Klang, Taman Mutiara Rini, Johor, Mutiara Damansara township and One Cochrane Residences as well as the impact of the property market sentiments on the Group’s projects.

4. Pharmaceutical Division

On the halal certification for more than 30 products in 2018 and additional of 45 products to be certified in 2019. a) The potential upside for the Group globally. b) The estimated market demand for halal pharmaceutical products in FY2019.

Corporate Governance and Sustainability Matters

1. The timeframe to adopt the following Practices as required under the Malaysian Code on

Corporate Governance (MCCG):- a) Practice 4.1 – Board to comprise a majority of Independent Directors. b) Practice 4.2 – Two-tier shareholder voting process to retain an Independent Director

who has served for more than 12 years. To review the position of the two Directors individually who has served the Board for 30 years, in line with the recommendation of the MCCG.

2. On the Group’s adoption of sustainability vision – “Building a legacy of sustainable growth as a leading diversified conglomerate”. a) The key targets and measurements for each of the Company’s fundamental material

issues that focuses on the three strategic spheres of activity, specifically on economic, environment and social for FY2019.

b) The plan to translate this sustainability agenda across the Group’s various entities and diversified businesses.


A copy of the Company’s reply to MSWG is attached herewith as Appendix A.

4.0 Significant Matters raised by Shareholders

Shareholders/Proxies raised the following significant matters which were duly answered by the Board and members of Senior Management. 1. In light of the losses incurred by the Heavy Industries and Plantation Divisions, the Group

remain committed to achieving better performance in 2019 through the implementation of strategic plans and targets that are already in place. The plans among others include rationalising of assets, strengthening of operations and cost efficiencies as well as tapping opportunities ahead.

The Plantation Division would continue to focus on enhancing efficiencies and improving yields, whilst the Heavy Industries Division continues to undertake transformation initiatives by strengthening operational and cost management as well as pursuing opportunities both in Malaysia and in the region.

Meanwhile, the Property Division aimed to remain competitive in the property development and property investment segments by enhancing various retail and commercial offerings. As part of the Group’s continuous review of asset and business plans, the Group embarked on the proposed disposal of Royale Chulan Bukit Bintang to unlock its value. The Group will also continue to explore market demand for Industrial Building System (IBS) products in the construction of affordable housing.

Overall, the Group’s Pharmaceutical, Finance and Investment, as well as Trading and Industrial Divisions are expected to contribute positively to the Group’s profitability and deliver better results in the year ahead.

2. On the Group’s plan to maintain the dividend payout, the Group would continue to review the business potential of the subsidiary companies in order to improve the contributions to the Group’s bottom-line. Apart from maintaining cost effectiveness, the Group is committed to improving the foundation of its core businesses by strengthening operational efficiencies as well as implementing strategic rationalisation exercise and business plans. Boustead Holdings remain committed in delivering value to the shareholders.

3. On the Board’s commitment in providing objectivity in the boardroom, the Board would ensure the Independent Directors continue to bring independent judgements to Board deliberations and the decision-making process as a whole, notwithstanding the quantitative measures including its number of independent directors and their respective tenure. The Board would also continue to evaluate the composition of the Board as part of an ongoing effort to enhance Board effectiveness and efficiency. The Board recognises the opportunities for improvement in the Group’s corporate governance initiatives in ensuring good governance practices throughout the Group.


5.0 Resolution Passed

Based on the poling results, all resolutions were passed by shareholders except Resolution 2, 9 and 10 as follows:

Resolutions Results

Resolution 1 Re-election of Gen. Tan Sri Dato’ Seri Panglima Mohd Ghazali Hj. Che Mat (R)

Carried

Resolution 2 Re-election of Dato’ Wira (Dr.) Megat Abdul Rahman Megat Ahmad

Not Carried

Resolution 3 Re-election of Puan Nik Amlizan Mohamed Carried

Resolution 4 Payment of Directors’ fees, allowances and other benefits from 25 April 2019 until the conclusion of the next Annual General Meeting of the Company.

Carried

Resolution 5 Re-appointment of Messrs. Ernst & Young as Auditors of the Company

Carried

Resolution 6 Authority to Directors to Allot and Issue Ordinary Shares Carried Resolution 7 Renewal of Shareholders’ Mandate for Recurrent Related

Party Transactions Carried

Resolution 8 Additional Shareholders’ Mandate for Recurrent Related Party Transactions

Carried

Resolution 9 Retention of Gen. Tan Sri Dato’ Seri Panglima Mohd Ghazali Hj. Che Mat (R) as an Independent Director

Not Carried

Resolution 10 Retention of Dato’ Wira (Dr.) Megat Abdul Rahman Megat Ahmad as an Independent Director

Not Carried

Special Resolution 1

Adoption of the New Constitution of the Company Carried

Pursuant to Paragraph 8.29A of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, all resolutions were voted by poll. The Annual General Meeting concluded at 5.30 p.m.

Boustead Holdings Berhad3sn-H

22 April2019

Minority Shareholder Watchdog Group 11th Floor Banounan K WSP

' 0

No_ 3 Changkat Raja Chulan Off Jalan Raja Chulan 50200 Kuala Lumpur

(A member of LTAT Gr011p)

Attention: Mr Devanesan Evanson; Chief Executive Officer

Dear Sirs, 571h ANNUAL GENERAL MEETING (AGM) TO BE HELD ON 24 APRIL 2019

We thank you for your letter which was received on 18111 April20 18_ Our response to your enquiries is set out below:

Strategic and Financial Matters

I. In the I ight of the losses incurred by the Heavy Industries and Plantation Divisions, the Group posted a loss ofRM388.0 million (Page 26, Annual Report 2018).

What measures have you taken or intend to take to address the losses incurred by this two Divisions? Our response:

In the year ahead, our Shipbuilding and ship t·epair activities under Heavy Industries

Division will focus on strengthening operations and cost efficiencies in order to r eturn

to profitability. We are also seeking new opportunities in Malaysia and in the region

which includes potential pt·ospects from the Royal Malaysian Navy's ongoing 15to5

Tt·ansforrnation Pmgrarnrne.

MHS Aviation, which is invo lved in air transpor·tation services, is planning an asset

rationalisation exercise where idle assets will be put up for liquidation. This will res ult

in lower finance and interest cost as well as increasing cash ba lance. MHS Aviation

will continue to seek out opportunities and new contracts in order to utilise our

ex isting aircraft which in turn will contribute to earnings.

"A TRADITION OF STRENGTH AND STABILITY. A VISION OF GROWTH AND EXCELLENCE"

5th Floor, Menara Bo ustead , 69, )alan Raja Chulan, 50200 Kuala Lumpur. P.O . Box 11011,50732 Kuala Lu mpur. Tel: 03-2141 9044 (24 Lines ) Fax: 03-2142 3435 Website: www.boustead .com.my

Appendix A

Strategic and Financial Matters (Cont'd.)

1. In the light of the losses incurred by the Heavy Industries and Plantation Divisions, the Group posted a loss ofRM388.0 million (Page 26, Annual Report 2018).

What measures have you taken or intend to take to address the losses incurred by this two Divisions? (Cont' d.) Our response (Cont'd.):

The loss recorded by the Plantation Division for 2018 was mainly attributed to decline in palm product prices, lower crop production, rehabilitation and improvements undertaken on certain estates, increase in finance cost as well as the adoption of new accounting requirements under MFRS.

Operationally for 2019, we are addressing acute labour shortages impacting cr·op production with mechanisation of harvesting and in-field evacuation as well as investing in digitisation initiatives in estates operations for timely and accurate decision making. We are also revamping and tightening processes to expedite foreign labour recruitment and achieve cost optimisation.

In the medium term, monetising our non-core assets with high development potential is another avenue to lighten om· balance sheet towards minimal debts and improve our· profitability from interest savings. Routine replanting and replanting of fields with low stand per hectare is being undertaken using advanced planting and superior clonal materials to improve oil yield per hectare, while high density planting with compact planting materials will improve productivity by 15%.

2. On the Executive Director' s Review, (Page 29, Annual Report 2018) the Group's Trading & Industrial Division reported a profit of RMll9.0 million as BHPetrol achieved solid growth in its key business segments. However, the Division's results were impacted by stockholdings losses due to reduced oil prices and higher finance costs.

Is there any way to address the stockholding losses due to the reduced oil prices and the higher finance costs? Our response:

The stockholding loss incuned by BHPetml in FY2018 was mainly due to lower closing oil prices as compared to the opening position on 1 January 2018. Whilst this is beyond our control, we will continue to focus on inventory management to mitigate the impact of stockholding loss. We hold sufficient stocks to sei'Vice our retail stations, ensuring that there is no stock-out and at the same time maintain an optimal inventory to reduce exposure to oil price movements.

Meanwhile, the increase in finance costs is attributable to higher· borrowings to finance the increase in subsidy receivables due to high oil prices from January to September· 2018. The retail pump prices and subsidy rates are determined by the Government.

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3. The Property Division reported a lower profit of RM2.0 million compared to a profit of RM54 million in FY 2017, mainly as a result of weaker contributions from the hotel segment as a result of weaker occupancy rates and losses from MyTOWN Shopping Centre's first full year of operations. (page 42 , Annual Report 20 18).

a) What is the occupancy rate of the hotel? What measures have you taken to improve the occupancy rate and the returns? Our response:

The aver·age occupancy of our eight hotels ranged fr·om 35% to 60% for 2018.

The ongoing mitigating measures and strategies include enhanced marketing and sales using dynamic room pricing strategies to increase occupancy in all the hotels as well as increasing banquet revenue through functions, events and weddings. Greater use of social media to create enhanced brand presence and online booking is producing results.

With the expected impr·ovement in demand later in the year, we are confident that our turnaround programme will bear fruit and contribute positively to Division by the end of this year.

b) What is the status on the disposal of Royale Chulan Bukit Bintang? What are your

plans for the sale proceeds of RM 197 million? What are the long-term plans for this

segment? (page 44 & 45, Annual Report 20 18).

Our response:

The SPA has been signed and the Purchaser has paid a 10% deposit amounting to RM19.7 million. The Purchaser· has submitted their application to the Economic Planning Unit of the Prime Minister's Department for approval to acquire the Hotel as they are a Singapore owned company. We hope to complete this disposal by mid-July 2019 ba tTing any unforeseen circumstances.

The proceeds from the disposal of Royale Chulan Bukit Bintang will be used to pare down our existing bonowings.

As mentioned in reply to question 3 (a) above, we have put in place plans to turn this segment around and we hope to see the results of our efforts come to fruition by the end of this year.

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3. The Property Division reported a lower profit of RM2.0 million compared to a profit of RM54 million in FY 2017, mainly as a result of weaker contributions from the hotel segment as a result of weaker occupancy rates and losses from MyTOWN Shopping Centre' s first full year of operations. (page 42, Annual Report 20 18). (Cont' d).

c) When do you expect to turnaround MyTOWN Shopping Centre?

Our response:

As you are aware, there is an oversupply of shopping centres in the country and it is a retailers' market. We hope that with improvements in the economy, the Shopping Centre will turnaround. The MyTOWN shopping centre is already generating profits at the EBITDA level and is generating positive cash flow from operations.

4. What is the status of each development, take-up rates and unsold units for the Group's projects in Bukit Raja, Klang, Taman Mutiara Rini, Johor, Mutiara Damansara Township and One Cochrane Residences? What is the impact of the property market sentiments on your projects? (Pages 42 & 43, Annual Repoti 20 18) Our response:

Bukit Raja, Klang We are still awaiting sub-division of the Industt·iallots and we hope to launch several lots this year. We have completed earthworks and hope to complete infrastructure works such as water·, electricity and sewerage by the last quarter of 2019.

Taman Mutiam Rini, Johor We are into our 25111 year of development in Taman Mutiara Rini and continue to launch around 600-700 units every year. Take-up has always been good as the pricing of these mostly double-storey landed terrace houses is in the RM500k range. However, we ar·e at the tail-end of this township and the last launch will be in 2020.

Mutiara Damansara Township We have completed the r·esidential component ofthis township and what is left is four corporate lots and nine bungalow lots which we hope to sell in stages.

One Cochrane Residences We launched Phase 1 of One Cochrane Residences comprising 448 units of condominiums in April 2018. Take-up is lukewarm as expected for high-end condominium projects. The sale has been impacted by the current property market sentiments. We continue to pursue diverse strategies to market the remaining unsold units and are confident that once the units are completed in June 2020, the take-up will improve due to the excellent location of the project and the unique offering of low density and high proportion of green open spaces.

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4. What is the status of each development, take-up rates and unsold units for the Group' s projects in Bukit Raja, Klang, Taman Mutiara Rini, Johor, Mutiara Damansara Township and One Cochrane Residences? What is the impact of the property market sentiments on your projects? (Pages 42 & 42, Annual Report 20 18) Our response (Cont'd.):

One Cochrane Residences (Cont'd.)

We have not been spared as our pr·ospective buyers have been impacted by the difficulties in getting loans and we have experienced a higher than normal rate of cancellations as a result.

However, we are confident of our developments which are located in strategic locations, and the eventual sale of all units launched.

5. On your manufacturing segment, we note that you have collaborated with some global partners including a global vaccine research development organisation.

What is the amount you have invested in this initiative and what are the expected returns? Our response:

To-date, almost RMl million has been invested in collaboration with the resea rch organisation to develop the facility concept, formulations in line with product portfolio and in identifying technology partners.

The amount invested currently is minimal, as the Group has not yet embarked on facility construction. We expect the facility design work to commence by Quarter 4, 2019.

In view ofthe stringent technicalities and regulator-y compliance in developing vaccine products, we expect to see returns after approximately five years.

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6. The Group has obtained Halal certification for more than 30 products in 2018 and is targeting an additional45 products to be certified in 2019.

What is the potential upside for the Group in this sphere globally? What is the estimated market demand for Hal a! pharmaceutical in FY20 19? Our response:

The global Halal pharmaceutical market is currently in the region of US$240 million, and based on past trends, is expected to develop at an average growth rate of 15%.

We are optimistic in expanding our local and global Halal pt·esence in line with the increase in our Halal certified products and the corresponding increase in market demand.

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1. We refer to the Corporate Governance Report (pages 18, 19 & 20) on the following departures: a) Practice 4.1 - Board to comprise a majority of Independent Directors (Large

Company); and b) Practice 4.2 - Two-tier shareholder voting process to retain an Independent Director

who has served for more than 12 years.

Kindly disclose the timeframe to adopt Practice 4.1 as required under Malaysian Code on Corporate Governance ("MCCG").

The Company is proposing a single-tier voting basis for shareholders' approval to retain the Independent Directors who have served the Board for a cumulative term of more than twelve ( 12) years. Under Practice 4.2, MCCG, the board should seek annual shareholders' approval through a two-tier voting process. We note that two of the directors individually have served the Board for 30 years. The Board should seriously review the position in line with the recommendation ofMCCG. Our response:

a) The Board is satisfied that the current size and composition of Directors is adequate to provide objectivity in the boardroom and that sufficient checks and balances are in place during board deliberations and decision making. The Board will also continue to assess the boardroom environment to ensure diver·se perspective and insights from each member·.

With effect from 1 Januar-y 2019, the composition of the Board compr·ised a majority of Independent Directors.

b) Shar·eholders' voting rights are enshrined under the Company's Constitution, which states that ever-y shareholder has one vote for ever-y share held and resolutions are to be decided by a simple majority for ordinary resolutions and 75% of votes for special resolutions.

Given that the two-tier voting is not operationalised by the Company, in order to reconcile with the spirit of the MCCG, at the upcoming AGM shareholders' approval is being sought for both Directors to continue to act as Independent Directors, but on a single tier basis.

We take note of MSWG's comment on the retention of Independent Director·s who have served for more than 12 years. We will also consider MSWG's suggestion for the Company to r·eview this position in line with the recommendations of the MCCG.

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2. The Group has adopted a sustainability vision - "Building a legacy of sustainable growth

as a leading diversified conglomerate", (page 19, 2018 Sustainability Report).

What are the key targets and measurements for each of your fundamental material issues

that focuses on the three strategic spheres of activity, specifically, economic, environment

and social for FY20 19?

How does the Group translate this sustainability agenda across the Group's various entities

and diversified businesses?

Our response:

The Group believes that sustainability is a key aspect to further the Group's growth and r·each in the segments we are involved in. Hence, the Group developed a 5-year sustainability roadmap from FY2016 to FY2020 to strategies, measure, improve and report mater·ial sustainability concerns.

In line with our sustainability roadmap, the Group has streamlined our material issues to concentrate on six key matters based on stakeholder priorities. In addition, we have developed indicators to monitor these material issues and a Group-wide Sustainability Policy to translate our sustainability agenda across the Group's various diversified subsidiaries.

The Group key targets for FY2019 are: • To distribute mor·e than RMlO billion of economic value to the Malaysian

economy; • To assist at least 1,500 local entrepreneurs in our various entrepreneurial

programmes such as BHP Dealer Owned-Dealer Operated retail petroleum stations and tenancy in our malls;

• To ensure efficient energy usage in terms of reduction in energy intensity; • To reduce the Group-wide injury rate to below than 3.5 times per 1,000

employees per· annum; • To continue with all existing community outt·eaching programmes.

The Group also committed to introduce more comprehensive short and long-term targets in om· second 5-year· (2021-2025) sustainability r·oadmap.

We have launched our Group Sustainability Policy on 3 December 2018 as part of our effor·t to cascade and translate the sustainability agenda into our subsidiaries' respective operations and strategic business plans.

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If you like to have more information or c larification, you are welcome to contact the undersigned.

Best Regards, BOUSTEAD HOLDINGS BERHAD

~· F AHMY ISMAIL

_:& ChiefOpe•·ating Officer/Group Finance Director

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