scomi group bhd - malaysiastock.biz 191 notice of annual general meeting • form of proxy new...
TRANSCRIPT
Annual Report 2011NEW OPPORTUNITIES. MOVING AHEAD.
Scomi Group Bhd
Scomi Group Bhd (571212-A)
Level 17, 1 First Avenue, Bandar Utama47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia
Tel: +603 7717 3000Fax: +603 7725 5853
www.scomigroup.com.my
Sco
mi G
roup
Bhd
(571212-A
)A
nnual Report 2011
CONTENTS2 Key Financial Indicators
3 Key Financial Highlights
4 Corporate Structure
6 Corporate Statement of Scomi Group
7 Corporate Information
10 Profile of Directors
16 Management Team
18 Chairman’s Statement
26 Group CEO’s Review of Operations
36 Corporate Social Responsibility
44 Statement on Corporate Governance
53 Statement on Internal Control
56 Audit and Risk Management Committee Report
61 Additional Information
63 Statement of Directors’ Responsibility
65 Financial Statements
180 Analysis of Shareholdings
183 Analysis of Irredeemable Convertible Secured Loan Stocks (“ICSLS) Holdings
185 Analysis of Warrant Holdings
187 List of Properties
189 Corporate Directory
191 Notice of Annual General Meeting
• Form of Proxy
New Opportunities. Moving Ahead.
With a presence in 27 countries, Scomi Group is an accomplished global technology enterprise. Entrusted with numerous high-profile projects, Scomi’s achievements have reinforced its position as a world-class service provider and technology owner in oilfield services, transport solutions and energy logistics.
By consolidating operations and building on its strengths, Scomi will continue to seek out new opportunities in both the domestic and global market. Moving ahead, Scomi will keep delivering value to its stakeholders and making a difference in the communities it helps shape.
10th
ANNUAL GENERAL MEETING
Ballroom 3 1st Floor, Sime Darby Convention Centre 1A Jalan Bukit Kiara 1 60000 Kuala Lumpur
on 27 June 2012 at 2.30 p.m.
Notes
** Based on PAT after non-controlling interests and on the weighted average number of shares assumed to be issued in the respective years.
@Based on PAT after non-controlling interests and on the weighted average number of shares assumed to be issued in the respective years after taking into consideration the dilutive effect of unexercised ESOS.
2007-2010The financial highlights on pages 2 and 3 reflect the actual audited results of Scomi Group Bhd, with certain numbers restated to reflect retrospective effects as a result of adoption of new or revised Financial Reporting Standards in the respective years.
In RM’000 2011 2010 2009 2008 2007
Turnover 1,383,737 1,521,935 1,971,455 2,106,140 1,995,530
EBITDA (169,530) (39,077) 210,566 291,364 441,277Depreciation 52,103 66,764 82,043 74,524 65,987Finance costs 50,789 77,874 76,404 75,168 87,946Share of profit in associated companies (48,536) (87,225) (9,898) 28,040 23,570Share of profit from jointly controlled entities (439) (739) 3,596 – –
Profit/(Loss) before tax (120,186) (169,409) 50,715 140,213 286,416Taxation (48,692) (20,209) (24,750) (3,928) (4,261)
Profit/(Loss) after tax (168,878) (189,618) 25,965 136,285 282,155Loss from Discontinued Operations (127,653) (3,269) – – –
Profit/(Loss) for the year (296,531) (192,887) 9,875 116,553 257,129Non-controlling interests (64,199) (19,981) 16,090 19,732 25,026
PAT after non-controlling interests (232,332) (172,906) 9,875 116,553 257,129
Number of shares assumed in issue (’000) 1,187,688 1,182,658 1,086,801 1,021,839 1,019,705Weighted average number of shares assumed in issue (’000) 1,391,731 1,371,255 1,025,795 1,006,342 1,004,806Weighted average number of shares used to compute diluted earnings per share (’000) 1,394,528 1,387,259 1,053,648 1,016,009 1,037,091
Basic– Net EPS (RM)** (16.69 sen) (12.61 sen) 0.96 sen 11.58 sen 25.59 senFully diluted– Net EPS (RM)@ (16.66 sen) (12.46 sen) 0.94 sen 11.47 sen 24.79 sen
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 2
KEY FINANCIAL INDICATORS
Revenue (RM Million)
^2011
^2010
2009
2008
2007
1,384
1,522
1,971
2,106
1,955
Profit/(Loss) Before Tax (RM Million)
^2011
^2010
2009
2008
2007
(190)
51
140
286
Profit/(Loss) After Tax AfterNon-Controlling Interest (RM Million)
2011
2010
2009
2008
2007
(193)
10
117
257
(297)
(169)
Total Assets (RM Million)
RM2,242 • 2011RM2,466 • 2010RM3,039 • 2009
Earnings per Share (basic)
(16.69) sen • 2011(12.61) sen • 20100.96 sen • 2009
Net Tangible Assets (RM Million)
RM188 • 2011RM346 • 2010RM360 • 2009
Shareholders’ Fund (RM Million)
RM509 • 2011RM726 • 2010RM920 • 2009
Net Assets Per Share(Attributable to owners of the Company)
43 sen • 201161 sen • 201085 sen • 2009
Note^ The 2010 and 2011 financials are in respect of
continuing operations only.
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 3
KEY FINANCIAL HIgHLIgHTS
49%
50%
51%
51%
20%
51%
60%
96%
80.54%
49%
Emerald Logistics Sdn Bhd
Vibratherm Limited(England & Wales)
Wasco Oil ServiceCompany NigeriaLimited (Nigeria)
Scomi Oiltools DeVenezuela, SA (Venezuela)
Scomi Oiltools Overseas (M) Limited
(Mauritius)
Scomi Oiltools Pty Ltd(Australia)
Oiltools Gabon SA (Gabon)
Premium IndustrialMachining SA (Venezuela)
Scomi Oiltools (Shetland) Limited
(Scotland)
KMC Oiltools AlgerieEURL (Algeria)
KMC Oiltools BV(The Netherlands)
Scomi Oiltools Egypt SAE(Alexandria Free Zone, Egypt)
Scomi Oiltools Ltd(Cayman Islands)
Scomi Oiltools OmanLLC (Oman)
Scomi OiltoolsCanada Inc.
(Alberta, Canada)
Scomi Oiltools (Africa) Limited (Cayman Islands)
Scomi Oiltools Inc(Texas, USA)
Scomi Oiltools SouthAmerica Limited
(BVI)
Gemini Sprint Sdn Bhd
Marineco Limited (Labuan)
Trans Advantage Sdn Bhd
Southern Petroleum Transportation Joint Stock Corporation (Vietnam)
Scomi Marine Services Pte Ltd (Singapore)
Goldship Pte Ltd(Singapore)
PT Rig TendersIndonesia Tbk3
(Indonesia)
King BridgeEnterprises Limited
(BVI)
42.75%2
SCOMI GROUP BHD1
Scomi Marine Bhd1 Scomi InternationalPrivate Limited
(Singapore)
Scomi CapitalLimited (Labuan)
Global Learning andDevelopment Sdn Bhd
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 4
SCOmI gROup CORpORATE STRuCTuREas at 30 April 2012
50%
51%
95%
95%
95%
4%48%
40%
Scomi Oiltools (Thailand) Ltd (Thailand)
PT Scomi Oiltools(Indonesia)
Sosma (B) Sdn Bhd (Brunei)
Scomi Rail Bhd Scomi Trading Sdn Bhd
Scomi OiltoolsSdn Bhd
Scomi Oiltools (Kemaman) Sdn Bhd
Oilfield Services de Mexico S. de RL de CV (Mexico)
Scomi Anticor S.A.S (France)
Scomi Coach Sdn Bhd
Scomi CoachMarketing Sdn Bhd
Scomi Oiltools (Europe) Limited (Scotland)
Scomi Oiltools (RUS)Limited Liability Company(Russia)
Scomi KMC Sdn Bhd
Scomi Barite Sdn Bhd
Scomi Oiltools deMexico S de RLde CV (Mexico)
Scomi Oiltools (S)Pte Ltd (Singapore)KMC All Star
Chemical Sdn Bhd
KMC Oiltools IndiaPrivate Limited (India)
Scomi OBM TerminalSdn Bhd
PT Multi JayaPersada (Indonesia)
KMCOB Capital Berhad
PT Inti Jatam Pura(Indonesia)
Scomi Oiltools (Cayman) Ltd (Cayman Islands)
76.08%
67.35%
Scomi Oilfield Limited (Bermuda)
Scomi Engineering Bhd1
Scomi ChemicalsSdn Bhd
Scomi EnergySdn Bhd
Scomi SosmaSdn Bhd
Scomi Enviro Sdn Bhd
Scomi OiltoolsBermuda Limited (Bermuda)
Scomi EcosolveLimited (BVI)
Scomi Transportation
Systems Sdn Bhd
Scomi SpecialVehicles Sdn Bhd
Scomi OMS OilfieldServices Ltd (BVI)
Urban TransitPrivate Limited5
(India)
Scomi TransitProjects Sdn Bhd
Scomi Transit Projects Brazil
Sdn Bhd
Scomi TransitProjects Brazil
(Sao Paulo) Sdn Bhd
Urban Transit Servicos Do Brasil
LTDA (Brazil)
Scomi Nigeria PteLtd (Singapore)
Scomi SolutionsSdn Bhd
Titan TubularsNigeria Limited (Nigeria) 50.1%
Oiltools AfricaLimited4 (Nigeria)
1 Listed on the Bursa Malaysia Securities Berhad (Kuala Lumpur Stock Exchange)2 Includes 0.05% held by Scomi Energy Sdn Bhd.3 Listed on the Jakarta Stock Exchange.4 Includes 2.0% held by Scomi Group Bhd.5 Includes 0.01% held by Scomi Rail Bhd.
Notes
– This corporate structure does not include the subsidiaries/associated companies of PT Rig Tenders Indonesia Tbk.
– Except as otherwise expressly stated, all companies in this corporate structure are incorporated in Malaysia.
– Except as otherwise expressly stated, all companies in this corporate structure are wholly owned by their respective holding companies.
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 5
With a presence in 52 locations across 27 countries, the Scomi group of companies is a global technology enterprise in the energy and logistics industries.
WE ARE A GLOBAL TECHNOLOGy ENTERPRISE.
Our global reach, capabilities and talent provide us with the necessary resources to develop and own new technology in all areas of our business.
W E F O C U S O N E N E R G y & LOGISTICS.
All of our 3 business units are focused on the Energy and/or Logistics sectors with the ability to compete globally. All of us in the Scomi family should remember that any new initiatives we undertake will focus on these areas of business.
W E P R O v I D E I N N O v A T I v E SOLUTIONS.
We innovate to respond to an evolving env i ronment . Our products and operations meet today’s needs while ant ic ipat ing tomorrow’s. We are committed to developing competitive and innovative solutions to create efficiency, add value and grow with our customers to shape our future.
WE AIM TO REALISE POTENTIAL FOR OUR STAKEHOLDERS.
• Our customers: We will develop and offer customers innovative and competitive products and services that help them grow their business.
• Our shareholders: We are committed to providing long-term superior returns to our shareholders.
• Our people: We aim to provide our employees with developmental opportunities so they can succeed on personal and professional levels.
• Our suppliers: We will treat our suppliers as our partners in the mutual interest of business growth.
• Our society/environment: As a good corporate citizen, we will give back to the communities we operate in worldwide.
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 6
CORpORATE STATEmENT OF SCOmI gROup
BOARD OF DIRECTORS
Tan Sri Asmat Bin KamaludinChairman
Tan Sri Nik Mohamed Bin Nik Yaacob
Datuk Haron Bin Siraj
Datuk Mohamed Azman Bin Yahya
Dato’ Mohammed Azlan Bin Hashim
Dato’ Abdul Rahim Bin Abu Bakar
Dato’ Sreesanthan A/L Eliathamby
Foong Choong Hong
Shah Hakim @ Shahzanim Bin Zain
ExECUTIvE COMMITTEE(Dissolved with effect from 31 August 2011)
Tan Sri Nik Mohamed Bin Nik YaacobChairman
Dato’ Mohammed Azlan Bin Hashim
Shah Hakim @ Shahzanim Bin Zain
AUDIT AND RISK MANAGEMENT COMMITTEE
Dato’ Abdul Rahim Bin Abu BakarChairman
Datuk Haron Bin Siraj
Foong Choong HongResigned on 31 August 2011
Tan Sri Nik Mohamed Bin Nik YaacobAppointed on 31 August 2011
Dato’ Mohammed Azlan Bin HashimAppointed on 31 August 2011
NOMINATION AND REMUNERATION COMMITTEE
Tan Sri Asmat Bin Kamaludin Chairman
Datuk Mohamed Azman Bin Yahya
Dato’ Mohammed Azlan Bin Hashim
OPTIONS COMMITTEE
Tan Sri Asmat Bin Kamaludin Chairman
Datuk Haron Bin Siraj
Shah Hakim @ Shahzanim Bin Zain
REGISTERED OFFICE
Level 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaT +603 7717 3000F +603 7728 5853
ADMINISTRATIvE AND CORRESPONDENCE ADDRESS
Level 17, 1 First AvenueBandar Utama47800 Petaling JayaSelangor Darul Ehsan, MalaysiaTel : +603 7717 3000Fax : +603 7728 5853Website : www.scomigroup.com.myEmail : [email protected]
REGISTRAR
Symphony Share Registrars Sdn BhdLevel 6, Symphony HouseBlock D13, Pusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul Ehsan, MalaysiaTel : +603 7841 8000Fax : +603 7841 8008
ADvOCATES & SOLICITORS
Albar & PartnersAdvocates & Solicitors6th Floor, Faber Imperial CourtJalan Sultan Ismail50250 Kuala Lumpur, Malaysia
COMPANy SECRETARIES
Ong Wei Leng (MAICSA 7053539)Chong Mei Yan (MAICSA 7047707)
AUDITORS
PricewaterhouseCoopers (AF: 1146)Chartered AccountantsLevel 10, 1 SentralJalan Travers, Kuala Lumpur SentralPO Box 1019250706 Kuala LumpurMalaysia
PRINCIPAL BANKERS
CIMB Bank Berhad10th Floor, Bangunan CIMBJalan Semantan, Damansara Heights50490 Kuala LumpurMalaysia
United Overseas Bank (Malaysia) BerhadLevel 18, Menara UOBJalan Raja Laut50350 Kuala Lumpur
STOCK ExCHANGE LISTING
Main Market of Bursa MalaysiaSecurities BerhadStock Name: ScomiStock Code: 7158
CURRENCy
Ringgit Malaysia (RM)
SC
OM
I G
RO
UP
BH
D
pg 7
Ann
ual
Rep
ort
2011
CORpORATE INFORmATION
Reinventing ourselves to realise opportunitiesWe continue to recognise the importance of re-inventing
ourselves, re-evaluating our endeavours and following
through with strategies that will increase our opportunities
in the global market.
Tan Sri Asmat Bin KamaludinChairman, Independent Non-Executive Director
Tan Sri Nik Mohamed Bin Nik YaacobIndependent Non-Executive Director
Tan Sri Asmat holds a Bachelor of Arts (Honours) degree in Economics from the University of Malaya, and he also holds a Diploma in European Economic Integration from the University of Amsterdam.
Tan Sri Asmat has vast experience in various capacities in the public service and his last position was as the Secretary-General of the Ministry of International Trade and Industry, a position he held from 1992 to 2001. He has served as Economic Counsellor for Malaysia in Brussels and has worked with several international bodies such as ASEAN, World Trade Organisation and the Asia-Pacific Economic Co-operation, representing Malaysia in relevant negotiations and agreements. Tan Sri Asmat has also been actively involved in several national organisations such as Permodalan Nasional Bhd, Johor Corporation, the Small and Medium Scale Industries Corporation (SMIDEC) and the Malaysia External Trade Development Co-operation (MATRADE) while in the Malaysian Government service. Tan Sri Asmat is also a Governor representing Malaysia on the governing Board of the Economic Research Institute for Asean and East Asia (ERIA). Other Malaysian public companies in which he is a director are UMW Holdings Berhad, YTL Cement Berhad, Permodalan Nasional Bhd, Malaysian Pacific Industries Berhad, Lion Industries Corporation Berhad, Panasonic Manufacturing Malaysia Berhad, Symphony House Bhd, TASCO Berhad, Compugates Holdings Berhad, The Royal Bank of Scotland Berhad and Scomi Marine Bhd. He also serves on the Board of JACTIM Foundation.
Tan Sri Asmat is a member of, and chairs the Nomination and Remuneration Committee and the Options Committee of the Board. Tan Sri Asmat attended all of the 6 Board Meetings held in the year ended 31 December 2011.
Tan Sri Nik Mohamed holds a Diploma in Mechanical Engineering, a B.E. (Hons) Degree from Monash University and a Masters in Business Management from the Asian Institute of Management. He also completed the Advanced Management Programme at Harvard University in the United States.
He served as the Group Chief Executive of Sime Darby Berhad from 1993 until his retirement in June 2004. He was Sime Darby Berhad’s Director of Operations in Malaysia prior to his appointment as the Group Chief Executive in 1993. He also served on the Boards of many of the Sime Darby group companies during this time. He was also the Chairman of the Advisory Council of National Science Centre and Chairman of the Board of UITM and served as a member of the INSEAD East Asian Council, National Council for Scientific Research and Development, Co-ordinating Council for the Public-Private Sectors in the Agricultural Sector, National Coordinating Committee on emerging Multilateral Trade Issues and the Industrial Coordinating Council. He was a representative for Malaysia in the Apec Business Advisory Council and the Asia-Europe Business Forum. Other Malaysian public companies in which he is a director are GuocoLand (Malaysia) Berhad, Bolton Berhad and Kencana Petroleum Berhad. Tan Sri Nik Mohamed is also the Executive Director of Yayasan Kepimpinan Perdana (Perdana Leadership Foundation).
Tan Sri Nik Mohamed is a member of the Audit and Risk Management Committee of the Board. Tan Sri Nik Mohamed attended all of the 6 Board Meetings held in the year ended 31 December 2011.
Tan Sri Asmat, 68, a Malaysian, is an Independent Non-Executive Director and the Chairman of the Company. He was appointed to the Board on 3 March 2003.
Tan Sri Nik Mohamed, 63, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 10
pROFILE OF DIRECTORS
Datuk Haron Bin SirajIndependent Non-Executive Director
YBhg Datuk Haron graduated from the University of Manchester, United Kingdom, with a Bachelor of Arts with Honours in Economics, and also holds a Masters Degree in Development Economics from Williams College, United States of America.
YBhg Datuk Haron started his career as an Assistant Controller with the Ministry of Commerce and Industry. He subsequently served as the Principal Assistant Secretary, and later as the Under Secretary, in the Ministry of Primary Industries until 1980. From August 1980, he served as the Minister Counsellor (Economic Affairs) of the Permanent Mission of Malaysia in Geneva, Switzerland, and returned to Malaysia in 1985 to join the Ministry of International Trade and Industry, holding various directorship positions, and was later appointed as Deputy Secretary-General (Trade) in 1990. YBhg Datuk Haron was appointed as Ambassador Permanent Representative of Malaysia to the United Nations and other International Organisations (including the GATT and the WTO) and Specialised Agencies in Geneva, Switzerland from September 1992 to December 1996. On his return, he became the Secretary-General of the Ministry of Primary Industries where he served until 2000. He served as the Chief Executive Officer of the Malaysian Palm Oil Promotion Council from 2000 until his retirement in January 2006. Other Malaysian public company in which he is a director is Kulim (Malaysia) Berhad.
YBhg Datuk Haron is a member of the Audit and Risk Management Committee and the Options Committee of the Board. He attended 5 out of the 6 Board Meetings held in the year ended 31 December 2011.
YBhg Datuk Haron, 67, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.
Datuk Mohamed Azman Bin YahyaNon-Independent Non-Executive Director
YBhg Datuk Mohamed Azman bin Yahya, a Malaysian, aged 48, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.
Datuk Azman is the Group Chief Executive and Director of Symphony House Berhad, a listed business process outsourcing group and the Executive Chairman of Bolton Berhad, a listed property group. He holds a first class honours degree in Economics from the London School of Economics and Political Science and is a member of the Institute of Chartered Accountants in England and Wales, the Malaysian Institute of Accountants and the Malaysian Institute of Banks.
Datuk Azman started his career at KPMG in London before returning to Malaysia in 1988 where he built his career in investment banking to become the chief executive of Amanah Merchant Bank.
During the Asian Financial Crisis in 1998, Datuk Azman was appointed by the Malaysian Government to set-up and head Danaharta, the national asset management company and he subsequently became the Chairman of Corporate Debt Restructuring Committee. These two entities were set-up to assist the financial and corporate sectors in managing the crisis, and both were successful in their missions leading to their closure after the crisis.
In 2003, he returned to the private sector and founded Symphony House Berhad. Outside his professional engagements, Datuk Azman is active in public service and sits on the boards of Khazanah Nasional Berhad and Ekuiti Nasional Berhad, the investment arm and the private equity arm of the Malaysian Government respectively. He also serves as a Non-Independent and Non-Executive board member of Malaysian Airlines System Berhad and PLUS Expressways Berhad. Datuk Azman is a member and advisor of several national agencies including the Special Taskforce to Facilitate Business (PEMUDAH), the National Innovation Council and the Financial Reporting Foundation. He is also a Director of Sepang International Circuit and the Chairman of Motorsports Association of Malaysia.
Datuk Azman is a member of the Nomination and Remuneration Committee of the Board. He attended 4 out of the 6 Board Meetings held in the year ended 31 December 2011.
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 11
Dato’ Sreesanthan A/L EliathambyIndependent Non-Executive Director
Dato’ Mohammed Azlan Bin HashimIndependent Non-Executive Director
Dato’ Sreesanthan, aged 51, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 18 April 2006. Dato’ Sreesanthan, is an Advocate & Solicitor and a Partner with the legal firm of Messrs Kadir, Andri & Partners.
Dato’ Azlan, aged 55, Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July 2004.
Dato’ Azlan graduated with a Bachelor of Economics from Monash University and qualified as a Chartered Accountant in Australia. He is a fellow member of the Institute of Chartered Accountants, Australia, a member of the Malaysian Institute of Accountants, a fellow member of Malaysian Institute of Directors, a fellow member of Malaysia Institute of Chartered Secretaries and Administrators and a honorary member of the Institute of Internal Auditors, Malaysia.
He has extensive experience in the corporate sector. Dato’ Azlan is the Chairman of D&O Green Technologies Berhad and SILK Holdings Berhad. He also serves as a Non-Executive Director of Khazanah Nasional Berhad, IHH Healthcare Berhad (formerly known as Integrated Healthcare Holdings Berhad) and is a member of the Investment Panel of the Employees’ Provident Fund and Retirement Fund Incorporated. During his career, he served in various capacities in the financial services industry and investment holding companies, including as Chief Executive of Bumiputra Merchant Bankers Berhad, Group Managing Director of Amanah Capital Malaysia Berhad and Executive Chairman of Bursa Malaysia Berhad Group.
Dato’ Azlan is a member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee of the Board. He attended 5 out of the 6 Board Meetings held in the year ended 31 December 2011.
Dato’ Sreesanthan obtained his undergraduate law degree from the University of Malaya and his post graduate degree in law from the University of Oxford, United Kingdom.
He was formerly a Legal Assistant and later a Partner with the legal firm of Messrs Zain & Co and Messrs Zul Rafique & Partners. Dato’ Sreesanthan is a member of the Investment Committee of Amanah Saham Wawasan 2020 Fund, the Listing Committee of Bursa Malaysia Berhad and the Disciplinary Committee Panel of the Advocates and Solicitors’ Disciplinary Board. He currently sits on the Board of Guinness Anchor Berhad and Sime Darby Berhad.
Dato’ Sreesanthan attended 4 out of the 6 Board Meetings held in the year ended 31 December 2011.
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 12
pROFILE OF DIRECTORS
Foong Choong HongNon-Independent Non-Executive Director
Mr Foong, 51, a Malaysian, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 17 March 2003.
Mr Foong holds a post-graduate degree in Management Studies majoring in Finance, from Middlesex University, United Kingdom.
Mr Foong started his career with Robert Fleming Merchant Bank in the United Kingdom as a Economist responsible for South-East Asian markets and as an adviser for European and British pension funds and insurance companies on investments in South-East Asia and the Far East. Mr Foong returned to Malaysia to develop a joint venture company with Powers Supermarkets (UK), a then wholly-owned unit of Associated British Foods public listed company, to develop a Far Eastern sourcing and trading house based in Malaysia. Mr Foong is a Certified Financial Planner and also a Fellow of the Chartered Management Institute (UK). He also plays an advisory role in the Investment Committee of several multi-national companies for the identification of investments and development of business opportunities. He is currently the Managing Director of Asian Asset Group Sdn Bhd and a director of Asian Asset Management Sdn Bhd.
He attended all of the 6 Board Meetings held in the year ended 31 December 2011.
Dato’ Abdul Rahim Bin Abu BakarIndependent Non-Executive Director
Dato’ Rahim, aged 65, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 7 October 2010.
Dato’ Rahim graduated from the Brighton College of Technology, United Kingdom with B.Sc (Hon) Electrical Engineering in 1969. Dato’ Rahim is a member of the Institute of Engineers Malaysia (MIEM) and is a Professional Engineer, Malaysia (P.Eng). He also holds the Electrical Engineer Certificate of Competency Grade 1.
Dato’ Rahim began his career in 1969 with the then National Electricity Board. He was attached to the organisation for 10 years in various technical and engineering positions before he moved on to the private sector. From 1979 to 1983, he served with Pernas Charter Management Sdn Bhd, a management company for the tin mining industry. Then, from late 1983 to 1991, he was attached to Malaysia Mining Corporation Berhad (MMC) in various senior positions. Later from 1991 to 1995, he moved on to MMC Engineering Services Sdn Bhd and subsequently to MMC Engineering Group Berhad as the Managing Director. In May 1995, he joined Petronas to assume the position of Managing Director of Petronas Gas Berhad (PGB) and subsequently moved on to Petronas as its Vice President, in charge of the Petrochemical Business in 1999. He retired from Petronas on 31 August 2002. Dato’ Rahim’s other directorships in public companies are Scomi Engineering Bhd, Telekom Malaysia Berhad and Global Maritime Ventures Berhad.
Dato’ Rahim is the Chairman of the Audit and Risk Management Committee of the Board. He attended 5 out of the 6 Board Meetings held in the year ended 31 December 2011.
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 13
Shah Hakim @ Shahzanim Bin ZainGroup Chief Executive Officer/ Non-Independent Executive Director
Encik Shah Hakim, 47, a Malaysian, is the Chief Executive Officer/Non-Independent Executive Director of the Company and was appointed to the Board on 3 March 2003.
Encik Shah Hakim started his career as an auditor with Ernst & Young and was subsequently promoted as Consulting Manager, responsible for servicing large corporations. He went on to be appointed as Executive Director of a regional packaging manufacturer in 1992, with direct operational responsibility. He currently sits on the Board of Sapura Industrial Berhad, Scomi Marine Bhd, Scomi Engineering Bhd and KMCOB Capital Berhad.
Encik Shah Hakim is a member of the Options Committee of the Board. He attended all of the 6 Board Meetings held in the year ended 31 December 2011.
Note:
None of the Directors have any family relationship with any other Director and/or substantial shareholder of Scomi Group Bhd.
With the exception of the disclosure on page 62, none of the Directors are involved in any conflict of interest, or any personal interest in any business arrangement, involving Scomi Group Bhd.
None of the Directors have been convicted for offences within the past ten years (other than traffic offences, if any).S
CO
MI G
RO
UP
BH
DA
nnual Report 2011
pg 14
pROFILE OF DIRECTORS
Shah Hakim ZainGroup Chief Executive Officer
Sharifah NorizanShahabudin
Chief Legal & GovernanceOfficer
Dinesh ChelvathuraiChief Learning Officer
Loong Chun NeeChief Investment &Performance Officer
Rohaida Ali BadaruddinChief of Staff
mANAgEmENTTEAm
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 16
Hilmy Zaini ZainalCountry President – Brazil
Kanesan veluppillaiPresident – Scomi International& Country President – India
Steve BrackerPresident – Oilfield Services
Wan Ruzlan IskandarWan SalaidinPresident – Oilfield Services Market Units
Mukhnizam MahmudPresident – Scomi Marine Bhd
Suhaimi yaacobPresident – Rail
Andrew NguPresident – Oilfield Services
Turnkey & Multiple Drilling Services
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 17
CHAIRMAN’SSTATEmENT
Tan Sri Asmat Bin KamaludinChairman
We live in fast-changing times in which the only certainty is uncertainty. Yet some organisations have the ability to thrive in challenging environments such as this. And I believe Scomi is one. As one of only a few truly international Malaysian companies, we have been exposed to the full force of the global downturn since 2009 – an economic crisis so severe it has been described as the worst recession the world has seen since the Great Depression. Yet, Scomi has not just survived but is emerging leaner, stronger and more sure-footed as we continue to explore and expand into new growth areas, in realising potentials.
Dear Stakeholders,
OvERvIEW
As if continuing financial woes in the US and Europe were not enough to keep us all on our toes, the year 2011 brought with it added encumbrances in the form of the political upheavals in the Middle East and a spate of natural disasters that spread across the globe. None perhaps were as devastating as the tsunami that brought Japan to a temporary standstill.
Amid the general gloom was an upturn in the price of oil, which remained robust throughout the year, spurred by demand from emerging economies together with uncertainty over supply. This had double-edged consequences. On the one hand, it caused a marked increase in oi l and gas act iv i ty worldwide, although in the US this was tempered by a strict tax regime in the deepwater horizon which caused activity to be erratic. Conversely, the high price of oil added to reduced manufacturing activity in the West to
cause a severe dent in global trade. This led to an oversupply of vessels – as was the case in 2010 – with a concomitant drop in freight rates.
The Arab Spring stalled key decisions by governments in the Middle East on infrastructure and other massive projects that had been planned as part of their economic development, and this directly affected our efforts and investments in the region. Meanwhile, a depreciation of the US Dollar and Indian Rupee led to significant forex losses. Although these impacted our financial performance in the year, we have learnt from our experiences and move forward with a reinforced belief that any venture into a foreign market needs to be preceded by in-depth analysis of the political and economic climate of the country or region. We have also put in place added forex loss management strategies which include localising our fund-raising activities.
Amid these operating challenges, Scomi Group rose to the occasion to post a commendable performance, mainly as a result of strategic forward planning and concerted efforts to rein in our expenses while improving productivity. In all, it has been an exciting but certainly challenging 12 months, and it gives me great pleasure to present our results for the year to you.
FINANCIAL PERFORMANCE
For the year ended 31 December 2011, the Group recorded total revenue of RM1.38 billion on the back of strong performance by our Oilfield Services Division, which contributed to 79% of this figure. Total revenue from non-Malaysian operations amounted to RM838.5 million, or 56.4% of the total. As a result of cost efficiencies, our operational expenditure (OpEx) fell and we achieved an operating profit after tax of RM58.5 million. However, our
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 19
earnings were impacted by impairment losses, unrealised foreign exchange losses and other one-off charges resulting in a loss after tax of RM296.5 million as compared to RM192.9 million in the previous year. This also affected our EBITDA margin, which dropped from -2.6% to -7.4%.
Of our three main divisions, Oilfield Services posted the best performance in terms of exceeding our expected revenue and profit. Driven by active dri l l ing operations in the Eastern Hemisphere – Malaysia, Indonesia and Thailand – it recorded higher revenue from continuing operations of RM1.13 billion as compared to RM1.12 billion in the previous year. Its segment earnings before interest and tax from continuing operations was 6.9 times higher, at RM71.3 million as compared to RM10.3 million in the previous year.
The Energy Logistics Division recorded a slight decrease in revenue of 4.5% from RM409.1 mill ion in 2010 to RM390.8 million. However, its segment earnings before impairment charges, disposal gains of an associate company and tax was 21.3% higher than in 2010, at RM43.3 million as compared to RM35.7 mil l ion. We are very encouraged by this result, as it shows the effects of concerted efforts to increase productivity in the division, which was seen in a generally better port mix, reduced vessel stand-downs leading to significant savings in bunker fuel and third-party charter-in charges.
The Transport Solutions Division, meanwhile, recorded lower revenue of RM246.8 mill ion as compared to RM400.8 million in 2010, despite being awarded the Brazil monorail systems. This was mainly due to civil works and approvals delays in our monorail project in Mumbai, which we are managing via requests for extensions of t ime, compounded by a weakening of the Indian Rupee against the Ringgit.
Consequently, the Division posted a loss of RM69.4 million principally due to unrealised foreign exchange, as opposed to a loss after tax of RM30.3 million in the previous year.
Given the Group’s on-going corporate restructuring, the Board of Directors has decided it would be expedient not to declare a dividend for the financial year and to use our available capital to ensure our successful transformation. This will bring sustainable benefits to the Group, which will be reflected in greater shareholder value in the long term.
CORPORATE ExERCISE
In 2009 we launched a transformation roadmap called Formula 2011, and have accelerated the pace of change over the years. We are guided in this transformation journey by a holistic vision of our final destination – of what we want to be financially, operationally and culturally.
Financially, we are reducing our debts and strengthening our balance sheet to support further growth. Operationally, we aim to be leaner and more focused on key business areas, with a flatter internal structure so we are more nimble and able to respond faster to market demands. Culturally, we strive to nurture a strong service ethic so as to add value to the Scomi brand and keep our customers and partners satisfied.
In 2011, we made significant strides towards achieving these goals. In October, we proposed to issue a new bond at KMCOB Capital from the disposal of assets which have fully realised their value as this would reduce our debt, improve our cash flow and help fund new growth opportunities. In November, we entered into a sale and purchase agreement to dispose of our Oilfield Services businesses in North America and Mexico for a total consideration of USD35.0 mil l ion
(RM108.56 million), not because these operations were not profitable, but because the region had become volatile, posing a risk on steady rates of return. Following this sale, we issued a new bond that raised RM342.6 million.
We have also transferred the ownership of a number of our Indonesian Energy Logistics companies from Scomi Marine Services (SMS), a fully-owned subsidiary of our associate company Scomi Marine Berhad (SMB), into Rig Tenders Indonesia Tbk (PTRT), an Indonesian company 80.54%-owned by SMS. In April 2012, the entire equity of the following companies under SMS were transferred to PTRT for a total consideration of USD57 million – CH Logistics Pte Ltd and its wholly-owned subsidiary Sea Master Pte Ltd, CH Ship Management Pte Ltd, and Grundtvig Marine Pte Ltd and its 95%-owned subsidiary PT Batuah Abadi Lines. The sale is in line with our plans to develop SMB as a larger and more integrated upstream service provider.
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 20
CHAIRmAN’S STATEmENT
CORPORATE RESTRUCTURING
The Group continued with our global strategy in which we have decided to focus on two high growth areas, namely oil and gas, and urban transport solutions. Towards this end, we are streaml in ing our operat ions and undergoing major internal restructuring.
In order to better serve our oil and gas customers, in 2011 we expanded the range of services offered by Oilfield Services (OFS) beyond Drilling Fluids and Drilling Waste Management – which have been our flagship services – to set up a Multi Drilling Services (MDS) division. We are further consolidating and focusing on the Eastern Hemisphere OFS (namely the business East of the Suez) and Offshore Supply Vessels businesses under SMB to create a new unit which is able to provide enhanced and greater value-add services to our oil and gas customers.
We are confident of further growth of the oil and gas sector in the Asian region in general, given increasing demand for energy. In Malaysia itself,
the Government is looking actively to develop this sector as a National Key Economic Area. Towards this end, PETRONAS is investing heavily in marginal oilfield development, which will create greater demand for our products and services.
In the urban t ranspor t sector , meanwhile, we will continue to focus in the countries in which we have already made inroads – namely Malaysia, India and Brazil – while also exploring for other emerging markets that will benefit from our efficient and environment-friendly monorail technology. During the year under rev iew we also developed a new MRT system that embraces a 4C concept of maximum C a p a c i t y , C o m f o r t a n d C o s t effectiveness in tandem with reduced Carbon footprint. This system adds significantly to our product range and allows us to offer more comprehensive urban transport solutions in the dynamic markets we are targeting, which in turn, present the greatest opportunity for us to further grow our services.
GLOBAL JOURNEy
If there is one lesson we have learnt in our journey as a global company it is that we have to be adaptable and flexible in managing our businesses in the different countries. Each country has its own operating culture which we seek to understand. There is certainly no one size that fits all when it comes to country strategy and management. It is because we are respectful of national characteristics that we have been able to make inroads into countries like Brazil and India. We are one of the first Malaysian companies to penetrate the Brazilian market, while our growing presence in India speaks volumes for our technology and the relationships we have built in this vast and traditionally challenging market.
Part of our success in these foreign markets has been strategic partnerships formed with prominent local companies, which include Larsen & Toubro (L&T), CR Almeida S.A. Engenharia de Obrasare (CR Almeida), Andrade Gut ie r rez S .A . (AG) , Geodes ic
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 21
Techniques, INTL Enso Rail Systems (IERS), Engineering Project (India) (EPI) Ltd and Infrastructure Leasing & Financial Services Limited (IL&FS). In addition, we bring to our projects world-class expertise by forming partnerships with leading technology companies such as Siemens, Thales, Bombardier and Knorr-Bremse.
In Brazil, we are further strengthening ou r pos i t i on by se t t i ng up a manufacturing plant to produce rolling stock and other rail-related items in collaboration with two partners – Montagens e Projetos Especiais SA (MPE) and Brasell Gestão Empresarial, LTDA (Brasell). We are recognised as one of only three global monorail manufacturers able to meet Brazil’s tender requirements. Not only were we invited to participate in Brazil’s monorail tender exerc ises, but we have successfully won the first monorail project in Brazil - the Monorail Line 17 also known as the Gold Metro of Sao Paulo, Brazil. In all projects, moreover, we source for the most rel iable suppliers to ensure the highest quality service and products, as these reflect our own Scomi brand.
We continued to increase awareness and recognition of the Scomi brand in our key markets via consistent in aggressive engagement with key stakeholders. Our regular interactions with the media, key opinion leaders and t h e i n v e s t o r c o m m u n i t y a r e comp lemented by es tab l i sh ing relationships with the relevant authorities. To further stamp our brand indelibly in these foreign markets, we also participate in high level forums and conferences like the World Economic Forum.
CORPORATE RESPONSIBILITy
We realise that our long-term success is dependent not just on how much profits we make, but how these profits were made. In other words, we place g rea t emphas i s on co rpo ra te responsibility and on ensuring that we balance our financial bottom line with a positive impact on the community and the environment. Our Foundation Yayasan Scomi has been contributing to the community since its establishment in 2005, and in recent years its efforts have been doubled by an employee-driven programme called Project Pyramid which sees our staff throughout our global operations go out into local communities to lend a helping hand where needed.
We are also cognisant of the need to play our part in preserv ing the environment, and to reduce our carbon footprint to contribute to global efforts towards managing climate change. All new technologies being developed by our R&D centres are designed to be environment-friendly, while at the corporate offices we have adopted many green practices to reduce as far as possible our use of resources, hence our impact on the environment.
PROSPECTS
Although the year 2012 promises to be challenging, we are confident of making good headway as a Group in the markets and businesses that we have targeted.
We anticipate continued growth in oil and gas exploration and production in order to meet the increasing energy needs of emerging economies. This will be accompanied by a concomitant escalation in leading indicators such as drilling rig count, tendering and contract award activity in the Eastern Hemisphere countries, led by Malaysia, Indonesia and Thailand. Having expanded the range of services we provide via Multi Drilling Services, we offer a stronger value proposition to our customers.
SC
OM
I GR
OU
P B
HD
Annual R
eport 2011
pg 22
CHAIRmAN’S STATEmENT
Now, as we consolidate our Eastern Hemisphere Oilfield Services with Energy Logistics’ Offshore Services, we look forward to enjoying a bigger share of the expanding market.
We are equally upbeat on the potential of taking our Transport Solutions, and especially our environment-friendly monorail technology, to more corners of the world. As global populations continue to increase, and as urban areas continue to expand, there will be increasing need for efficient and affordable modes of public transport. Scomi Engineering is already in talks on a number of monorail proposals and the future certainly looks bright for this division. Behind the scenes at Scomi Engineering is the North Kuala Lumpur Facility, where research and technology is being undertaken to keep improving on our prototypes. This lends us a definite edge in the competitive niche which will keep our order books full for the foreseeable future.
ACKNOWLEDGEMENTS
The last few years, 2011 inclusive, have been trying for any global operation. For Scomi, it has been a time of reinvention and reckoning. On behalf of the Board of Directors, I would like to acknowledge all our stakeholders for being with us, and lending us their support as we transformed into a leaner and more focused organisation that we are today.
We would not have come this far without the continued patronage of our customers, who spur us to keep striving for excellence; our shareholders, who have been constant in their trust, even in the face of challenge and change; and our business partners, advisors, suppliers and bankers, who have been true partners in cooperating and collaborating with us. We are also grateful to the governments of the various countries in which we have operations, for their guidance and regulatory support.
To my fellow Directors, I would like to extend my heartfelt appreciation for your wisdom and integrity in guiding the Group always to a position of greater light and clarity. Most of all, I would like to thank the management and staff of Scomi – each and every individual of our more than 3,000 strong team globally – for your commitment and dedication to the Group. We may be separated by geographical distance, but remain united by the fact that we speak all speak one language – the Scomi language of achievement and success.
Sincerely,
Tan Sri Asmat Bin KamaludinChairman
SC
OM
I G
RO
UP
BH
DA
nnua
l R
epor
t 20
11
pg 23