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On behalf of the Board of Directors of WCT Berhad (“WCT”), I am pleased to present the Annual Report and Audited Financial Statements of the Group and the Company for the year ended 31 December 2008.
OPERATING ENVIRONMENT OVERVIEW
From the global perspective, the past year has been a year full of challenges, affecting people from all walks of life. It witnessed the turbulence that hit the US financial system and the repercussions that followed were felt worldwide, including in Malaysia through its trade linkages. The financial tsunami had bankrupted and caused the collapse of several long-established financial institutions and corporate giants. The spiralling crude oil price hit its peak at US$147 per barrel in July 2008 before plummeting to its low of US$34 per barrel in February 2009. It has since been averaging around US$50 per barrel.
According to the International Monetary Fund (“IMF”), on an average annual basis, global growth has moderated from about 5% in 2007 to 3.9% last year. The growth was contributed mainly by the emerging and developing economies since most of the advanced economies were already in recession last year.
On the home front, Bank Negara Malaysia reported that the Malaysian economy grew by 4.6% in 2008 (2007: 6.3%), supported mainly by the robust domestic demand. The rapidly rising fuel price and its accompanying effect on all goods and services caused Malaysia’s inflation to peak at 8.5% in July 2008. It eased to 5.7% in November 2008 following a reduction in domestic fuel prices. The inflation rate was 3.5% in March 2009 as reported by the Statistics Department.
The local construction and property development industries operated in a difficult and uncertain environment last year. The prices of major building materials such as steel and cement increased unpredictably, giving rise to severe supply issues. Against this bleak scenario and coupled with the unstable prices, builders were cautious in starting new projects while developers found it challenging trying to determine the selling price of houses.
FINANCIAL HIGHLIGHTS
Amidst the volatility and unpredictability of the past year, the Group had to contend with the spiralling cost of all essential services, raw materials and fuel which had risen to unprecedented levels. Against this adverse economic and financial backdrop, the Group managed to achieve revenue of approximately RM3.8 billion, an increase of 36% over its previous year’s revenue of RM2.78 billion. It recorded a profit after tax of RM102 million, a decrease of 31% over its previous year’s profit after tax of RM148 million.
For the year under review, the Construction and Property Development segments contributed approximately RM3.50 billion (92%) and RM192 million (5%) respectively to the Group’s revenue in 2008. About 68% of the Group’s revenue was contributed by its construction operations in the Gulf Cooperation Council (“GCC”) countries, mainly in Bahrain, Qatar, Abu Dhabi and Dubai.
OUTLOOK
The width and depth of the current economic crisis has led the IMF to declare it the “Great Recession”. It has revised downwards the global growth rate for 2009, forecasting a negative growth of 1.3% this year.
The drop in demand from the major importing countries has resulted in a sharp decline of 27.8% in Malaysia’s exports in January 2009, severely affecting both the primary and manufacturing industries. In an effort to boost domestic demand, avert a contraction in liquidity and to ease the hardship faced by the people, the Malaysian government has announced several measures in November 2008 and March 2009. To improve liquidity and reduce the cost of funds, Bank Negara Malaysia reduced the Overnight Policy Rate (OPR) by a total of 150 basis points between November 2008 and February 2009 while the statutory reserve requirement (SRR) was cut from 4% to 3.5% with effect from December 2008. To keep the economy going, the Malaysian government has unveiled two stimulus packages in November 2008 (RM7 billion) and March 2009 (RM60 billion) totalling almost 10% of the GDP.
Malaysia’s GDP for 2009 has been revised from 3.5% to between -1% to 1%. With the softening economy, the domestic inflation rate is expected to subside further, ranging from 1.5% to 2% in 2009 (2008: 5.4%).
The looming recession and rising unemployment have affected both business and consumer sentiments. With fewer new sizeable project roll-outs, the local construction sector’s growth in the year ahead is expected to remain low. Nevertheless, the stimulus spending by the Malaysian government is expected to boost growth in the construction sector. Demand in the office sector will be affected by the slow down in business activities in 2009 while the weak consumer sentiments will dampen demand for retail properties. Under such circumstances, developers will be offering competitive packages to attract purchasers.
In the face of a weakening domestic and global economy, the Group needs to be resilient and exercise prudence in managing its resources to tide over this economic downturn.
CORPORATE EXERCISES AND PROPOSALS
The following are corporate activities undertaken in 2008 since the last Annual Report:-
(a) The Company changed its name to WCT Berhad on 5 June 2008 to better reflect its growing reputation in the international arena, enhance its image and to reflect the greater diversity of the Group’s businesses.
(b) The Group entered into a conditional Share Sale Agreement with the Employees Provident Fund Board (”EPF”) on 29 September 2008 whereby EPF became a strategic partner in the Group’s development project known as the Paradigm, located in Kelana Jaya, Petaling Jaya. This related party transaction with EPF was approved by the shareholders at the Extraordinary General Meeting held on 9 April 2009.
DIVIDENDS
The Company paid an interim dividend of 5.0 sen per ordinary share of RM0.50 each less 26% tax on 18 September 2008 in respect of the year ended 31 December 2008. The Board of Directors is recommending a final dividend of 4.5 sen per ordinary share of RM0.50 each less 25% tax. If approved at the forthcoming Annual General Meeting, the total dividend payout for the financial year 2008 will be 9.5 sen per ordinary share of RM0.50 each, less tax (2007: 8.25 sen per ordinary share of RM0.50 each, less tax).
DIRECTORATE
Mr Chua Siow Leng, an Executive Director of the Company, has retired on 1 August 2008 after serving the Group for more than 12 years. On behalf of the Board, I would like to extend our sincere gratitude to Mr Chua for his dedication and contribution to the Group.
ACKNOWLEDGEMENT & APPRECIATION
On behalf of the Board of Directors, I would like to express my sincere gratitude to our customers, shareholders and business partners for their continuous support and confidence in the Group throughout the year. I would also like to convey my appreciation to the regulatory and government authorities for their invaluable assistance and guidance. Last but not least, to the management and staff, my heartfelt thanks for your dedication and commitment to WCT Group.
Dato’ Capt. Ahmad Sufian
Chairman
Date: 28 April 2009
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