Chairman Statement
Extracted from Annual Report 2014
Dear Valued Shareholders, On behalf of the Board of Directors of Zelan Berhad ("Zelan" or the "Group"), I hereby present to you Zelan's Annual Report and Audited Financial Statements for the Nine (9) Months period ended 31 December 2014.
Overview
The financial period under review has been a productive period for Zelan. We had successfully secured two major infrastructure projects through open tenders, while we continued with our efforts to implement other existing projects.
Zelan Construction Sdn Bhd ("ZCSB"), our wholly-owned subsidiary, secured from PETRONAS Refinery and Petrochemical Corporation Sdn Bhd, the contract for the basic design, detail engineering, procurement, construction and commissioning of the Material Off-Loading Facilities ("MOLF") jetty at Tanjung Setapa, Johor for the Refinery & Petrochemical Integrated Development ("RAPID") project in Pengerang, Johor. The contract price awarded is approximately RM248.5 million and the contract duration is 18 months. The MOLF Jetty is scheduled to complete on 20 January 2016 and is intended to be used for the import of heavy lift oversized ("HLO") and super HLO equipment and materials as well as some break-bulk and containerised cargo during the implementation of the RAPID project.
The other project secured by ZCSB was awarded by East Coast Economic Region Development Council ("ECERDC") to Zelan – Hasrat Sedaya Consortium (a 70 : 30 joint venture in which ZCSB is the lead member). The contract is for the construction of the drawbridge connecting Muara North and Muara South in Kuala Terengganu City Centre at a contract price of approximately RM248.7 million with a scheduled completion date of 14 March 2017. The drawbridge will serve as a bridge link to connect the two reclaimed areas on the north and south of the Terengganu River and to create a strategic connection between the Kuala Terengganu City Centre across the two areas, all the way to the Kuala Terengganu's Sultan Mahmud Airport. The drawbridge will have an overall length of 632m, a width of 23m and a clean span of 50m.
The construction of the Centre of Foundation Studies (Phase 3) of the International Islamic University Malaysia ("IIUM"), Gambang Campus, in Pahang, which was secured pursuant to the Concession Agreement we entered into with the Government of Malaysia (the "Goverment") and IIUM in July 2012, started in January 2013 and is expected to be completed in January 2016. Upon handing over of the completed centre to IIUM, we will undertake the asset management services of the said centre and its facilities for the next 20 years in accordance with the Concession Agreement.
In respect of the two subcontract packages which the Group secured under the expansion of Tanjung Bin's 1 x 1,000 MW Coal Fired Power Plant Project in Johor, ZCSB and its joint venture partner, Balanced Engineering & Construction Pte Ltd, from Singapore have successfully completed the design and build of chimney in January 2015. The final contract value for the said subcontract package is approximately RM31.3 million. As for the subcontract package of design and construction of cooling water intake and cooling water discharge culvert for the lump sum price of RM215.25 million, the work is scheduled to be completed in July 2015.
For the Gombak Integrated Transport Terminal in Selangor, the Government has extended the timeline for the fulfillment of the remaining condition precedent, which is the upliftment of the Malay Reservation land status to 13 September 2015. In respect of the construction of the Integrated Immigration, Custom, Quarantine and Security Complex in Kedah which has been awarded to ZCSB and Kiara Teratai Sdn Bhd on a joint venture basis, we are still awaiting the notice on the date for commencement of work to be issued by the concession company, Northern Gateway Infrastructure Sdn Bhd.
"Zelan is optimistic about securing more engineering and construction projects in the country during year 2015."
Outside of Malaysia, following the Second Supplementary Agreement ("SSA") which was entered into between Meena Holdings LLC ("MH") and Zelan Holdings (M) Sdn Bhd ("ZHSB") on 15 April 2014 in relation to Meena Plaza Mixed Use Development Project in Abu Dhabi, UAE, MH paid to ZHSB a total amount of AED121.6 million (approximately RM108.2 million) on 1 September 2014, being the refund of AED92.5 million (approximately RM82.4 million) under the performance bond liquidated by MH in November 2012 and the payment of AED29.1 million (approximately RM25.8 million) for outstanding progress claim owed to ZHSB. Upon receipt of the said payment, ZHSB had settled the outstanding amount owed to the issuing bank arising from the aforementioned liquidation of the performance bond. ZHSB has since recommenced work for the project on 1 October 2014 in accordance with the provisions of the SSA.
"For the 9 months period ended 31 December 2014, the Group registered a total net revenue of RM211.0 million as compared to RM250.2 million in the preceding financial year."
Group Results
For the 9 months period ended 31 December 2014, the Group registered a total net revenue of RM211.0 million as compared to RM250.2 million in the preceding financial year. The major contributor of revenue for the period under review is the IIUM project mentioned above. The Group recorded a net profit of RM38.4 million in the current financial period as compared to RM35.2 million in the preceding financial year.
Dividend
In view of the financial position of the Group, the Board does not recommend payment of any dividend for the financial period ended 31 December 2014.
Business Outlook and Strategy
Despite the recent sharp fall in crude oil prices worldwide, our country's economy is expected to register a steady growth of 4.5% to 5.5% in 2015. The outlook for construction sector remains positive due to its resilience and strong domestic demand. Consistent with this, Zelan is optimistic about securing more engineering and construction projects in the country during year 2015.
Corporate Governance
To ensure transparency, accountability and protection of shareholders' interest, the Board places great emphasis on ensuring and maintaining the highest standards of corporate governance throughout the Group. Our statement on corporate governance and related reports are set out on pages 25 to 32 of the Annual Report.
Related Party Transactions
Significant related party transactions of the Group for the financial period under review are disclosed in Note 30 to the financial statements.
Change Of Financial Year End
As we have announced in May 2014, our financial year end has been changed from 31 March to 31 December.
Acknowledgement
On behalf of the Board, I would like to thank all our shareholders for the steadfast support and encouragement given to Zelan, providing us with the strength and motivation to steer forward.
I would also like to thank all our other stakeholders such as our clients, business associates, partners, bankers and financiers, for the continuous trust, collaboration and co-operation which helped to create effective synergies in our efforts to strengthen the Group's business performance.
Last but not least, I would like to extend my appreciation to all the Board members for their valuable advice and guidance, and to all the employees of the Group, for their efforts and commitment.
We believe that Encik Suhaimi bin Halim, a civil engineer by profession, who has been appointed as a Board member on 11 September 2014, will be able to contribute to the Board's composition and mix of professional experience for the benefit of the Group.
We would like to take this opportunity to place on record our appreciation to one of our long serving Board members, Cdr Mohd Farit Bin Ibrahim RMN (R), who has resigned from the Board on 13 February 2015 in order to attend to his other commitments.
The Board, the management and everyone else of the Group will continue to work hand in hand towards our common goal to enhance the performance and value of Zelan.
Yours faithfully,