Chairman's Statements

ECONOMIC REVIEW

The year 2015 saw moderate growth in the global economy while emerging markets faced challenges due to increased volatility arising from the slowdown in China's economy, plunge in global oil prices and the uncertainties on policy adjustments in several major economies.

At home, Malaysia grappled with headwinds on the economic front following an unexpected global commodity currency shock, weaker global trade and sudden capital outflows. Nonetheless, Malaysia recorded a healthy 5.0% Gross Domestic Product (“GDP”) growth, exceeding World Bank's revised forecast of 4.7% for 2015. Economic growth continued to be driven by investments and consumption from the private sector, in line with the objectives of the Economic Transformation Program to see increased participation of the private sector in driving the economy forward. Meanwhile, inflation remained manageable with the Consumer Price Index registering at 2.1% in 2015 compared to 3.2% in 2014 despite the introduction of the Goods and Services Tax and subsidy rationalisation.

The Malaysian economy is expected to expand at a slower pace for 2016 in anticipation of easing in private consumption growth and the effects of low commodity prices on export revenues.

PERFORMANCE REVIEW

In FYE 2016, the Group recorded revenue of RM162.4 million, a 23.8% increase from RM131.2 million in the previous financial year arising from higher interest income generated through the introduction of improved risk-based products at the back of a larger loan base. The Group also saw an increase in its pre-tax profits by 18.6% from RM45.7 million to RM54.2 million, primarily as a result of higher revenue from the loan financing segment.

Similarly, profit after tax (“PAT”) improved 9.4%, from RM36.2 million to RM39.6 million in FYE 2016. This translated into improved earnings per share of 3.08 sen, up 35.7% from a year ago, and higher return on equity of 7.7% for FYE 2016.

The Group expects to remain profitable in the next financial year ending 31 March 2017.

CONSUMER FINANCING

Bank Negara Malaysia (“BNM”) in its 2015 Annual Report cited that Malaysia's household debt remained elevated at 89.1% against the GDP, albeit at a slower growth pace of 7.3% (2014: 9.9%; 2013: 11.7%). The slower growth was largely due to the pre-emptive macro and micro-prudential measures implemented by BNM and fiscal measures introduced by the Government to contain household debt, particularly among the lower income group. According to BNM, asset quality has improved and the ability to service debt remains sound as at the end of 2015. Nonetheless, the Group is conscious of the risks associated with high household debt and remain guided by BNM's rulings and guidelines.

On the business front, the Group remains focused in building quality loans with continued emphasis on improving asset quality and operational efficiencies. The Group is also mindful of the importance in staying relevant to maintain its competitiveness in the market. Separately, the participation in BNM's Central Credit Reference Information System (CCRIS) is under progress and augurs well with the Group's objective in pursuing responsible lending.

Despite the challenging environment, the Group's personal financing segment strengthened over the financial year arising from favourable market demand. Asset quality remained a key focus area for FYE 2016 where efforts to improve and strengthen our credit scoring model resulted in sustainability of our loans portfolio. Additionally, the Group simplified its processes with the objective to improve overall loan processing turn-around-time, giving rise to better operational efficiency. Against this backdrop, total loans portfolio grew by a commendable 17.8% from RM1.2 billion to RM1.4 billion against the previous financial year.

COMMERCIAL FINANCING

This segment registered a lower net loss of RM1.8 million during the financial year, as the Group streamlined its business, focusing on cost management, optimising headcount and credit recovery. This translated into a significant 52.6% improvement compared to the RM3.8 million loss in the previous year.

Moving forward, the Group remains focused in servicing its existing clients while driving recovery efforts with the objective of returning “back to black”.

CORPORATE DEVELOPMENT

The Group carried out two corporate exercises in FYE 2016, namely the implementation of a new Employees' Share Scheme (“ESS”) as well as a Share Consolidation and Capital Repayment exercise.

The ESS replaced the previous Employees' Share Option Scheme (“ESOS”) on 31 December 2015 and incorporates a Restricted Share Grant component to provide greater flexibility in incentivising its employees. On 23 June 2016, the Company offered a total 7,940,000 options to its eligible employees for their continuing contribution to the success of the Group.

On 26 April 2016, the Group successfully consolidated four (4) ordinary shares of RM0.025 each into one (1) ordinary share of RM0.10, resulting in an adjusted issued and paid-up share capital of 340,952,486 ordinary shares from 1,363,809,945. Subsequently, the Capital Repayment of RM0.075 per share, totalling RM97.5 million, was completed on 6 May 2016. These initiatives formed part of the Group's capital management strategy towards achieving a more efficient capital structure with the aim of improving the Group's performance and returns to shareholders.

Meanwhile, a Sukuk Murabahah Asset-Backed Securitisation Programme of up to RM900.0 million in nominal value (“Sukuk Programme”) has been established via Al Dzahab Assets Berhad (“ADA”), a trust-owned special purpose bankruptcy remote vehicle, with the underlying loan receivables originated by RCE Marketing Sdn Bhd. This marked the Group's fourth venture into the debt capital markets.

On 21 June 2016, ADA successfully launched its first issuance of RM155.48 million with AAA and AA3 ratings assigned to its senior class by RAM Rating Services Berhad.

INVESTOR RELATIONS

The Group practises a strong commitment to transparency as well as good corporate governance. The Company's website (http://www.rce.com.my) provides the latest information, financial results and corporate developments in a timely manner.

Enquiries or issues of concern can also be directed to IR@rce.com.my, a dedicated point of contact for investors and shareholders.

Shareholders are also given the opportunity to comment or enquire on the performance and operations of the Group during the Annual General Meeting, where shareholders are updated with a presentation of the Group's major activities and performance by its key personnel.

CORPORATE SOCIAL RESPONSIBILITY

In addition to being a growing business entity, the Group is committed towards giving back to the society. The Group through its continued partnership with National Kidney Foundation carried out health screening campaigns in order to raise health awareness and foster a healthier lifestyle.

The Group also considers education a vital element in improving quality of life. The Group, in collaboration with Yayasan Azman Hashim, assisted deserving students through academic sponsorships believing in their potential to be the leaders of the next generation.

DIVIDENDS

The Group had on 8 October 2015, paid a special interim single-tier dividend of 105% (10.5 sen) per share totalling to RM134.7 million to its shareholders to reward them for their continuous support in addition to achieving a more efficient capital structure.

Additionally, the Board is pleased to recommend a final single-tier dividend of 35.0% (3.50 sen) per share for FYE 2016 which will result in an estimated pay-out of RM11.4 million or 28.8% of PAT of RM39.6 million. As of FYE 2016, this represents the tenth consecutive year of dividend payments declared by the Group with the objective of providing sustainable returns to our shareholders.

LOOKING FORWARD

The subdued economic conditions are expected to continue for 2016 and Malaysia's GDP growth rate is forecasted to remain stable between 4.0% - 4.5%. Nevertheless, the Group is cautious in anticipation of increased competition and continued volatility in the macro environment.

Going forward, the Group takes a long term view in quality growth through continuous fine-tuning of its credit scoring model. The Group also believes in keeping abreast on technology advancements, not just how they enable us to be more efficient, but also to aid us in moving beyond conventional lending. Therefore, the Group had embarked on a strategy to simplify processes across all divisions to better position ourselves in pursuing responsible growth and delivering long-term value to our shareholders.

ACKNOWLEDGMENT

On behalf of the Board, I would like to extend my sincerest thanks and appreciation to all our shareholders, business associates and management team for their continuous support, commitment and contributions.

I also wish to convey my gratitude to the regulatory authorities for their counsel as well as my fellow Board members for their valuable contributions and cooperation.

Shahman Azman
Chairman

8 July 2016