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Chairman's Message

Chairman's Statement

Dato' Seri (Dr.) Goh Eng Toon
Chairman, Non-Independent Non-Executive Director

Dear Shareholders,
On behalf of the Board of Directors, I am delighted to present to you the Annual Report and Audited Financial Statements of Salcon Berhad ("Company") and its group of companies ("Group") for the financial year ended 31 December 2014.


Financial Performance

During the year under review, the Group recorded a revenue growth of 23% to RM194.5 million as compared to RM164.6 million for the same period in the preceding year. However, profit after tax was 36% lower at RM36.9 million during the financial year as compared to a profit after tax of RM57.6 million in the previous year. The drop in profit is due to lower profit from the discontinued China concessions as a result of the completion of disposal transactions under SPA-B apart from Salcon Linyi (HK) Limited.

We are delighted that the Group has successfully secured two landmark projects in Selangor, namely Langat 2 Water Treatment Plant project and the Langat Centralized Sewage Treatment Plant project with a combined contract value of nearly RM600 million in April and December 2014 respectively. These two projects will keep us busy for the next 2-3 years and are expected to contribute positively to the Group's earnings in the coming financial year.

The Group's balance sheet remains strong with shareholders' funds at RM540.4 million whilst cash and cash equivalents of RM294.5 million as at 31 December 2014. The Group is at net cash position in terms of gearing.

Dividens

As demonstrated in previous years, the Company remains committed to a progressive dividend policy for the financial year ended 2014 and the Board is proposing a first and special final single tier dividend of 3.0 sen per share equivalent to RM20.2 million.

Awards & Recognition

In April this year, Salcon was awarded IEM Award for Contribution to Engineering Industry in Malaysia by the Institution of Engineers Malaysia in recognition of its contribution and achievement in Water and Wastewater Engineering.

The Group was also awarded the Best Site Construction Management under the category of 'Projek Pembinaan Sistem Rangkaian Paip Pembetungan bernilai melebihi RM100 juta' by Jabatan Perkhidmatan Pembetungan (JPP). The award and recognition for best construction site management is testament to the Group's excellence in the construction management of Package D55 which involved upgrading works of sewerage services in Klang. The award was presented by YB Datuk Seri Panglima Dr Maximus Johnity Ongkili, the Minister of Energy, Green Technology and Water during the 'Malam Amal Mesra' organized by JPP - Yayasan Hijau on 23rd November 2014.

IEM Award for Contribution to the Engineering Industry in Malaysia by the Institution of Engineers Malaysia

The Best Site Construction Management Award by Jabatan Perkhidmatan Pembetungan (JPP)



Business Outlook & Prospects

As a premier water and wastewater engineering treatment specialist in Malaysia and other Asian regions since 1974, Salcon continues to play a vital role in the water and wastewater industry. Having established a strong foothold in our core business of water and wastewater management, the Group has started venturing into property development and technology services, as part of its long-term strategic plans to diversify its businesses and revenue streams.

The Malaysian economy is expected to expand at a steady pace with Gross Domestic Product (GDP) growth of between 4.5% to 5.5% in 2015, despite the declining crude oil price and ringgit depreciation. This modest growth will be driven by resilient domestic demand underpinned by the 2015 Budget measures and the anticipated improving external sector given the better global economic outlook.

In terms of prospects for water and wastewater projects, in the National Budget 2015 announced in October last year by the Prime Minister, the Government will formulate a National Water Blueprint to ensure sustainable long-term water supply nationwide. These include holistic management of rivers, construction and improving water treatment plants all of which are expected to create opportunities for the Group.

The Group will remain vigilant to market changes and alert to take on such opportunities that may arise from the domestic and overseas markets that the Group operates in.

As for property development, the Group is positive with the growth of the industry. We believe that buying interest should progressively return as potential house buyers come to the realisation that property prices are resilient and that potential inflationary pressures from the implementation of the GST in April 2015 could push up property prices further.

In our new technology services venture, we look forward to good contribution as the Group anticipates to sign new contracts to supply fibre optic services as well as build on other ancillary businesses by leveraging on our fibre optic infrastructure and through strategic partnerships.

We are confident that with our good management skills and expertise together with the new areas that we venture in, we will deliver on our promises and excel in our performance. We remain committed to the objectives that have driven our success over the past 40 years. These values are ingrained into our corporate culture and are followed in every aspect of our business operation through our five core values: Commitment, Teamwork, Professionalism, Respect and Results.

Laying of fibre optic cables along the LRT track in the Klang Valley

RES280 sales team during Buyers' Appreciation Day


Corporate Responsibility

We place our corporate responsibilities high on our agenda to ensure good corporate governance practices to instil confidence in the Group. We subscribe and will continue to uphold the principles of good corporate governance as we believe that it is the platform for sustainable enhancement of shareholders' value.

Appreciation

I would like to take this opportunity to express our appreciation to the management and employees of the Group for their dedication and commitment and to our shareholders, partners, customers, suppliers, bankers and regulatory authorities for their invaluable support and assistance during the year. We look forward to their continuous support to embrace and overcome the new challenges ahead.

Last but not least, on behalf of the Board, I would like to express our sincere appreciation and highest gratitude to Mr. Ho Tet Shin for his dedication and contribution during his tenure as an Independent Non-Executive Director of Salcon Berhad since 2005. I take this opportunity to wish him all the best for his future endeavors. I am pleased to welcome Mr. Chan Seng Fatt, an experienced management leader in various corporate entities for more than 25 years as a new member to the board.