Chairman's Statement

On behalf of the Board of Knusford Berhad (KB or the Group or the Company), I am pleased to present the Annual Report and Audited Financial Statements for the Group for the financial year ended 31 March 2025 (FYE 2025).

The core activities of the Group are trading of building materials, construction, property development and investment. The Group is also involved in landscape construction and maintenance services as well.

Performance Overview

The Group recorded revenue of RM80.48 million and a profit before tax of RM11.92 million in FYE 2025, compared to revenue of RM148.80 million and a profit before tax of RM13.63 million in financial year ended 2024 ("FYE 2024"). The decrease in revenue was mainly due to lower contributions from the trading and construction sectors. The decrease in profit before tax was primarily due to the lower sales volume. However, the impact was partially mitigated by an one-off gain of RM12.03 million from the disposal of an investment property.

An in-depth review of the financial performance is presented under the Management Discussion and Analysis ("MD&A") section on pages 24 to 27.

Corporate Development

  1. On 27 September 2023, the Company received a letter of proposal dated the same day ("Proposal Letter") from Tan Sri Dato' Lim Kang Hoo ("TSDLKH"), a major shareholder of the Company, who is also a major shareholder and the Group Executive Chairman of Ekovest Berhad ("Ekovest"). The Proposal Letter requested the Company to consider participating in a reorganisation, rationalisation, and merger exercise involving, among others, the proposed merger of the construction and construction-related businesses of Ekovest and Knusford through the acquisition by Knusford of the entire issued share capital of Ekovest Construction Sdn Bhd ("ECSB"), a wholly-owned subsidiary of Ekovest and its existing construction arm ("Proposed Knusford–ECSB Merger").

    Pursuant thereto, on 27 October 2023, the Company entered into a binding heads of merger agreement ("HOA") with Ekovest to exclusively explore and negotiate the Proposed Knusford–ECSB Merger. Under the HOA, the Company proposes to acquire the entire equity interest in ECSB from Ekovest for an indicative purchase consideration of RM450 million ("Purchase Consideration"), to be arrived at on a willing-buyer, willing-seller basis, taking into consideration the audited net assets of ECSB as at 30 June 2023.

    Under the terms of the HOA, both parties have agreed to use their best endeavours to negotiate in good faith and enter into the definitive agreement within four (4) months from the date of the HOA, with an automatic extension of three (3) months thereafter, or such further extended period as may be mutually agreed upon ("Expiry Date").

    On 27 May 2024, the Parties mutually agreed to extend the HOA to 27 July 2024. Subsequently, on 26 July 2024, the Parties further agreed to extend the HOA for an additional six (6) months, from 28 July 2024 to 27 January 2025.

    On 27 January 2025, the Parties have mutually agreed for a final extension of 6 months from 28 January 2025 to 27 July 2025, to grant more time for the Parties to assess, evaluate and deliberate the Proposed Knusford-ECSB Merger.

    On 28 July 2025, the Board announced that the HOA had lapsed on 27 July 2025.

  2. The Company had on 27 March 2024, entered into a conditional sale and purchase agreement ("SPA") with Emerald Plan Sdn. Bhd. to dispose a freehold land together with the buildings erected thereon held under HSD 51799, PT 43447, Mukim and District of Klang, Selangor with a provisional land area of 25,625.48 square metres (approximately 275,832 square feet) bearing postal address of No. 8, Jalan Kecapi 33/2, Taman Perindustrian Elite, Seksyen 33, 40350 Shah Alam, Selangor Darul Ehsan for a cash consideration of RM28.0 million ("Proposed Disposal").

    At the Extraordinary General Meeting ("EGM") held on 28 June 2024, the shareholders of the Company had approved the Proposed Disposal.

    The disposal was completed on 23 October 2024.

Industry Landscape

Malaysia's Gross Domestic Product (GDP) growth is officially forecasted at 4.5% to 5% for 2025, supported by strategic investments, sound fiscal management, and overall economic resilience. The growth outlook is expected to be driven by sustained inflows of foreign direct investments (FDIs), rising domestic investments, and initiatives by government-linked investment companies (GLICs), aligned with national development priorities.

Nonetheless, downside risk remains, particularly from geopolitical tensions and policy uncertainties, following the election of U.S. President. The recent implementation of U.S. tariff measures has already begun to impact Malaysia's export-oriented manufacturing sector and may moderate the country's economic momentum.

In 2025/2026, the pricing of building materials in Malaysia is likely to reflect a mix of stability and upward pressure. Although costs of some materials declined from peak inflationary level, certain materials, especially steel and lumber, may experience increased volatility due to ongoing global trade tensions and supply chain disruptions.

In the construction sector, the Government's policy on subsidy rationalisation is also expected to influence inflation trends. Contributing factors include higher building materials costs, the anticipated introduction of a carbon tax, the removal of fuel and utility subsidies, and labour cost adjustments proposed under Budget 2025. The recent introduction of Sale Tax and expansion of the Service tax could further lift the inflation rate up. Additionally, the newly announced Employees Provident Fund (EPF) contribution requirement for Non-Malaysian Citizen Employees is expected to further increase construction costs. Collectively, these factors are expected to raise the overall construction costs, posing margin compression risks for contractors.

In an increasingly competitive environment, contractors often resort to price undercutting to secure jobs, placing further pressure on suppliers' margins. Additionally, delays in client payments continue to restrict cash flow, tightening liquidity and limiting the Group's ability to bid for new projects. As such, timely receivables collection is therefore essential to sustain operational momentum and replenish Group's order book.

Turning to the property sector, the outlook remains cautiously optimistic, underpinned by government policy support and selected areas of resilient demand. However, the sector still faces several headwinds, including persistent oversupply, particularly in the high-end segment—elevated household debt, high interest rates, and subdued consumer sentiment. The recent expansion of the Sales and Service Tax is expected to increase construction costs for infrastructure, commercial, and industrial buildings. While developers may attempt to pass on these costs to buyers, market acceptance and affordability remain key uncertainties. In addition, domestic inflation continues to exert pressure on housing affordability. Despite these challenges, opportunities remain in targeted segments, particularly affordable housing and transit-oriented developments (TODs), which continue to benefit from policy support and underlying demand.

Moving Forward

The Board acknowledges the ongoing challenges in the construction and property sectors, largely driven by escalating construction costs, supply chain disruption and stiff competition. Budget 2025, with an allocation of RM335 billion for operating expenditures and RM86 billion for development projects, includes substantial investments in transport infrastructure such as highways, ports, and railways. These initiatives are expected to generate new tender opportunities, which the Group will monitor closely.

Against a backdrop of continued order books depletion and broader market challenges, the Board anticipates a challenging operating environment in the near term. Despite this, the Group remains focused on its core businesses areas, namely building materials trading, civil and building works, and landscaping services.

To mitigate inflationary pressures and protect margins, the Group has adopted a selective tendering approach, targeting only projects with viable profit potential. The Board remains to monitor operational and financial risks closely and will continue to take proactive measures to ensure business continuity and long-term sustainability.

In navigating market complexities such as tariff volatility, the Group will further strengthen supplier relationships and diversify sourcing strategies to avoid over reliance on any single supply channel. Exploring the use of alternative, non-tariff materials forms part of the Group's broader risk mitigation plan.

The Group remains committed to delivering all projects on time and within budget. Prudent spending, cash flow management, and disciplined cost control will be maintained, supported by the experience and expertise of the Group's management team.

Moving forward, the Group will pursue cautious expansion of its order book, explore new business avenues and uphold high project delivery standards. These initiatives, underpinned by strict financial discipline, are essential to sustaining operational resilience and ensuring long-term growth in a dynamic and competitive landscape.

Corporate Governance

The Board recognises the importance of maintaining good corporate governance and is committed to meet all applicable rules, regulations, norms and standards that will meet the expectations of the stakeholders.

The principles of integrity, transparency and accountability are embedded in its Code of Conduct and Ethics. Measures are put in place and constantly tested and reviewed to ensure that they stay relevant and effective in the environment of the Company's operations.

For further insights into our measures in upholding corporate governance, please refer to the Corporate Governance Overview Statement ("CG Statement") within this Annual Report and our Corporate Governance Report ("CG Report").

Sustainability

At KB, we continue to recognise the importance of conducting our business in a sustainable and responsible manner focusing on sustainability values based on Environmental, Social and Governance framework. An update on our approach towards sustainability is included in our Sustainability Statement section on pages 47 to 65.

Acknowledgment

On behalf of the Board, I would like to express my gratitude to all our valued customers, employees, bankers, business associates and partners and the shareholders for their continuous support and confidence in the Group.

DYAM Tunku Ismail Ibni Sultan Ibrahim
Chairman

Date: 25 July 2025