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Chairman's Statement

On behalf of the Board of Directors of Knusford Berhad ("KB"), I am pleased to present the Annual Report and Audited Financial Statements of the Group for the Financial Year Ended ("FYE") 31 December 2018.

Overview of Financial Performance

For FYE 2018, the Group reported revenue of RM209.46 million, a healthy increase of 29.73% compared to revenue of RM161.45 million in FYE 2017. The significant escalation in revenue was predominantly drawn from the construction and trading divisions, where sales were high arising from the commencement of new construction projects.

The Group's loss before tax, however, deteriorated from RM3.44 million in FYE 2017 to RM29.03 million in FYE 2018. The poor performance of the Group in FYE 2018 stemmed from the loss sustained by the Group in a construction project in Pengerang, Johor despite the construction division recording the strongest revenue from among all divisions in the Group.

2018 was a challenging year for the construction and property development industries, upon which the Group substantially relies. Rising construction costs, property cooling measures taken by the Government and the overall market's lower consumer sentiment have contributed to a sluggish property market.

Moving Forward

KB will continue to grow and add value to all our business divisions comprising trading of building materials and rental of plant and machinery, civil construction and engineering works, as well as property development, to attain sustainable returns for our shareholders. Financial management and cost control will be strongly emphasised, while business development will continue to be pursued to ensure a steady pipeline of work going forward.

The trading division will pursue practical measures to ensure that it is not only remains resilient and cost effective, but also relevant and competitive in the market place given the growth in suppliers from China and other markets. The ongoing Setiawangsa Pantai expressway and River of Life projects are anticipated to further enhance the revenue for this division in 2019.

The construction division has attained the highest revenue for the Group in 2018. Furthermore, business development activities have surpassed targets, garnering the Group an order book of more than RM410 million in 2018. The Board expects the projects secured to enhance the Group's earnings and net assets in 2019. Though the industry as a whole is facing immense challenges and is forecast to grow at a relatively slow pace in 2019, the Group will take all concerted efforts and continue to bid for viable projects, particularly with our existing clients, to ensure that the construction division's business remains intact and sustainable. We will also strive to ensure that the loss suffered by the Group in 2018 would not be repeated and hence return the construction division to profitability soon.

The property market faced severe challenges in 2018 and will continue to do so in the near future. The factors of poor sentiment, price affordability, oversupply in certain segments, and disinclination of lenders to give out loans are some of the major obstacles faced by the industry. Nonetheless, the Group takes the long view of the property market and will continue to participate in property development albeit in a more cautious and careful manner.

The Group's low gearing should place us in good stead to secure new construction and other projects in the future. KB will continue to diligently pursue projects by exploring business opportunities independently or through strategic alliances with business partners and associates.

Industry Overview and Prospects

Malaysia's economic prospects remain favourable on the back of sound domestic demand. However, the construction and property development industries remain vulnerable owing to the uncertainties of the macro market, poor sentiment, as well as the structural challenges mentioned earlier. As such, we expect the Group to face increasing competition in all aspects of its businesses.

KB will continue to take proactive measures to strengthen our skills and capabilities, manage our cost base and finances, seek out quality and cost-effective products and services, enhance our network and business relationships, compete and bid for viable projects, and deliver to our clients on time and at agreed costs - all in order to deliver superior performance and enhance shareholder returns.

Corporate Governance

The Board recognises the importance of adopting sound corporate governance and is committed to meeting all applicable rules, regulations, norms and standards to ensure that we meet the expectations of all stakeholders in this regard.

Acknowledgment

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

I would also like to express my most sincere appreciation on behalf of the Board to our former director, Mr Lee Hun Kheng for his invaluable contribution to the Group during his tenure of office. In addition, I would like to take the opportunity to welcome Mr Lim Chen Thai who joined the Board on 26 February 2019.

Last but not least I would like to extend my gratitude to the Directors for their undivided support and manifold contribution, and my sincere appreciation to the Management and staff for their hard work and loyal dedication to the Group.

DYAM Tunku Ismail Ibni Sultan Ibrahim
Chairman