The Group remains focused on executing the ongoing projects secured earlier as well as tendering for new projects where we have the competitive edge and track records. Zelan through its subsidiary, Zelan Construction Sdn Bhd (“ZCSB”) managed to complete the construction of the Temporary Building Development Consisting Four-Storey Sales Office, Show Unit and a Single-Storey Sub-Basement on part of Lot PT 143, Section 56, Jalan Hang Tuah / Jalan Pudu, Wilayah Persekutuan Kuala Lumpur for BBCC Development Sdn Bhd (“BBCC Project”). The Certificate of Practical Completion (“CPC”) was issued on 4 August 2017.
Our wholly-owned subsidiary, Konsesi Pusat Asasi Gambang Sdn. Bhd. ("KPAG") is currently undertaking the final stage of rectification works in respect of the Centre for Foundation Studies (Phase 3) of the International Islamic University Malaysia ("IIUM"), Gambang project in Pahang ("IIUM Gambang Project") and thereafter a Certificate of Availability ("COAV") will be issued to IIUM upon completion of the said rectification works. In light of the said development, KPAG is entitled to the issuance of the Certificate of Acceptance ("COA") by IIUM based on the Concession Agreement dated 5 July 2012 entered into between the Government of Malaysia ("Government"), IIUM and KPAG. As the project is a Build-Lease-Manage-Transfer basis by way of private finance initiative ("PFI"), upon securing the COA from IIUM, KPAG will carry out the asset management services of the IIUM Gambang Project commencing from the date of the issuance of the COA until the expiry of the concession period.
The physical works are in progress for the two (2) ongoing projects undertaken by the Group namely, the construction of the Drawbridge connecting Muara North and Muara South in Terengganu (“Drawbridge Project”) and the construction of the Sungai Besi-Ulu Kelang Expressway (SUKE) Package CB-2 in Kuala Lumpur (“SUKE Project”). ZCSB together with its appointed sub-contractors/consortium partner are working hand-in-hand to ensure that both projects will be able to complete within the contractual completion date.
In relation to Meena Plaza Mixed Use Development Project in Abu Dhabi (“Meena Plaza Project”), the Confidentiality and Arbitration Proceedings Stay Agreement (“CA”) entered into between Meena Holdings LLC (“MH”) and Zelan Holdings (M) Sdn Bhd (“ZHSB”) dated 2 February 2017 has been uplifted, hence the arbitration proceedings have re-commenced. ZHSB and MH have finalised and executed the Terms of Reference and submitted the same to the Arbitral Tribunal of the International Court of Arbitration, International Chamber of Commerce (“ICC”) in Abu Dhabi. The Procedural Timetable has also been agreed upon and approved by the Arbitral Tribunal of ICC. The hearing dates for the arbitration have been fixed on 6 January 2019 to 17 January 2019.
For more details on the Group’s operational and financial performance for the year under review, please refer to Management Discussion & Analysis which can be found on pages 010 to 013 of this Annual Report.
The Group consolidated revenue for the financial year ended 31 December 2017 (“FYE 2017”) stood at RM70.9 million, representing a decline in revenue of RM151.9 million or approximately 68.1% from RM222.8 million reported last year. The Engineering and Construction business segment marked a slowdown in revenue principally due to the completion of three (2) main projects namely, Material Off Loading Facility Jetty Project at Tanjung Setapa, Johor and BBCC Project, coupled with the final rectification works in respect of the IIUM Gambang Project and the completion of major phases of the Drawbridge Project. Nonetheless, this decline was mitigated by the revenue from SUKE Project which was secured by the Group in August 2016.
The Group posted higher Loss After Zakat and Taxation ("LAZT") of RM74.3 million as compared to RM67.6 million reported in the preceding financial year due to lower gross loss of RM1.2 million contributed by higher finance income of RM36.8 million coupled with higher diminution in carrying value of long term receivables from Meena Plaza Project and IIUM Gambang Project of RM54.1 million, provision for impairment of amount due from an associate of RM3.6 million, unrealised foreign exchange loss of RM13.2 million and income tax of RM2.9 million. However, this is compensated by lower interest expense of RM26.7 million and refund of late payment interest on the revised tax assessment of RM11.6 million from the Group's Indonesian Operations.
In view of the current financial position of the Group, the Board does not recommend payment of dividend for the financial year ended 31 December 2017. The Board will continue to assess Zelan’s capital structure based on the goals and strategies as well as the financial position of the Group.
BUSINESS OUTLOOK AND STRATEGY
In Budget 2018, the Government of Malaysia forecasts that the GDP in 2018 is expected to expand between 5.0% to 5.5% led by domestic demand. The construction sector will be the ultimate beneficiary of the 11th Malaysia Plan (“11MP”) as most of the development expenditure will be infrastructure-centric. The transport and logistics sector will continue to remain a crucial driver of growth; leveraging new investments in roads, rails, and air services to boost regional development.
The Engineering and Construction Business segment is poised to be the growth engine of the Group for the next few years. As part of our business plan, we will continue to look out for and pursue opportunities for both engineering and construction projects and private partnership projects locally. At present, we are optimistic that we will be able to secure a few more construction projects especially from the tenders which we have participated during first quarter of the financial year 2018.
The Board is committed and focused in upholding and implementing high standards of corporate governance, compliance, business conduct, safety and environmental management, all of which are vital to the Group’s performance and business sustainability. It is our belief that good corporate governance supports long-term value creation for all our stakeholders. Our Corporate Governance Overview Statement can be found on pages 023 to 030 of this Annual Report.
RELATED PARTY TRANSACTIONS
Significant related party transactions of the Group for the financial year under review are disclosed in Note 28 of the Notes to the Financial Statements.
On behalf of the Board, I would like to express my appreciation to various parties who had given Zelan their utmost support. Our sincere gratitude to valued shareholders for their continuous faith and confidence in us all these years. Our sincere thanks also to our financiers, clients, business partners, consultants and the regulatory authorities for their unwavering support and co-operation. I would also like to express my appreciation to the Board members for their contributions and unwavering support during the year. I look forward for their continued enthusiasm, wisdom and co-operation in guiding the Group through the challenges in the year ahead.
We were saddened by the loss of one of our Directors, Allahyarham Dato' Abdullah bin Mohd Yusof, who passed away on 25 April 2018. His contributions to the Company will be always be remembered. I also wish to place on record my appreciation to YBhg. Dato' Sri Che Khalib bin Mohamad Noh who has resigned from the Board for his sound advice and contributions throughout his tenure as Director of the Company.
Last but not least, I wish to convey my appreciation to the Management team and employees for their unrelenting commitment and dedication to the Group. The Board, the Management and everyone else in the Group will continue to work hand-in-hand towards our common goal to enhance the performance and value of Zelan.
Dato' Anwar bin Aji