performance review
Innovation, strong partnerships, an enhanced customer focus and a keen sense of adaptability are the core strategies EON has adopted to accelerate forward in a highly competitive environment. We are committed to pursuing every opportunity with a view to maximising profitability and enhancing shareholder value. 36 Chairman’s Statement
42 Managing Director’s Review of Operations
50 Group Financial Review Chairman’s Statement
Tan Sri Ab. Rahman Bin Omar
36 eon berhad annual report Dear Shareholders, 2005 marked another challenging and exhilarating year for EON. Despite the adversities, we were able to remain steadfast and weather the storm because of the solid foundation we have put in place.
Growth Strategy Dividend Payout While margins came under pressure amidst a volatile and For the year under review, EON continued to deliver value highly competitive business environment, we pursued our to its shareholders by paying out an interim dividend of 5 sen long-term growth strategy which calls for EON to be an agile, per share less 28.0% tax on 14 October 2005. Subject to robust and customer-centric entity. The Group’s continued shareholders’ approval at the forthcoming Annual General commitment to this strategy will ensure that our evolution Meeting, the Board is recommending that a final dividend towards long-term success will continue unhampered despite of 18 sen per share amounting to RM32,269,000, be paid to the increasingly challenging operating environment. Our core shareholders on 22 June 2006. Total cash dividends for the values of integrity, customer service, learning, innovation year would thus amount to 23 sen per share less 28.0% tax. and pride, have reinforced the foundation on which we will continue to develop. In 2005, the Group accelerated its Key Initiatives business transformation through an increased focus on the The business transformation initiatives implemented over multi-brand business and after sales services. the last few years will enable us to continue focusing our efforts on remaining competitive. Innovative products and EON Group remained profitable in 2005 despite the tough improved service levels to customers will be the driving forces challenges of the operating environment. that will assist us to become a truly customer-centric entity.
Financial Performance Proton and Multi-brand Businesses On behalf of the Board of Directors, I am pleased to present The Proton marque has been and will remain our core the Company’s Annual Report for the financial year ended business. During the year, the Company worked closely 31 December 2005. with Proton Edar Sdn Bhd (Proton Edar) to implement various marketing activities targeting different market segments. The year under review saw the EON Group achieve profit before taxation (PBT) of RM108.6 million on a revenue of During the year, the EON Group commenced the distribution RM3,094.1 million. This decline over 2004’s results was entirely of the Mitsubishi marque with the sales of Colt, Lancer 1.6, attributable to the exclusion of the results of EON Capital Lancer Evo, L200, Grandis and Outlander models in July 2005. Berhad (ECB) Group effective July 2004, following the In addition, EON Group will continue to build up its other distribution of ECB shares to shareholders as well as the multi brand businesses including the Audi and Hyundai/ net gain on the disposal of EON’s investment in EONCAP Inokom brands. Securities Sdn Bhd (formerly known as Leong & Company Sdn Bhd) of RM18.5 million included in 2004. The distribution There was a concerted effort to derive revenue from after of ECB’s shares and the disposal of EONCAP Securities were sales services for both Proton and other marques at our both part of the Group’s continuing strategy of divesting service centres. our non-core businesses to unlock shareholders’ value. Skills Development Excluding the earnings of the ECB Group and the net gain Over the years, EON has invested in enhancing the skills of on the disposal of EONCAP Securities, Group revenue and its employees through building up the capabilities of Akademi PBT were in fact higher by 3.8% and 24.1% respectively. Saga, an in-house technical training centre. In this respect, Group PBT was higher due to the voluntary staff separation Akademi Saga has received accreditation as an authorised cost of RM13.7 million taken up in 2004 and the write-back assessment Centre for Automotive Education and Training of certain provisions partly offset by lower interest and via a strategic alliance with the Institute of The Motor other income. Industry United Kingdom (IMI) and Majlis Latihan
37
eon berhad annual report Chairman’s Statement
Vokasional Kebangsaan (MLVK). We are now in a position In 2005, our support of community programmes included to train our personnel on other marques and derive additional contributions to the “Snoozelan” Therapy Room for the revenue from sharing of expertise with other players in the Autism Education Centre in Melaka, the Ipoh Spastic Children industry, including entrepreneurial bodies like MARA. The Daily Centre and the Manjung Haemodialysis Centre. overall aim of this initiative is to build up an internal and national automotive workforce of international standard. Awards And Recognition As a result of the various initiatives covering customer centric activities and employee relations, the Company Under the EON Leadership Development Programme, received the International Association of Business selected prime candidates are being groomed to take Communicators (IABC) Silver Quill Awards for Customer up key positions within the organisation. This programme Relations, Customer Service, Employee Relations , Best will ensure that employees with leadership potential are Workplace and was declared the overall winner of the identified, nurtured and placed on a steep learning curve IABC Silver Quill Awards. to give the necessary exposure and coaching to prepare them to propel EON into the upper ranks of the multi-brand The Company also received a merit award at the 2005 automotive business. Chinese New Year Greeting Ad Awards Presentation organised by China Press and Nanyang Siang Pau in Customer-centric Activities March 2005. The same month saw us receiving another At EON, we believe that our holistic approach to meeting merit award at the ACCA Mesra Awards. customer needs and a consistency in high-quality customer experiences will help reinforce the EON brand and reputation Our adherence to good corporate governance practices as well as ensure repeat business and greater brand awareness. resulted in EON receiving a merit award for our 2004 annual These initiatives include the implementation of the data report submission for the National Annual Corporate Report warehousing projects, realignment of the complaint Awards (NACRA). management process for the multi-franchise businesses and upgrading our contact centre for telemarketing and In September 2005, some 253 employees were recognised survey activities. for their 10 years of service at EON while 214 staff received their 20-year long service awards at the 10/20 Years Service
ISO certification for Euromobil Sdn Bhd was obtained in Awards ceremony. April 2006 while EON Berhad successfully received ISO Local Prospects certification for the second year in a row. The Malaysian Economy The Malaysian government forecasts that the Malaysian Corporate Social Responsibility (CSR) Activities economy is expected to strengthen further in 2006 in an EON is committed to building enduring and mutually beneficial environment of more favourable global conditions. Real relationship as well as re-investing in the communities we GDP is projected to grow at a faster rate of 6.0% in operate in. We implemented tangible CSR activities with the 2006 (5.3% in 2005), driven by the strengthening export understanding that good corporate citizenship and effective performance and resilient domestic demand. Domestic community relations are essential to our long term success. demand would be driven by private consumption as a
38 eon berhad annual report result of rising income and demographic factors. The latter will prompt rationalisation among all players. While the underscores the high propensity to consume of Malaysia’s expected reductions in per unit cost will enable manufacturers relatively large young working population. Private investment to devote their resources to enhancing quality, it will also is expected to expand particularly in the manufacturing make competition more intense. sector and the oil and gas industry, spurred by favourable demand conditions. Inflation is expected to be in the The NAP includes among other elements, a reduction of range of 3.5% to 4%. At the same time, in an environment effective tax rates for CBU, CKD and fully-imported vehicles of ample liquidity, credit conditions are expected to from ASEAN. It calls for import duties to be reduced to 5% remain supportive. (from 15% previously) under the new ASEAN Common Effective Preferential Tariff (CEPT) guidelines. With the The Government has launched the Ninth Malaysia Plan this excise duty structure being streamlined, this will result in an year incorporating the National Mission, which sets out the overall reduction in the effective tax rates of most motor foundation for further development and the strengthening of vehicles and a reduction in the tax differential between the prospects for the Malaysian economy for the next 5 years the different categories. in three main economic sectors, namely, manufacturing, services and agriculture. New sources of growth in these In terms of CKD vehicles, we are pleased that the NAP is sectors will be identified and promoted to generate complementary to national car manufacturers like Proton additional income and to develop new sources of as it provides many advantages to prepare the various economic wealth. local players for imminent market liberalisation. As a party to the Super Dealership Agreement with Proton Edar, we Auto Industry especially welcome the price reductions for Proton cars In 2005, the total vehicle market surpassed the half a million ranging from RM1,800 to RM4,400 as this augurs well for our mark for the first time to hit a high of 551,042 units with own sales. On top of this, Proton’s range of fuel efficient passenger vehicles comprising 400,835 units or 73.0% of the cars should sit well with customers in view of the recent total industry volume. The Malaysian Automotive Association petrol price hike. The several road shows currently being (MAA) forecasts a modest 3.0% growth in volume for 2006 planned will leverage on these elements to boost the sales to 565,000 units. Nevertheless, we also anticipate the of Proton vehicles. competition to get more intense, with higher Interest rates and stricter financing terms. Used car prices are expected to decline while higher steel and transportation costs will In terms of CBU vehicles, we are involved in this segment by translate into an increase in the cost of raw materials for virtue of our being a distributor of the Audi and Mitsubishi completely built-up (CBU) and completely knocked-down marques. The NAP now provides for a more level playing (CKD) units. Compounding these issues is the higher petrol field with its call for restrictions on the issuance of Approved prices which will adversely impact consumer spending. Permits and more transparency on importation among the players. Going forward in this area, we plan to work more The recently unveiled New Automotive Policy (NAP) is indeed closely with Audi AG and Mitsubishi Motors Malaysia Sdn a positive development for the Malaysian automotive industry. Bhd to stimulate greater sales by selecting suitable models It will result in an increase of investments in the industry and that are readily marketable. As we move forward, we will tap the opportunities of the NAP and position ourselves
39
eon berhad annual report Chairman’s Statement
strategically in the marketplace to deliver value as a competitive environment. Our resources, capabilities and multi-brand player. expertise will all hold us in good stead as we steer through the anticipated challenges that will come our way. EON is of the view that the broad-based policy will help ensure sustainable growth and systematic development Appreciation in all sub-sectors of the local automotive industry over Our sincere thanks to all our shareholders and our the long term. It will give meaningful support for national customers for their loyal support of the EON Group, players, create a more competitive business environment our products and services despite the constraints and and provide a level playing field for all in the industry. uncertainties of the market environment.
To our business partners, PROTON, Proton Edar, Audi AG, Strategy Going Forward Hyundai- Sime Darby Motors, Mitsubishi Corporation and Given the challenging outlook, EON will continue to work Mitsubishi Motors Malaysia as well as our dealers, suppliers, closely together with our principals, especially Proton Edar contractors and government authorities, our heartfelt via joint sales and marketing activities, to capture a good appreciation for your continued commitment in these slice of the market, providing high quality services and turbulent and trying times. competitive pricing. We will also persist with our strategy of enhancing our revenue from the after sales initiatives. We also thank our employees for their dedication, service and contribution to the Company. Your professionalism In terms of cost reduction measures, more aggressive efforts and commitment will help us go a long way in overcoming are required to cut cost and raise productivity. We will the challenges of our operating environment and ensuring carry on reviewing all our networks to ensure that they our continued success. remain competitive and profitable. Going forward, EON will continue to focus its resources on service excellence On behalf of the Board of Directors, the senior management and benchmark ourselves against the best-in-class and all employees, I would like to take this opportunity amongst the automotive players. to thank our outgoing Chairman, Y Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong, for the instrumental role he has Overall, we will persevere to refine and adapt our played for the last 10 years in steering EON’s dynamic business strategy to derive maximum value in this highly growth in the 1990s and in unlocking shareholder value in the new millennium.
40 eon berhad annual report Our heartfelt appreciation also goes to Y Bhg. Tan Sri Adzmi We also extend our heartfelt gratitude to En. Ahmad bin Abdul Wahab for his leadership, dedication and worthy Othman bin Yahaya, Y Bhg. Datuk Haji Faisal bin Siraj, contribution in strengthening EON’s foundation during his Mr. Anthony Nightingale, Y Bhg. Dato Maznah bte Abdul 13-year tenure as the Managing Director. Jalil, Y Bhg. Dato’ Dr M. Shanmughalingam, Y Bhg. Datuk Wan Awang bin Wan Yaacob and Encik Wan Mat bin We want to welcome on board, Y Bhg. Datuk Syed Hisham Wan Sulaiman who have resigned from the Board. bin Syed Wazir who succeeded Y Bhg. Tan Sri Adzmi Abdul Wahab on 12 May 2005. He is no stranger to us having The commitment and participation as well as the insights served with the DRB-HICOM Berhad Group and Proton and ideas of these fine personalities, have helped EON Holdings Berhad Group for more than 20 years. We look significantly in the day-to-day running of our business. We forward to his contribution in his strategic role and assure bid them all adieu and wish them every success in their him that he will receive the Board’s full support as he takes future endeavours. on the challenges of leading EON to greater heights. Thank you. In addition, we would also like to welcome Y Bhg. Datuk Mohd Khamil bin Jamil, En. Mohd Reza Shah bin Abdul Wahid, Mr. Adam Keswick, Y Bhg. Dato’ Anwar bin Aji and Y Bhg. Datuk Abdul Hamid bin Sawal, who have joined the Board on 18 October 2005, 8 December 2005, 1 January 2006, 1 March 2006 and 22 March 2006 respectively. TAN SRI AB. RAHMAN BIN OMAR Chairman We would like to take this opportunity to record our appreciation and gratitude to Y Bhg. Datuk Choo Keng Kit and Ms. Vimala Menon for their valuable contribution and continuous support during their tenure as members of the Board of EON until their resignation on 22 March 2006. They will continue to serve in their current functional responsibilities and accountabilities and remain as members of the Management Committee.
41
eon berhad annual report Managing Director’s
Dear Shareholders, I would like to take this opportunity to thank you for giving me the trust and confidence to lead this esteemed organisation. It is an honour for me to lead an experienced and dedicated team that will further build upon EON’s 21-years of achievement as a leading national vehicle super dealer, and more recently, as a multi-brand automotive company.
Since I came on board on 12 May 2005, the EON team has extended me their undivided support and the rapport between us has been very encouraging. The high energy and dynamism continue to manifest itself throughout the organisation and I am confident that this will hold us in good stead as the Group accelerates to meet the challenges of the marketplace.
Operating Environment Group Performance In 2005, the EON Group faced a tough operating environment For the year ended 31 December 2005, the EON Group with challenges from the aggressive competition from the recorded total revenue of RM3,094.1 million and PBT of national as well as the non-national marques. Perodua, RM108.6 million, lower by 21.7% and 63.8% respectively Toyota and Honda all made substantial inroads into the over 2004’s revenue of RM3,901.2 million and PBT of marketplace. Higher steel and transportation costs have RM300.5 million. This was mainly due to the exclusion of the raised the cost of raw materials for CBUs and CKDs, hence results of ECB Group (effective July 2004) following the affecting profit margins. distribution of the ECB shares to the shareholders and a net gain on the disposal of our investment in EONCAP As competition continued to intensify throughout 2005, Securities Sdn Bhd (formerly known as Leong & Company resources were focused on meeting customer expectations Sdn Bhd) of RM18.5 million taken up in 2004. in our quest to broaden our customer base. Activities centred around reducing attrition and generating revenue by bringing Excluding the earnings of ECB group and the net gain on added value to elements within the multi-brand business the disposal of EONCAP Securities, Group revenue and PBT and after sales services. were in fact higher by 3.8% and 24.1% respectively due to the voluntary staff separation cost of RM13.7 million taken Cooperation between EON and PROTON / Proton Edar was up in 2004 and the write-back of certain provisions partly intensified paving way for better collaboration on key issues offset by lower interest and other income. Higher revenue and the implementation of joint sales and marketing campaigns was registered for the non-Proton vehicle sales with the to enhance sales and customer loyalty to the Proton brand. commencement of the Mitsubishi business during the year. We will continue to tap on each other’s strengths to strategically position Proton’s reputation in the marketplace and deliver customers a quality experience.
EON also responded swiftly to the external factors impacting our business by embarking on aggressive sales and marketing campaigns for the other marques with the support from our principals, namely, Audi AG, Hyundai-Sime Darby Motors and Mitsubishi Motors Malaysia.
42 eon berhad annual report Review of Operations
Y Bhg. Datuk Syed Hisham bin Syed Wazir
43
eon berhad annual report EON Berhad For the year under review, the Company recorded revenue of RM2.8 billion and PBT of RM133.0 million, similar to that of 2004.
New Vehicle Sales Overall, the Malaysian automotive industry registered a robust growth of 13.0% in 2005 based on positive consumer sentiments, attractive financing schemes and the introduction of new models coupled with aggressive sales campaigns. Total industry volume (TIV) surged to an all time high of 551,042 units, compared to 487,605 units in 2004. While the total sales volume for passenger cars rose from 380,568 units in 2004 to 400,835 units in 2005, the overall market share for the passenger car market, however, declined by 5.0% from 78.0% of TIV in 2004 to 73.0% in 2005.
Growth in sales volume of passenger cars was led by the national car segment (i.e. the Proton, Perodua and, Inokom marques) registering 305,763 units or 76.3% of total passenger car sales, down 0.6% from 2004. Correspondingly, the non-national passenger car segment After Sales Services increased by this 0.6% with sales in 2005 rising to 95,072 units Currently, EON has in place an after sales network comprising or 23.7% of total passenger car sales. 38 service branches, 200 Franchise Service Dealers (FSDs) and 79 parts dealers. In 2005, after sales services was also Proton’s market share dipped to 41.4% with 166,118 units provided for the Mitsubishi, Hyundai-Inokom, MTB and TATA sold, as compared to 166,826 units in 2004 with the 43.8% marques, all of which contributed positively to the overall market share of the total passenger car market. after sales revenue.
Due to stiff competition from the other national as well as While the After Sales Division recorded revenue of RM206.9 non-national marques, EON saw its share of Proton sales million in 2005, total service throughput (TP) declined by decline by 2.0% from 68,224 units in 2004 to 66,890 units 3.6% from 702,158 units in 2004 to 676,604 units in 2005. Of in 2005. EON’s sales constituted 40.0% of Proton total car this total TP, EON branches accounted for 50% or 335,475 sales in 2005. Of the total Proton vehicles sold by EON in units and our FSDs registered the remaining 50%. Collision 2005, 32.0% was made up of Wira model; 24.0%, Iswara repair TP at our branches dropped 7.5% to 8,187 units from and 23.0%, Waja. Gen.2, Savvy and Perdana models 8,855 units in 2004. accounted for 15.0%, 3.0% and 2.0% respectively of the total number of Protons sold by EON in 2005. Satria and We also extended our after sales capacity to include enhanced Arena models accounted for the final 1.0% sold. multi-brand and multi-level service offerings following
44 eon berhad annual report Managing Director’s Review of Operations
Akademi Saga’s strategic alliance with international EON Auto Mart Sdn Bhd (EON Auto Mart) awarding body, IMI and MLKV. EON is now in a better EON Auto Mart was appointed to retail and service the position to offer high-level certified training courses Mitsubishi range of vehicles and parts in Malaysia distributed to all interested parties within the motor industry. This by Mitsubishi Motors Malaysia, a joint venture company development ultimately elevates EON to new heights of between Mitsubishi Corporation and EON, of which EON service excellence. owns a 48% stake. For the year ended 31 December 2005, the company recorded sales of 619 units of the Mitsubishi Euromobil Sdn Bhd (Euromobil) marque with a revenue of RM60.3 million and made a loss Euromobil has been involved in the importation and of RM4.7 million due to start-up operating costs. distribution of the Audi marque since November 2003. For the year under review, the company’s revenue soared to Although newly established, EON Auto Mart has in place a RM62.2 million in 2005 as compared to RM20.9 million in network of 28 showrooms throughout Malaysia. In line with 2004. Losses in 2005 declined significantly to RM1.6 million the multi-brand direction of the Group, the Mitsubishi brand as compared to a loss of RM6.1 million in 2004. is being serviced by all of EON’s 38 service centres nationwide.
The company expanded its network of branches and In accordance with Mitsubishi’s stringent quality standards, dealers beyond its world-class flagship facility at Glenmarie EON Auto Mart will continue to train its sales force to maximise to cover Kuala Lumpur, Prai, Johor Baru, Ipoh, Melaka and their competencies in product knowledge and customer Kuching. It has also stepped up customised training for its service. The company aims to tap the resources available fast expanding team of sales consultants as well as its within the EON Group to increase Mitsubishi’s presence and its customer relations and technical support staff. market share in the Malaysian automotive market.
Throughout 2005, the Audi marque received several accolades including the “World Car of the Year 2005” for the Audi A6 and “Engine of the Year 2005” for the Audi A4. Closer to home, the A4 2.0TFSI was crowned “Executive Car of the Year 2005” in the NST MasterCard Car of the Year Awards 2005.
EONMobil Sdn Bhd (EONMobil) For the year under review, EONMobil was awarded the “Best Mega Dealer” by its principal, Hyundai-Sime Darby Motors Sdn Bhd for its efforts. In 2005, EONMobil recorded revenue of RM109.2 million but made a loss of RM1.3 million on sales of 1,964 units of Inokom/Hyundai. This was against revenue of RM98.7 million and a profit of RM2.2 million in 2004 on sales of 2,227 units due to higher operating costs from a total network of 18 branches.
Going forward, EONMobil foresees a challenging operating environment in 2006 and anticipates that margins will come under increasing pressure from intense competition. EONMobil will continue to devote its resources to maximising sales as well as after sales service through EON’s service centres.
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eon berhad annual report Managing Director’s Review of Operations
Automotive Conversion Engineering Sdn Bhd (ACE) PBT was also attributable to higher operating expenses due ACE’s main business activities are the conversion and to the opening of regional distribution centres in East Malaysia. modification of Proton Perdana vehicles into Executive and Limousine models. ACE obtained its manufacturing The two regional parts centres in East Malaysia, namely in license to convert and modify automotive vehicles from Kota Kinabalu and Kuching, were set up in October and the Malaysian Industrial Development Authority (MIDA) November 2005 respectively, in line with the company’s in 1997. The company posted a total revenue of RM10.3 mission to provide high quality service while creating value million in 2005, a 24.3% decline in comparison to the RM13.6 for its customers. 2006 will see several other regional parts million recorded in 2004. Accordingly, its PBT declined centres being set up nationwide. The opening of these by 50.0% to RM2.5 million from RM5.0 million in 2004. The new parts centres is expected to increase the efficiency of decline in financial performance was attributed to a lower parts delivery that will lead to better customer service and conversion volume of 229 units in 2005 against 311 units in 2004. improved revenue streams in the longer term.
Proton Parts Centre Sdn Bhd (PPC) Johnson Controls Automotive Holding (M) Sdn Bhd PPC, a jointly controlled entity between EON and PROTON, (Johnson Control) is primarily involved in the warehousing and distribution of Johnson Control is in the business of manufacturing car motor vehicle spare parts. In 2005, company’s revenue fell seats, seat padding, steering wheels and car interior parts by 5.0% to RM 203.3 million in comparison to 2004’s revenue primarily for the Proton market. For the year under review, of RM 214.1 million due to the inclusion of a non-recurring revenue increased by 18.0% to RM348.9 million. The strong export sales to Iraq in 2004. Excluding this, revenue was sales growth was attributed to the commencement of the 5.0% higher. Accordingly, PBT was also lower by 27.2% at supply of seats for the new Gen.2 and Savvy models. RM27.3 million from 2004 of RM37.6 million. The decline in
46 eon berhad annual report As competition continued to intensify throughout 2005, resources were focused on meeting customer expectations in our quest to broaden our customer base. Activities centred around reducing attrition and generating revenue by bringing added value to elements within the multi-brand business and after sales services.
47
eon berhad annual report With the implementation of the NAP, EON expects a significant change in the current automotive landscape. EON will face up to the challenges and continue to implement initiatives to boost our performance in 2006.
SRT-EON Security Services Sdn Bhd (SRT-EON) Market Outlook SRT-EON, another associate company, is in the business of 2006 is expected to be an even more challenging year providing security services. For the year under review, its for the EON Group. Competition is expected to intensify revenue of RM30.5 million was comparable to that of 2004. further due to higher interest rates and stringent financing SRT-EON is currently looking at tapping technology such as requirements, reduced margins, higher inflation, higher fuel a central monitoring system to strengthen its revenue base. prices, and increased steel costs.
In 2006, competitors of both national and non-national National Automotive Policy marques are expected to launch new models at competitive EON welcomes the NAP which gives a clear and definitive road prices to improve their market share. On the after-sales front, map for the development of the automotive industry. In the case more independent workshops with better service offerings of the Proton business, it will assist EON in our planning and and the availability of cheap imitation parts are expected capacity improvements as well as network rationalisation to result in declining revenue in our after sales services. as we prepare for imminent market liberalisation. The MAA forecasts that TIV will grow by a modest 3.0% to The NAP emphasises transparency and this will result in the reach 565,000 units in 2006 and EON hopes to maintain our players working on a level playing field. We will continue to market share of passenger car sales. work closely with Audi to stimulate greater sales on selected models that are readily marketable. We will also continue to work with Mitsubishi to remain competitive in the marketplace. Moving Forward As a dealer of the Hyundai/ Inokom marque, we will be With the implementation of the NAP, EON expects a guided by the dealership terms of our principal. significant change in the current automotive landscape. EON will face up to the challenges and continue to Whilst the NAP means lower-priced cars, higher interest implement initiatives to boost our performance in 2006. rates and stringent approval procedures for hire purchase financing may dampen the growth of the automotive industry. However, we are hopeful that the reduction in vehicle prices would mitigate the resulting negative impact.
48 eon berhad annual report Managing Director’s Review of Operations
These will include aggressive sales and marketing activities for all marques; effective training programmes for staff at all levels to increase productivity; improve salesmanship skills and reduce cost; as well as specific programmes aimed at intensifying cost-reduction activities and enhancing customer satisfaction activities. We will also continue to work closely with the Government, our principals and dealers to resolve issues pertaining to the automotive industry in general, and EON in particular.
As we continue our journey to become a leading multi-brand automotive player, we will tap the benefits of group synergy, focusing on long term-growth strategy and strong partnership with our stakeholders. We are committed to pursue every opportunity with a view to maintaining profitability and enhancing shareholders’ value.
Thank you for your continued support to EON.
Datuk Syed Hisham bin Syed Wazir Managing Director
49
eon berhad annual report Group Financial Review
2005 has been a challenging year for EON. EON was able to respond swiftly to the external factors by embarking on aggressive sales and marketing campaigns to remain profitable despite the tough operating environment and challenges arising from the intense competition from both the national and non-national marques.
A summary of the Group results is tabulated below:
2005 2004 2004* RM Million RM Million RM Million Revenue 3,094.1 3,901.1 2,982.1 Cost of sales (2,840.8) (3,114.7) (2,746.0) Gross profit 253.3 786.4 236.1 Other operating income 16.7 30.7 23.1 Operating expenses (177.3) (523.4) (188.4) Profit from operations 92.7 293.7 70.8 Finance costs (1.3) (31.9) (0.2) Share of results of jointly controlled entitites 9.1 15.0 15.0 Share of result of associates 7.5 5.2 1.9 Net gain on disposal of investments 0.6 18.5 _ Profit before tax 108.6 300.5 87.5 Tax (29.7) (86.3) (28.1) Minority interest _ (66.2) _ Profit attributable to shareholders 78.9 148.0 59.4 Earnings per share (sen) 32 60 24
* Adjusted to exclude the results of EON Capital Berhad (ECB) group following the distribution of ECB shares to the shareholders in July 2004 and the effects of the disposal of EONCAP Securities Sdn Bhd (formerly known as Leong & Co. Sdn Bhd) in September 2004.
Excluding the results of ECB group and the disposal of EONCAP Securities Sdn Bhd, the Group revenue and profit before tax were 3.8% and 24.1% higher against 2004. An analysis of the Group performance for 2005 against 2004 (excluding the result of the ECB group and the effect of disposal of EONCap Securities Sdn Bhd) is as follows:
Operating Revenue
Non-Proton sales 7%
Used cars sales 2%
After sales services 7%
Proton sales 84%
50 eon berhad annual report Group revenue of RM3,094.1 million for the year ended The decline in Proton service TP was substantially offset 31 December 2005 was 3.8% higher than RM2,982.1 million by the non-Proton vehicles service TP which took off recorded in 2004 due mainly to increased revenue from during the year as the Group embarked on its multi- the multi-brand business with the commencement of the brand strategy. A total of 15,185 units (2004: 1,362 units) Mitsubishi business in July 2005. comprising mainly the Inokom/Hyundai, Mitsubishi and Audi vehicles were serviced at EON and Euromobil’s Vehicle sales service centres. The competitive operating environment led to a decline in Proton’s market share to 41.4% in 2005 (2004: 43.8%). Notwithstanding the intense market conditions with the The Company managed to invoice sales of 66,890 units influx of imitation parts, parts sales recorded an increase (2.0% lower than the 68,224 units achieved in 2004) due of 4% to RM80.9 million (2004: RM77.8 million). to aggressive incentives and promotional campaigns including the “Celebrating 20 Years of Proton” promotion The collision repairs business, however, registered lower organised jointly with PROTON and Proton Edar. Despite revenue of RM33.8 million (2004: RM35.4M). lower volume, revenue from new Proton cars of RM2,596.5 million was higher than RM2,548.3 million recorded in 2004 After sales revenue of RM212.2 million was comparable to due to the price increase during the year. RM213.7 million achieved in 2004.
Revenue from the non-Proton business comprising the Operating costs Inokom/Hyundai, Mitsubishi and Audi marques totalled Group’s total operating costs of RM3,018.1 million was RM210.3 million, 65.1% higher compared to RM127.4 million higher than RM2,934.4 million in 2004 due substantially to achieved in 2004. This was due to the commencement of the increase in cost of sales in line with higher revenue. This the Mitsubishi business in July 2005 which saw 619 units sold was partly offset by the voluntary staff separation (VSS) together with higher Audi sales. The strong demand for cost of RM13.7 million incurred in 2004. the A4 B7 model launched in June 2005 helped boost the Audi sales by more than 200%. Sales of Inokom/Hyundai 2005 2004 Increase/ cars were less encouraging with 1,964 units sold compared (decrease) to 2,227 units in 2004. The Group’s Inokom/Hyundai sales RM Million % were affected by supply constraints of the Atos and Matrix Cost of Sales 2,840.8 2,746.0 94.8 3.5 models in the early part of the year. Although deliveries Overheads 177.3 174.7 2.6 1.5 improved subsequently, the Atos sales were affected by intense competition with new model launches such as the 3,018.1 2,920.7 97.4 3.3 Savvy and Myvi models whilst the CBU models were less VSS Cost – 13.7 (13.7) (100) competitive following the price increase in October 2005. Total operating cost 3,018.1 2,934.4 83.7 2.9
Used car sales were lower with sales of 2,818 units (2004: The VSS exercise completed in January 2005 was amongst 3,937 units) and revenue of RM73.6 million in 2005 (2004: the key initiatives implemented to realign the organisation RM91.1 million). structure to conform to current business conditions. This, together with other cost reduction measures undertaken Overall revenue from vehicle sales stood at RM2,880.5 million, 4.1% higher than 2004 revenue of RM2,766.8 million. during the year had resulted in about 7.4% reduction in overheads in respect of the Proton business. After sales services Total service throughput (TP) was marginally lower at However, higher overheads were incurred by the multi-brand 339,255 units (2004: 341,229 units). Proton service TP was business from new network set-up for the Mitsubishi marque down by 4.6% to 324,070 units partly due to lower warranty as well as full year impact from the commencement of jobs with the decline in new car sales. Various campaigns operations at the Audi Hangar in August 2004 and sales and promotions were introduced to boost service TP. network of 18 branches for the Inokom/Hyundai marque. These included the “Service Vaganza” campaign and “Bonanza Xplosion” contest which saw TP picking up in the Consequently, the overall group’s overheads (excluding last quarter of the year. the VSS cost) were only 1.5% higher.
51
eon berhad annual report Group Financial Review
Finance cost Assets Finance cost of RM1.3 million was mainly in respect of bankers Total assets of the Group stood at RM1,598.3 million as at acceptances used for trade financing purposes which were 31 December 2005, compared to RM1,468.0 million as at fully repaid by year-end. 31 December 2004.
Other operating income Inventories rose to RM421.6 million (2004: RM211.5 million) Other operating income of RM16.7 million which comprised due to the addition of 1,122 units of Mitsubishi cars with mainly interest income was lower compared to RM23.1 the commencement of the Mitsubishi business and the million recorded in 2004 as a result of weaker cash flow increase in Proton vehicle stocks to 6,518 units from a low of during the year. 3,750 units as at 31 December 2004. Proton inventory level was affected by production and supply constraints from Share of results of jointly controlled entities Proton Edar in 2004. Lower contribution of RM9.1 million in 2005 (2004: RM15.0 million) was attributable to lower earnings from Proton Parts Receivables, which comprised substantially amounts due Centre Sdn Bhd due to higher operating costs and the from dealers, increased from RM257.3 million to RM351.4 inclusion of a non-recurring export sale to Iraq in 2004. million as at 31 December 2005 with the extension of credit terms granted to dealers in the last quarter of the year. Share of results of associates The Group’s share of results of associates was higher at As a result of increased stockholding and receivables, net RM7.5 million (2004: RM1.9 million) due mainly to higher operating cash flow stood at RM20.6 million compared earnings from Johnson Controls Automotive Holding (M) to the net profit of RM78.9 million. This, together with the Sdn Bhd but partly offset by higher losses from Hicom payment of dividends totalling RM191.8 million in June Megah Sdn Bhd. 2005 reduced the Group cash and cash equivalents from RM557.8 million as at 31 December 2004 to RM377.5 million Profit attributable to shareholders as at 31 December 2005. In summary, the Group profit before tax of RM108.6 million was 24.1% higher in comparison to 2004 due to the VSS Property, plant and equipment which comprised mainly costs of RM13.7M taken up in 2004 and write-back of certain land and buildings used as showrooms and workshops was provisions partly offset by lower interest and other income. maintained at about RM302.7 million (2004: RM306.8 million).
Accordingly, profit attributable to shareholders was higher An analysis of Group assets by major categories is shown in at RM78.9 million (2004: RM59.4 million) and earnings per the table below. share at 32 sen (2004: 24 sen).
RM’000 Group Assets
600,000 2005 2004
500,000
400,000
300,000
200,000
100,000
0 Inventories Cash and cash equivalents Property, plant and eguipment Deferred tax assets Investments Receivables
52 eon berhad annual report Shareholders’ funds Accordingly, net tangible assets per share was also lower Group shareholders’ funds stood at RM1,051.2 million as at RM4.22 (31 December 2004: RM4.68) at 31 December 2005, lower than RM1,165.2 million as at 31 December 2004 following the payment of dividends The Group’s funding requirements were derived substantially totaling RM191.8 million including a special final dividend of from internal sources and to a lesser extent, the bankers 84 sen per share in respect of 2004. acceptances used for trade financing purposes which were fully repaid by year-end.
Shareholders’ Funds
Current liabilities 33%
Non-Current liabilities 1%
Shareholders’ funds 66%
53
eon berhad annual report corporate governance
Integrity, transparency, accountability and independence form the cornerstones of EON’s business. We are continuously assessing ourselves and are committed to applying corporate governance principals and best practices that enhance financial performance and protect shareholder value. 56 Statements on Corporate Governance
68 Statement on Internal Control
70 Risk Management
71 Report of the Board Audit Committee
75 Additional Compliance Infomation
75 Statement of Directors’ Responsibility for Preparing the Financial Statements Statement on Corporate Governance
The Board of Directors (“the Board”) is committed to applying the principles and best practices recommended by the Malaysian Code on Corporate Governance (“Code”) to improve and enhance the standards of corporate governance practised within the Group as well as to protect and enhance shareholders’ value and financial performance. The Board believes that effective corporate governance is premised on three important cornerstones namely, independence, accountability and transparency.
Towards achieving this, the Board not only observes the DIRECTORS Principles of Corporate Governance and the Best Practices Composition of the Board on Corporate Governance as set out in the Code, but has also The Board comprises members with relevant expertise and put in place stringent parameters for adherence by the experiences drawn from business, financial, technical and management. The Board has adopted a Board Charter public service. The wide spectrum of skills and experiences which provides, amongst others, guidance and clarity for has given them an edge and an added strength in terms directors and management with regard to the role of the of leadership and management, thus ensuring that the Board and its committees, the requirements of the directors in Company and its subsidiaries is steered and guided by an carrying out their roles and in discharging their duties towards accountable and competent Board. the Company as well as the Board’s operating practices besides emphasizing the relationship between the Board, At the beginning of the financial year, the Company had the management and the shareholders. Set out below is a sixteen (16) Directors on its Board of whom five (5) were statement of how the Group has applied the principles and Independent Directors. There were changes to the Board best practices of the Code during the financial year ended membership whereby seven (7) new appointments and ten (10) 31 December 2005. The principles of the Code enunciated directors left the Board. To-date, there are twelve (12) Directors in Part 1 are stated in four parts, namely: of whom four (4) are Independent. The composition of the Board was maintained so that not less than one-third (1/3) a. Directors were Independent Directors at all times. No individual or b. Directors’ Remuneration group of individuals dominated the Board’s decision making c. Shareholders powers and processes. The number of Directors reflects fairly d. Accountability and Audit the investment of the shareholders.
The Code, in mandating the compliance with the principles During the financial year under review, four (4) regular board stated, establishes the best practices in corporate governance meetings were held. The names of the Directors in office in Part 2 which is divided into the following parts: during the year and their attendance at board meetings are a. Board of Directors as set out in the Directors’ Profiles from page 26 to 29. b. Accountability and Audit c. Shareholders Tan Sri Ab. Rahman bin Omar (appointed with effect from 1 March 2006) who succeeded Y Bhg. Tan Sri Dato Seri The Board of Directors confirms that the Group has applied the Mohd Saleh b. Sulong (resigned with effect from 1 March principles set out in Part 1 of the Code to the circumstances 2006) sits as the Chairman of the Board. This is perceived as of the Group and has complied with the best practices set appropriate and of benefit to the Group for his experience out in Part 2 of the Code throughout the financial year from and intimate knowledge of the Group and its workings. 1 January 2005 to 31 December 2005. The Directors further The Board has always ensured compliance and best confirm that, going forward, the Group will continually apply practices with respect to impartiality, conflict-avoidance, the said principles and practices and where deemed shareholders and stakeholders’ interest and protection, appropriate, enhance the application thereof in pursuit of its and good corporate governance. commitment to the highest standards of Corporate Governance.
56 eon berhad annual report The Chairman is primarily responsible for ensuring Board The Board has four (4) regular meetings annually. Special effectiveness and conduct whilst the Managing Director Board meetings for particular matters are held as necessary. oversees the day-to-day running of the business including In 2005, the Board held four (4) regular meetings and one (1) implementation of the policies and strategies adopted by Special Board meetings. At each regular Board meeting, the Board and clarifying matters relating to the Group’s there was a full financial and business review and discussion, business to the Board. The Managing Director’s in-depth including report on trading performance to-date against and intimate knowledge of the Group’s affairs contribute the annual budget and financial plan previously approved significantly towards managing the direction of the Group to by the Board for the financial year. achieve its goals and objectives. The Chairman of the Board plays a pivotal role in ensuring The Group considers that its complement of Non-Executive that Directors are properly briefed on issues arising at Board Directors provide an effective Board with a mix of industry meetings, so that they can make effective contributions as specific knowledge and broad business and commercial Board members. As part of good corporate governance, experience. The presence of Independent Non-Executive the Chairman encourages a healthy debate on issues raised Directors is particularly important in corporate accountability at meetings, gives opportunity to Directors who wish to speak as they provide unbiased and independent views, advice on the motions, either for or against them. Every Board and judgement to take into account of the interests, not resolution is then put to a vote which would reflect the only of the Group, but also of shareholders (majority and collective decision of the Board, and not the views of an minority), employees, customers, suppliers and the many individual or an interested group. communities in which the Group conducts business. This balance enables the Board to provide clear and effective Minutes of every Board meeting are circulated to each Director leadership to the Group and to bring informed and for their perusal prior to confirmation of the minutes at the independent judgement to many aspects of the Group’s following Board meeting. Subsequently, all matters arising, strategies and performance so as to ensure that the highest deliberations and conclusions of the meetings of the Board standards of conduct and integrity are maintained. The are clearly and accurately recorded in minutes of meetings classification for independence is in accordance with by the Company Secretary, confirmed by the Board and paragraph 1.01 (Definition and Interpretations of the Bursa signed as a correct record by the Chairman. The proceedings Malaysia Listing Requirements). and resolutions passed at each Board meeting are kept in the statutory register at the registered office of the Company. In accordance with the requirements of the Code, Y Bhg. Tan Sri Saw Huat Lye is currently the Senior Independent The consideration and approval of the Annual Management Non- Executive Director who is available to deal with concerns Plan (AMP) is a significant annual exercise by the Board in affecting the Group, other than through the Chairman. establishing the goals of the Group for the following year which involves an assessment of the projected performance Roles and Responsibilities of the Board of the Group’s business. The Board retains full and effective control of the Group. This includes responsibility for determining the Group’s overall At appropriate times, the Board also considers the principal strategic direction as well as development and control of the risks affecting the business of the Group and the measures Group. Key matters, such as approval of annual and quarterly that could be taken to mitigate such risks. A yearly audit results, acquisitions and disposals, as well as material agreements, planning memorandum submitted by the External Auditors major capital expenditures, budgets, long-term plans and of the Group to the Audit Committee sets out the Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis succession planning for top management are reserved for for the Group which indemnifies and highlights the possible the Board. These matters are set out in a formal statement in options that can be implemented to mitigate the impact of the Board Charter. any business risk. The External Auditors, also on an annual basis, issue a Management Letter raising issues on risks The Directors are required to make written declarations and it is affecting the operations of the Group. The Board, through their responsibility to declare whether they have a potential its various committees, addresses and monitors the risks and or actual conflict of interest in any transaction. Where issues concerns affecting the Group. involve conflict of interest, the interested Directors abstain from discussing or voting on the matter.
57
eon berhad annual report Statement on Corporate Governance
Committees Directors should bring to the Board, and contributions of Specific responsibilities have been delegated to the Board each individual Director; Committees, all of which have written constitutions and terms • Recommending to the Board whether Directors retiring of reference. These Committees have the authority to by rotation should be put forward for re-election; examine particular issues and report back to the Board with their recommendations. The ultimate responsibility for the • Ensuring an appropriate framework and plan for Board final decision on all matters however, lies with the entire Board. and management succession for the Group; The five (5) principal Board Committees are as follows: • Evaluating and approving the appointment, promotion, transfer and dismissal of senior executive positions, except 1. Board Audit Committee that of the Managing Director and the Executive Directors Please refer to the Report of the Board Audit which will be decided by the Board based on the Committee on pages 71 to 74. recommendation of the Committee. 2. Board Nomination Committee Y Bhg. Datuk Ir. (Dr) Ahmad Zaidee bin Laidin, The Nomination Committee has developed and implemented Chairman procedures for evaluating the Board of Directors. The evaluation included the following: Y Bhg. Datuk Mohd Khamil bin Jamil (Appointed as Committee member with effect from 22 March 2006) i. Performance evaluation of the Board of Directors
Y Bhg. Dato’ Anwar bin Aji ii. Determination of the competency profile of the (Appointed as Committee member with effect from 22 March 2006) Board of Directors
iii. Determination of the competency model of the new Y Bhg. Dato’ Dr M Shanmughalingam Board members (Resigned as Committee member with effect from 22 March 2006) iv. Performance evaluation of the Managing Director and Y Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong Executive Directors (Resigned as Committee member with effect from 1 March 2006) During the financial year, the Nomination Committee held The members of the Nomination Committee are all Non- two (2) regular meetings i.e. on 10 January 2005 and Executive Directors, a majority of whom are independent. 15 February 2005 and two (2) special meetings i.e. on The Committee meets at least once a year and is 14 March 2005 and 12 April 2005 and all members were responsible for: present at the meeting. • Determining the criteria for Board membership; 3. Board Remuneration Committee • Identifying and recommending to the Board, candidates Y Bhg. Dato’ Anwar bin Aji , Chairman for directorships of the Company and its subsidiaries; (Appointed as Chairman of Committee with effect from 22 March 2006)
• Recommending to the Board on the appointment of Y Bhg. Datuk Mohd Khamil bin Jamil Directors on board Committees; (Appointed as Committee member with effect from 22 March 2006)
• Ensuring that adequate training and orientation is provided Y Bhg. Tan Sri Saw Huat Lye to the new Directors with respect to the business, structure Y Bhg. Datuk Ir. (Dr) Ahmad Zaidee bin Laidin and management of the Group as well as the expectations of the Board; Y Bhg. Dato’ Dr M Shanmughalingam • Evaluating the effectiveness of the Board and Board (Resigned as Committee member with effect from 22 March 2006) Committees with regard to their structure, size, balance and composition including the required mix of skills, Y Bhg. Tan Sri Dato’ Seri Mohd Saleh bin Sulong experience and core competencies that Non-Executive (Resigned as Committee member with effect from 1 March 2006)
58 eon berhad annual report The members of the Remuneration Committee are all Non- The Management Committee, meets on a regular basis and Executive Directors, a majority of whom are independent. The is responsible, within the limits of the policies determined Committee meets at least once a year and is responsible for: and powers delegated by the Board, for:
• Establishing the Managing Director and the Executive • Formulating Company and Group policies for recommendation to, and further consideration by, the Directors’ goals and objectives; Board of Directors. • Reviewing the Managing Director and the Executive • Acting as advisory body to the Board of Directors on Directors’ performance against the goals and operational and management matters. objectives set; • Discussing and deciding upon the implementation of • Establishing and recommending the remuneration key policy decisions of the Board of Directors. structure and policy for the Managing Director, Executive Directors and management; • Discussing and recommending to the Board of Directors on all matters important to the strategic operations of • The terms of employment/contract of employment/ service, the Company and the Group. any benefit, incentive scheme entitlement; and other • Co-ordinating activities and building up synergies within bonuses, fees and expenses, compensation payable on the the Group. termination of the service contract by the Company and Group and to review for changes to the policy, as necessary; • Approving new franchises for vehicles and recommending the same for subsequent approval by the Board of Directors. • Determining the remuneration of the General Manager and Senior Managers and recommend the remuneration • Approving the appointment of new vendors with an of the Managing Director and Executive Directors; expected business value exceeding RM1.5 million per annum.
• Reviewing and recommending to the Board on any new • Approving new Business Products, Services and Concepts Employees’ Share Option Scheme and/or amendments undertaken by the Divisions in the Company. to the existing scheme; • Approving the appointment of new Franchise Service Dealers and Franchise Parts Dealers. • Considering other matters as referred to the Committee by the Board; • Approving investment/divestments proposals and recommending the same for approval by the Board During the financial year, the Remuneration Committee held of Directors. two (2) regular meetings i.e. on 15 Feb 2005 and 23 Nov 2005 and two (2) special meetings i.e. on 24 February 2005 and • Reviewing the Limits of Authority of the Company and 12 April 2005 and all members were present. recommending the same for approval by the Board of Directors. 4. Board Management Committee • Reviewing the Annual Management Plan and Projections Y Bhg. Datuk Syed Hisham bin Syed Wazir, Chairman and recommending the same for approval by the Board (Appointed as Managing Director with effect from 12 May 2005) of Directors.
Y Bhg. Datuk Choo Keng Kit • Reviewing and approving the Credit Policy of the Company.
Ms Vimala Menon • Discussing and recommending for approval, by the Board of Directors, of expenditure with a cumulative Y Bhg. Tan Sri Adzmi bin Abdul Wahab value exceeding RM1.5 million per annum. (Retired as Chairman of the Committee with effect from 12 May 2005) • Approving trading terms including any discount/ Y Bhg. Dato’ Maznah bte Abdul Jalil rebate/incentives schemes for customers and dealers. (Resigned as Committee member with effect from 17 February 2006)
59
eon berhad annual report Statement on Corporate Governance
• Approving any commission or incentive schemes for staff. During the financial year, the Risk Management Committee formally met twice apart from having regular and frequent • Approving any payment schemes for introducers, discussions amongst its members. spotters, runners, etc.
• Approving business activities in other countries including Supply of Information participation in trade shows, etc. All Directors have the same right of access to all information within the Group and the duty to make further enquiries • Approving the organisation structure change including whenever deemed necessary whether as a full Board or in the creation or rationalisation of divisions and departments their individual capacity, in furtherance of their duties. The and the headcount considerations. Board is supplied in a timely fashion with information in a form • Approving applications for unsecured credit exceeding and of a quality appropriate to enable it to discharge its RM50,000 per customer. duties. In addition to financial information, other information deemed suitable such as customer satisfaction, product During the financial year, the Management Committee held and service quality, and market share are also provided. six (6) regular meetings and seven (7) special meetings.
An agenda and a set of Board papers are sent to all Directors 5. Board Risk Management Committee in advance prior to the meeting. The Board papers include, Y Bhg. Datuk Syed Hisham bin Syed Wazir, Chairman among others, the following: (Appointed as Managing Director with effect from 12 May 2005) • Minutes of meetings of all Board Committees; Y Bhg. Datuk Choo Keng Kit • Current operating and business issues;
Ms Vimala Menon • Annual management plan, forecasts and projections;
Y Bhg. Tan Sri Adzmi bin Abdul Wahab • Quarterly and annual financial reports; (Retired as Chairman of the Committee with effect from 12 May 2005) • Acquisitions and disposals of assets of substantial value;
Y Bhg. Dato’ Maznah bte Abdul Jalil • Major investment and financial decisions; (Resigned as Committee member with effect from 17 February 2006) • Changes to management and control structure of The Risk Management Committee, meets on a regular the Group, including key policies, procedures and basis and is responsible, within the limits of the policies authority limits; determined and powers delegated by the Board for: • Reports, advices and opinions of the external consultants/ • Aligning risk management strategies and policies with advisors as had been sought for. Minutes of every the business strategies; Board meeting are circulated to each Director for their perusal • Ensuring completeness of risk identification and assessment; prior to confirmation of the minutes at the following • Defining risk management policies; Board meeting.
• Arbitrating risk management conflicts between The Board has access to the Company Secretary who is functional divisions; available to provide the Directors with the appropriate • Designating risk owners and establishing accountabilities; advice and services and also to ensure that the relevant procedures are followed. The Directors are constantly • Monitoring the implementation of any approved risk updated on the latest developments in the legislations as management action plans. well as on statutory and regulatory requirements pertaining to their duties and responsibilities.
60 eon berhad annual report The Board also believes in adopting a hands-on approach The details of the training programmes are as follows: to the Group’s business activities as part of the Board’s Date Course Title Organiser assessment of its effectiveness, and the decision-making body of the Group. When necessary, the Directors also 31 May 2005 Key Obligations of Public Bursatra visit locations of business units that provide an insight on Listed Companies under Sdn Bhd operational matters which would assist the Board to make the Listing Requirements of effective decisions relating to the Group. Bursa Malaysia Securities Berhad Appointments to the Board There is a formal and transparent procedure for the 30 November Implementing Investor Bursatra appointment of new Directors to the Board, with the Board 2005 Relation Strategies for Sdn Bhd Nomination Committee making recommendations to the Company Directors and Board. Following the appointment of new Directors to Senior Management the Board, the Nomination Committee ensures that an induction programme is arranged, including visits to the Group’s businesses and meetings with senior management In addition to the in-house seminars, Directors are also as appropriate, to enable them to get a full understanding encouraged to attend talks, training programmes and of the nature of the Group’s businesses, current issues within seminars to update themselves on new developments in the Group and the Corporate Strategies as well as the the business environment. Furthermore, seminars and structure and management of the Group. conferences organised by the relevant regulatory authorities and professional bodies on, inter alia, areas relevant to the Directors’ Training Company’s operations; Directors’ responsibilities and All the Directors with the exception of Y Bhg. Datuk Abdul corporate governance issues, as well as on changes to Hamid bin Sawal who was appointed as an Independent statutory requirements and regulatory guidelines, are Non-Executive Director on 22 March 2006, have attended informed to the Directors, for their participation. the Mandatory Accreditation Programme (MAP) conducted by Research Institute of Investment Analyst Malaysia (RIIAM) Save and except for Y Bhg. Tan Sri Ab. Rahman bin Omar and as prescribed by Bursa Malaysia. They also continually Y Bhg. Datuk Anwar bin Aji who were appointed as Non- attend education programs and seminars to keep abreast Independent Non-Executive Director and Independent with developments in the market place, such as seminars Non Executive Director on 17 February 2006 and 1 March 2006 respectively, all directors have complied with Practice Note accredited under Bursa Malaysia’s Continuing Education 15/2003. The Board has assessed and considered the training Program (“CEP Program”). In respect of Y Bhg. Datuk Abdul programmes attended by them and deemed that the Hamid bin Sawal, it is his intention to attend and complete trainings were appropriate and sufficient. the MAP within the time frame stipulated by Bursa Malaysia Listing Requirements. Below are the courses and training programmes attended by the Directors for the financial year ended 31 December 2005: Under Practice Note 15/2003, the Board will assume the onus Director Course Title of determining or overseeing the training needs of the Directors with effect from year 2005 onwards. The Company has Y Bhg. Datuk Syed • Key Obligations of Public initiated its own comprehensive and formal training Hisham bin Syed Listed Companies under the programme tailored to the needs of the Board and during Wazir Listing Requirements of Bursa the financial year ended 31 December 2005, two (2) in-house (appointed with Malaysia Securities Berhad training programmes for Directors and Senior Management effect from 12/5/2005) • Implementing Investor of the Company were conducted and facilitated by industry Relation Strategies for experts. These training programmes were accredited under Company Directors and Senior the CEP Programme. Management 61
eon berhad annual report Statement on Corporate Governance
Director Course Title Director Course Title
Y Bhg. Datuk Mohd • Managing Corporate Mr. Adam Keswick • Key Obligations of Public Khamil bin Jamil Turnaround and Change (appointed with effect from Listed Companies under the 1/1/2006) (appointed with Management Listing Requirements of Bursa effect from 18/10/2005) Malaysia Securities Berhad
Mr. Rin Nan Lun • Key Obligations of Public • Risk Management Seminar Listed Companies under the – Role of Internal Audit, Risk Listing Requirements of Bursa Management & Compliance Malaysia Securities Berhad (Board Responsibilities & BASEL II Guidelines For Board Members, • A Strategic Approach Directors & Senior Management for Business Continuity of PLCs in Malaysia) Management
• International Currency Risk • Implementing Investor Management : Another Asian Relation Strategies for Crisis Possible (Implication on Company Directors and Senior Malaysia) Management Y Bhg. Dato’ Khalid • Implementing Investor Relation Encik Mohd Redza • Malaysian Financial Reporting bin Haji Ismail Strategies for Company Shah bin Abdul Standard – Salient Features Directors and Senior Wahid Management (appointed with effect from • The Audit Committee 8/12/2005) Y Bhg. Datuk Aziyah • Pengurusan Kecergasan • Risk Awareness Programme bt Bahauddin Pengurusan Tertinggi Kementerian Kewangan • Twentieth National Economic Briefing • Premier Leadership Program
• 2nd ATAIC Technical Conference
Y Bhg. Tan Sri Saw • Key Obligations of Public Huat Lye Listed Companies under the Listing Requirements of Bursa Malaysia Securities Berhad
• Implementing Investor Relation Strategies for Company Directors and Senior Management
62 eon berhad annual report The Remuneration Committee is responsible for setting Director Course Title the policy framework and for making recommendations Y Bhg. Datuk Ir (Dr) • Transactions by Directors to the Board on all elements of the remuneration and Ahmad Zaidee other terms of employment of each Executive Director. bin Laidin • Key Obligations of Public Executive Directors abstain from the deliberations and Listed Companies under the voting decisions in respect to their remuneration. The Board Listing Requirements of Bursa decides the remuneration of Non-Executive Directors. Malaysia Securities Berhad The shareholders at the Annual General Meeting approve • Bursa Malaysia’s Listing the aggregate annual directors’ fees for Non-Executive Requirements in relations to Directors. The Board decides the determination of the Transactions fees for each Non- Executive Director.
Details of Directors’ remuneration from the Group for the Retirement and Re-election financial year ended 31 December 2005 distinguishing In accordance with the Company’s Articles of Association, between Executive and Non-Executive Directors in aggregate, all Directors who are appointed by the Board are subject to with categorisation into appropriate components and the election by shareholders at the first Annual General Meeting number of Directors whose remuneration falls into each following their appointment. Pursuant to Section 129 (2) of successive band of RM50,000 are set out below: the Companies Act, 1965, Directors who are over the age of seventy (70) years shall retire at every annual general meeting, may offer themselves for re-appointment to hold Non- office until the next annual general meeting. Executive Executive Directors Directors Total The Articles also provide that all Directors shall retire from RM RM RM office once in every three years but shall be eligible for Directors’ Fees re-election. At each Annual General Meeting, one-third of & allowances – 585,086 585,086 the remaining Directors retire and offer themselves for re- Salaries 2,049,749 – 2,049,749 election. In practice, over a number of years, this means Bonus 383,074 – 383,074 that every Director has stood for re-election at least once Gratuity* 470,712 – 470,712 every three years. Benefits-in-kind 243,406 98,470 341,876 DIRECTORS’ REMUNERATION The objective of the Group’s policy on Directors’ remuneration Total 3,146,941 683,556 3,830,497 is to ensure that the Group attracts and retains Directors of the *The gratuity was paid to Y Bhg. Tan Sri Adzmi bin Abdul Wahab who retired as Managing Director on 12 May 2005. calibre needed to run the Group successfully. In the case of Executive Directors, the component parts of remuneration are structured so as to link rewards to corporate and individual performances. In the case of Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the Non-Executive Director concerned.
63
eon berhad annual report Statement on Corporate Governance
Directors’ Remuneration Executive Non- Total iv. Benefits-in-Kind Directors Executive Other customary benefits, such as car, driver, allowances, Directors etc are made available to Directors as appropriate. 0 – RM50,000 - 8 8
RM50,001 – RM100,000 - 9 9 v. Service Contract The Managing Director and one (1) of the Executive RM200,001– RM250,000 1 - 1 Director have service contract with the Company. The notice period for termination of employment under the RM450,001– RM500,000 1 - 1 service contract for the Managing Director and the RM650,000– RM700,000 1 - 1 Executive Director is three (3) months. In the case of the Executive Director who is on employment contract, the RM700,001– RM750,000 1 - 1 notice period is two (2) months. RM1,000,001–RM1,050,000 1 - 1 SHAREHOLDERS Total 5 17 22 Dialogue between the Company and Shareholders/Investors The Board values dialogue with investors and appreciates the i. Directors’ Fees and Allowances keen interest of shareholders and investors in the Group’s The shareholders at the Annual General Meeting approve performance. The Board acknowledges the need for the aggregate annual directors’ fees for Non-Executive shareholders to be informed of all material business matters Directors. The Board determines the fees and allowances affecting the Group. payable to each Non-Executive Director after considering comparable organisations and the level of responsibilities The Company supports the Code’s principle to encourage undertaken by the Director. shareholders’ participation. The Company’s Articles of
Association allows a member entitled to attend and vote ii. Salaries to appoint a proxy to attend and vote instead of the The basic salary inclusive of statutory employer member and also provide that a proxy need not be a contributions to the Employees Provident Fund for each member of the Company. Executive Director is recommended by the Remuneration Committee, taking into account the performance of In addition to various announcements made during the year, the individual, the consumer price index and information the timely release of financial results on a quarterly basis from independent sources on the rates of salary for similar positions in a selected group of comparable in line with the Bursa Malaysia Securities Berhad’s Listing companies. Salaries are reviewed annually. Requirements provides shareholders with an overview of the Group’s performance and operations. Bursa Malaysia iii. Bonus also provides for the Company to electronically publish The Managing Director and Executive Directors are all its announcements including its quarterly results and paid a discretionary bonus as with the other employees. Annual Report through Bursa Malaysia’s internet website The criterion for the discretionary bonus is dependent at www.bursamalaysia.com. on various performance measures of the Company together with an assessment of their individual Investor Relations performance during the period. The Remuneration The Executive Directors and senior management have regular Committee approves discretionary bonus for the dialogues with institutional investors, fund managers, analysts Managing Director and Executive Directors. and research houses. Press conferences are held for analysts
64 eon berhad annual report and investors to brief them on announcements relating to provide responses to questions from the shareholders major corporate exercises and pertinent issues within the during these meetings. disclosure requirements of Bursa Malaysia. The turnout of shareholders at the Company’s AGM has While the Company endeavours to provide as much always been large; a total of 264 shareholders attended information as possible to its shareholders and stakeholders, the AGM in 2005, while a total of 202 shareholders attended it must also be wary of the legal and regulatory framework in 2004. In addition, a press conference is held immediately governing the release of material and price-sensitive after the AGM where the Chairman and the Managing information. All corporate disclosures take into account the Director answered questions from the media on the Group’s prevailing legislative restrictions and requirements as well plans and activities. For re-election of Directors, the Board as the investors need for timely release of price-sensitive ensures that full information is disclosed through the notice information such as financial performance results and of meetings regarding Directors who are retiring and who statements, material acquisitions, significant corporate are willing to serve if re-elected. Items of special business proposals as well as other significant corporate events. In included in the notice of the meeting will be accompanied all circumstances the Group continually stresses on the by an explanatory statement to facilitate full understanding importance of timely and equal dissemination of information and evaluation of the issues involved. to shareholders and stakeholders. Shareholders can obtain up-to-date information on the Annual Report Group’s various activities by accessing its website. Press The Directors believe that an important channel to reach releases and latest quarterly results announcements of the shareholders and investors is through the Annual Report. Group can also be found on this website. Besides including the comprehensive financial performance Announcement of Quarterly Results for the financial year and information on the business activities, the Group strives ended 31 December 2005 to improve the contents of the Annual Report in line with The Directors view the timely announcement of the quarterly developments in corporate governance practices. financial results as vital to the dissemination of information to the shareholders and investors community. The Company The Company’s Annual Report can be obtained by accessing has consistently announced its quarterly results before the Bursa the Company’s website at www.eon.com.my. Malaysia’s deadlines as indicated below:
The Annual General Meeting (AGM) Announcement of Date of Announcement The Company encourages the exercise of voting rights and Quarterly Results 2005 constructive dialogue between the Board and the shareholders 1st Quarter 30 May 2005 at the AGM, whereby shareholders are given opportunity to pose their questions on proposed resolutions and the Group’s 2nd Quarter 24 August 2005 operations. Notice of the AGM and annual reports are sent 3rd Quarter 29 November 2005 out to shareholders at least twenty-one (21) days before the date of the meeting. 4th Quarter 22 February 2006
Besides the normal agenda for the AGM, the Board presents Continuing Disclosure of Material Information the progress and performance of the business as contained EON has long observed the continuing disclosure obligation in the Annual Report and provides opportunities for imposed upon a listed issuer by Bursa Malaysia. The Company shareholders to raise questions pertaining to the business has constantly adopted and applied the principles of best activities of the Group. All Directors are available to practices in Corporate Disclosure Policy and Procedures as laid down by Bursa Malaysia.
65
eon berhad annual report Statement on Corporate Governance
The following material information and the material pertaining to the acquisition of 15.8% of DRB-Hicom development thereof have been released to shareholders Berhad by Etika Strategi Sdn Bhd on 24 June 2005; via Bursa Malaysia Link on a timely basis: xi. Signing of Dealer Sales and Service Agreement i. Termination of Letter of Intent with Volswagen AG on between EON Auto Mart Sdn Bhd and Mitsubishi 31 January 2005; Motors Malaysia Sdn Bhd on 12 July 2005;
ii. Signing of Supplemental Sale Agreement between xii. Notice of change in the Interest of Director’s Euromobil Sdn Bhd and Audi AG on 9 March 2005; Shareholding on 21 July 2005;
iii. Proposed Renewal of Shareholders’ Mandate for xiii. Notice of change in the Interest of Director’s Recurrent Related Party Transactions of a Revenue or Shareholding on 22 July 2005; Trading Nature on 10 March 2005; xiv. Respond to query on an article entitled “ Proton to iv. Signing of Exclusive Distributor Sales and Service acquire stake in EON on 11 October 2005;” Agreement between Mitsubishi Motors Malaysia Sdn Bhd, a jointly controlled entity of EON and Mitsubishi xv. Recurrent Related Party Transactions of a Revenue Motors Corporation on 12 April 2005; and Trading Nature on 25 November 2005;
v. Signing of Memorandum of Understanding between xvi. Recurrent Related Party Transactions of a Revenue the Company and Scott & English (Malaysia) Sdn Bhd and Trading Nature on 22 February 2006; on 25 April 2005;
xvii. Related Party Transactions - Disposal of the Company vi. Resolutions passed at 21st Annual General Meeting car to Chairman on 28 February 2006; of the Company on 30 May 2005;
xviii. Related Party Transactions - Disposal of the Company vii. Related Party Transactions – Exit Benefits to Former car to former Director on 5 April 2006; and Managing Director dated 2 June 2005;
xix. Notice of Person ceasing to be a substantial viii. Notice of Interest of Substantial Shareholder Pursuant to shareholder pursuant to section 29C of the Form 29A of the Companies Act, 1965 pertaining to Companies Act, 1965 pertaining to the ceasation of the acquisition of 15.8% of DRB-Hicom Berhad by Tan deemed substantial interest of Y Bhg. Datuk Mohd Sri Dato’ Syed Mokhtar Shah bin Syed Nor through Khamil bin Jamil in the shares of EON Berhad pursuant Etika Strategi Sdn Bhd on 24 June 2005; to section 6A of the Companies Act, 1965 following the reduction of shareholding in Etika Stategi Sdn Bhd ix. Notice of Interest of Substantial Shareholder Pursuant to below 15% on 19 April 2006. to Form 29A of the Companies Act, 1965 pertaining to the acquisition of 15.8% of DRB-Hicom Berhad by Datuk Mohd Khamil bin Jamil through Etika Strategi Sdn Bhd on 24 June 2005;
x. Notice of Interest of Substantial Shareholder Pursuant to Form 29A of the Companies Act, 1965
66 eon berhad annual report Senior Management Personnel in Investor as well as meeting the auditors professional requirements. Relations Activities The external auditors, Messrs. PricewaterhouseCoopers Any queries regarding the EON Group may be conveyed to: has continued to report to shareholders of the Company on its opinion which are included as part of the Group’s • Y Bhg. Tan Sri Ab. Rahman bin Omar financial reports with respect to their audit on each year’s Chairman statutory financial statements. The auditors also highlight to the Board Audit Committee and Board of Directors on • Y Bhg. Datuk Syed Hisham bin Syed Wazir matters that require the Board’s attention. Managing Director A summary of the activities of the Board Audit Committee • Y Bhg. Tan Sri Saw Huat Lye during the financial year, including the evaluation of Senior Independent Non-Executive Director independent audit process, are set out in the Audit Committee Report • Y Bhg. Datuk Choo Keng Kit Executive Director, Motor Group Statement of Compliance with the Best Practices of the Code This statement is made in accordance with a resolution of • Ms Vimala Menon the Board of Directors dated 13 April 2006 Executive Director, Finance & Corporate Services
Telephone number : 603-7711 2211 Facsimile number : 603-7805 3505
ACCOUNTABILITY AND AUDIT Financial Reporting The Directors have a responsibility to present a fair assessment of the Group’s position and prospects in the quarterly reports to Bursa Malaysia and the annual report to shareholders. The Audit Committee assists the Board in scrutinising information for disclosure to ensure accuracy, Tan Sri Ab. Rahman bin Omar adequacy and completeness. The Statement of Directors’ Chairman responsibility for preparing the financial statements is set out on page 75 of this annual report. Datuk Syed Hisham bin Syed Wazir
Internal Control Managing Director The Code requires the Board to maintain a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. Information on the Group’s internal control is presented in the Statement on Internal Control laid out on pages 68 to 69.
Relationship with the Auditors The Group has always maintained a close and transparent relationship with its auditors in seeking professional advice and ensuring compliance with the accounting standards in Malaysia
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eon berhad annual report Statement on Internal Control
1. Introduction • Promoting a more innovative culture in which the The Board of Directors provides the following Statement taking of calculated risks in various opportunities to on Internal Control of the Group pursuant to Paragraph benefit the organisation is encouraged 15.27 (b) of the Listing Requirements of the Bursa Malaysia • Fostering an environment where staff assume Securities Berhad (Bursa Malaysia) and in accordance with responsibility for managing risks the Statement on Internal Control: Guidance for Directors of Public Listed Companies adopted by Bursa Malaysia. Risk Management Framework The Group has formalised its Risk Management Framework 2. Board Responsibility which encompasses the following key elements:- The Board, recognising the importance of sound internal controls and risk management practices in establishing - A Risk Management Committee. This Committee good Corporate Governance, acknowledges that it is is chaired by the Managing Director. It has been responsible for the Group’s System of Internal Controls established with the objective to assist the Board and risk management and for reviewing the adequacy of Directors in their responsibilities in establishing an and integrity of the system. This includes reviewing effective risk management system. The Committee financial, organisational, management information also serves as an oversight to the Board by providing system, operational and compliance controls as well as the necessary information required to understand and risk management procedures. The system is designed to assess the risks. manage, rather than eliminate, the risk of failure to achieve corporate objectives. Accordingly, it can only The Risk Management Committee is guided by its Terms provide reasonable and not absolute assurance against of Reference and the Risk Management Policy. It is material misstatement or loss. assisted by a Risk Manager whose function is to facilitate the Risk Management Process. 3. Risk Management For the financial year under review, the Group (excluding - A database of all risks and its corresponding controls associates and joint ventures) has in place an ongoing which have been identified has been created. The process in identifying, evaluating and managing the information is used to produce a detailed Risk Register, principal risks faced by the Group. and individual risk profiles for the business and support units. Key risks to each business and support unit’s It is for this reason that it continues to embed the risk objectives are identified and scored for likelihood of the management process in the conduct of the day-to-day risks occurring and the magnitude of impact. business operations to provide reasonable assurance of achieving the Group’s business objectives while at the - A consolidated risk profile of the Group was developed same time safeguarding and enhancing shareholders’ which, together with a report of the key findings, investments and the company’s assets. was discussed in the Risk Management Committee meetings in July and November 2005 before being The main objectives of the risk management are as follows: submitted to the Audit Committee and subsequently to the Board of Directors. • Ensuring proper framework for identifying and managing risk exposures 4. Key Elements of Internal Controls • Ensuring that contingency plans are in place to The Internal Control mechanism established by the handle any crisis situation Board is embedded within the organisation structure • Improving business performance by improving and the procedures for planning, capital expenditure, decision making and planning information and reporting systems and for monitoring • Providing a sound basis for integrated risk management the Group’s performances. They are as follows: and internal control as components of good corporate governance i. The organisation structure of the Group has clearly defined lines of accountability, delegation of responsibility and levels of authorisation for all aspects of the business.
68 eon berhad annual report ii. Management Committee meetings are held on viii. A Code of Ethics to support the business objectives. a regular basis to identify, discuss and resolve operational, financial and key management issues. ix. An MS ISO 9001:2000 Quality Management System which has been implemented to manage and control iii. Budget preparation is done by the operating units, the quality requirement for the Company’s services. reviewed by the Management Committee and approved by the Board. 5. Assurance The Audit Committee examines the effectiveness of the iv. Management accounts and reports are prepared Group’s systems of internal controls primarily through the monthly for monitoring performances against budgets. reviews of the annual and quarterly financial statements, the Internal Audit plans, its findings and the nature and v. Board Committees comprising Audit Committee, scope and findings from the external auditors. The Internal Nomination Committee, Remuneration Committee, Audit Division reports its findings to the Audit Committee Management Committee and Risk Management of the Company. The Division’s work is in accordance Committee with clearly defined terms of reference with an annual audit plan approved each year by the and functions have been established. Audit Committee, and is focused on areas of priority as identified by risk analysis. vi. Standard Operating Procedures are documented and regularly reviewed. vii. Appointment of employees of the necessary caliber to fulfill their responsibilities and also the provision of continuous training and development of the employees.
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eon berhad annual report Risk Management
EON recognizes the importance of sound internal controls and risk management practices for good corporate governance. It is for this reason that it continues to embed the risk management process in the conduct of the day-to-day business operations to provide reasonable assurance of achieving the Group’s business objectives while at the same time safeguarding and enhancing shareholders’ investments and the Company’s assets.
The main objectives of the risk management are as follows: The Risk Management Committee is guided by its • Ensuring proper framework for identifying and managing Terms of Reference and the Risk Management Policy. risk exposures. It is assisted by a Risk Manager whose function is to facilitate the Risk Management Process. • Ensuring that contingency plans are in place to handle any crisis situation. • A database of all risks and its corresponding controls • Improving business performance by improving which have been identified has been created. The decision-making and planning. information is used to produce a detailed Risk Register, and individual risk profiles for the business and support • Providing a sound basis for integrated risk management units. Keys risks to each business and support unit’s and internal control as components of good objectives are identified and scored for likelihood of corporate governance. the risks occurring and the magnitude of impact.
• Promoting a more innovative culture in which the • A consolidated risk profile of the Group was developed taking of calculated risks in various opportunities to which, together with a report of the key findings was benefit the organisation is encouraged. discussed in the Risk Management Committee meetings • Fostering an environment where staff assume in July and November 2005 before being submitted to responsibility for managing risks. the Audit Committee and subsequently to the Board of Directors.
Risk Management Framework The Group has formalised its Risk Management Framework Risk Management Process which encompasses the following key elements:- There is in place a formal and on-going process to identify, evaluate and manage significant risks faced by the Group. • A Risk Management Committee. This is made up of This process entails the overall establishment of an appropriate three (3) Members and chaired by the Managing framework to embed risk management in the process and Director. It has been established with the objective to activities of the Group. assist the Board in their responsibilities in establishing an effective risk management system. The Committee also serves as an oversight to the Board by providing the necessary information required to understand and assess the risks.
70 eon berhad annual report Report of the Board Audit Committee
The Board of Directors is pleased to present the Report of the Board Audit Committee for the year ended 31 December 2005.
Composition Members Attendance The composition of the Board Audit Committee is as follows: Y Bhg. Datuk Abdul Hamid bin Not Applicable Chairman Sawal Y Bhg. Tan Sri Saw Huat Lye (Appointed as Director and Audit Committee member with effect from 22/03/2006) (Independent Non-Executive Director) Y Bhg. Datuk Wan Awang All 4 meetings Members bin Wan Yaacob (Resigned as Independent Non-Executive Encik Mohd Redza Shah bin Abdul Wahid Director and Audit Committee Member with (Non-Independent Non-Executive Director) effect from 22/3/2006) (Appointed as Director and Audit Committee member with effect from Encik Wan Mat bin Wan Sulaiman All 4 meetings 8/12/2005) (Resigned as Independent Non-Executive Director and Audit Committee member with Y Bhg. Datuk Abdul Hamid bin Sawal effect from 22/03/2006) (Independent Non-Executive Director) (Appointed as Director and Audit Committee member with effect from Y Bhg. Datuk Haji Faisal bin Siraj 3 out of 4 meetings 22/03/2006) (Resigned as Director and Audit Committee Member with effect from 17/09/2005)
Y Bhg. Datuk Wan Awang bin Wan Yaacob Y Bhg. Tan Sri Adzmi bin 1 out of 4 meetings (Independent Non-Executive Director) Abdul Wahab (Resigned as Independent Non-Executive Director and Audit Committee (Retired as Managing Director and Audit Committee Member with effect from member with effect from 22/03/2006) 12/05/2005)
Encik Wan Mat bin Wan Sulaiman Y Bhg. Datuk Syed Hisham bin 3 out of 4 meetings (Independent Non-Executive Director) Syed Wazir (Resigned as Independent Non-Executive Director and Audit Committee (Appointed as Managing Director and Audit Committee Member w.e.f. 12/5/2005 and member with effect from 22/03/2006) subsequently resigned as a member of the Audit Committee with effect from 1/1/2006) Y Bhg. Datuk Haji Faisal bin Siraj (Non-Independent Non-Executive Director) (Resigned as Director and Audit Committee Member with effect from Activities of the Board Audit Committee 17/09/2005) During the year, the Audit Committee carried out its duties as set out in its terms of reference. In performing its functions, Y Bhg. Tan Sri Adzmi bin Abdul Wahab the Audit Committee reviewed and approved the overall (Managing Director) scope of the internal audit plans for the Company and the (Retired as Managing Director and Audit Committee Member Group to ensure adequate coverage over the activities with effect from 12/05/2005) of the respective business units. It met with the internal Y Bhg. Datuk Syed Hisham bin Syed Wazir auditors to discuss the results of their examinations, (Managing Director) management responses, follow-up action plans and their (Appointed as Managing Director and Audit Committee Member with implementation status. effect from 12/05/2005 and subsequently resigned as a member of the Audit Committee with effect from 1/01/2006) The Committee reviewed and approved the external audit plans of the Company and its wholly-owned subsidiaries, and Four Audit Committee meetings were held in 2005 and details discussed results of their examinations and recommendations. of attendance of the Committee members were as follows: The Committee reviewed the unaudited quarterly financial Members Attendance statements and audited annual financial statements of the Company and the Group and ensured that the financial reporting and disclosure requirements of the relevant Y Bhg. Tan Sri Saw Huat Lye All 4 meetings authorities had been complied with prior to submission to the full Board for consideration and approval. Encik Mohd Redza Shah bin Not Applicable Abdul Wahid Internal Audit Function (Appointed as Director and Audit Committee member with effect from 8/12/2005) The Audit Committee is assisted by an Internal Audit Division, which reports functionally to the Committee. The Internal
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eon berhad annual report Report of the Board Audit Committee
Audit has established an Audit Charter, which was proved current practice, the Internal Auditors are continuously by the Audit Committee, detailing its objectives, scope being sent for various relevant courses. and function. During the year, a number of internal control weaknesses were The Internal Audit Division’s role is to provide an independent, identified and brought to Management notice, all of which objective assurance and consulting services designed to have been, or are being addressed. None of the weaknesses add value and improve the Company’s operations. It helps have resulted in any material losses, contingencies or the Company accomplish its objectives by evaluating and uncertainties that would require separate disclosure in the improving the effectiveness of risks management, internal Group’s Annual Report. control and governance processes which include:- Terms of Reference of the Board Audit Committee 1. Compliance with applicable laws, regulations, rules, Quorum directives and guidelines set up by the Management The quorum for the Audit Committee meeting shall be two members and the majority of members present must be 2. Review of Business Plans and processes Independent Directors. 3. Information Technology and system review Terms of Reference 4. Special review at the request of Management The Audit Committee has written terms of reference that 5. Customer Retention Initiatives deal with its authority and duties.
6. Resources (assets & human capital) utilization and Meetings and Attendance cost reduction 1. The Audit Committee shall meet at least on three occasions each year and the three occasions in 7. The review of the business tranformation initiatives which they shall meet are as follows:- which include:- i. prior to the current year’s audit; • service network profit improvement plan and • collision repair business ii. prior to the Board’s approval of the announcement of the quarterly results to Bursa Adopting a risk-based approach after evaluation and Malaysia Securities Berhad (Bursa Malaysia); and assessment of risk at Company and Divisional level, the Internal Audit Division formulated the Annual Audit Plan, iii. prior to the approval of the financial statements which was approved by the Audit Committee, at its last by the full Board. meeting of the preceding year. The scope of the Internal 2. The external auditor has the right to appear and be Audit function covers the audit of all business units and heard at any meeting of the Audit Committee and operations of the Company and its subsidiaries. shall appear before the Committee when required to do so by the Committee. The Internal Audit Plan was also consistent with the Company’s current business initiatives and strategies. The Plan is also 3. Upon the request of the external auditor, the Chairman aimed at contributing to the Company’s internal control of the Audit Committee shall convene a meeting of requirement and corporate governance processes. the Committee to consider any matter the external auditor believes should be brought to the attention In this financial year, Internal Audit completed a total of 111 of the Directors or Shareholders. Audit Reports covering selected locations at Corporate 4. As necessary or desirable, the Chairman may request Head Office, Branches and Subsidiaries. Internal Audit that other directors, members of management, the contributed towards ensuring both Corporate Governance internal auditor, employees and representatives of and issues relating to effectiveness of internal control are the external auditor attend at any particular Audit properly addressed. Committee meeting only at the Audit Committee’s invitation, specific to the relevant meeting. The Internal Audit reports, which included the issues and action plans, were presented to and discussed with the Management. 5. The Company Secretary of the Company shall be Internal Audit subsequently monitored the implementation of present at all meetings to record minutes. the agreed action plans to ensure full compliance. The reports 6. Minutes of all meetings shall be prepared and sent together with the follow-up action plans and implementation to the Audit Committee members and the Company status were presented to the Audit Committee for their Directors who are not members of the Audit deliberation and subsequent approval. Committee. A copy of the minutes shall be filed at the Company. As at 31 December 2005, the Internal Audit Division has 13 Auditors with various mix of expertise and experience. In order to ensure that its auditing approach is in line with
72 eon berhad annual report Authority 4. Have familiarity through the individual efforts of 1. The Audit Committee may regulate its own procedures, its members, with the accounting and reporting in particular, the calling of meetings, the notice to be principles and practices applied by the Company given of such meetings, the voting and proceedings in preparing its financial statements. The Audit of such meetings, the keeping of minutes and the Committee shall make or cause to be made all custody, production and inspection of such minutes. necessary inquiries of management and the external auditor concerning established standards of corporate 2. The Audit Committee in performance of its duties conduct and performance and deviations therefrom. shall, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:- Scope and Functions i. Have the authority to investigate any matter of The Audit Committee shall, amongst others, discharge the the Company and its subsidiaries within its terms following functions:- of reference and all employees shall be directed 1. Review the audit plan with the external auditor prior to co-operate as requested by members of the to the annual audit. The scope and general extent of Audit Committee; the external auditor’s audit examination, including the ii. Be empowered to retain persons having special engagement letter, and confirmation that management competence as necessary and have the has placed no restrictions as to the scope and extent resources that are required to assist the Audit thereto. The external auditor’s fees are to be arranged Committee in fulfilling its responsibilities; with management and annually summarised for the Audit Committee’s review. The Audit Committee’s iii. Have full and unrestricted access to any review should entail an understanding from the external information pertaining to the Company; auditor of the factors considered by the external auditor in determining the audit scope including:- iv. Have direct communication channels with the external and the internal auditors at all times and i. Industry and business risk characteristics of the Chairman of the Audit Committee may call the Company; a meeting whenever he deems it necessary; ii. External reporting requirements; v. Be able to obtain independent professional or other advice; and iii. Materiality of the various segments of the Company’s consolidated and non-consolidated activities; vi. Be able to convene meetings with the external auditor, excluding the attendance iv. Quality of accounting and his evaluation of the of the executive members of the Committee system of internal controls; whenever deemed necessary. v. Extent of involvement of internal audit in the vii. The Audit Committee shall have the power to audit examination; instruct the internal auditor to carry out vi. Review of the scope, nature of work and results investigations if deemed necessary and to submit of the internal audit procedures; and reports arising therefrom to the Audit Committee. vii. Other areas to be covered during the Responsibilities audit engagement. The Audit Committee shall: 2. Evaluate the co-operation received by the external auditor during the audit examination, including access 1. Serve as a focal point for communications between to all requested records, data and information; elicit the non-committee Directors, the external auditor, the comments of management regarding the responsiveness internal auditor and the Company’s management as of the external auditor to the Company’s needs; inquire their duties relate to financial accounting, reporting of the external auditor whether there have been any and controls; disagreements with management which if not 2. Report formally to the Board of Directors and shall satisfactorily resolved would have caused the issue assist the Board of Directors in fulfilling its fiduciary of a non-standard report on the Company’s responsibilities as to accounting policies and reporting financial statements. practices of the Company and the sufficiency of 3. Review the quarterly results, year end financial auditing thereto; statements and press releases with management 3. Be the Board’s principal agent in assuring the prior to them being approved by the Board of independence of the Company’s external auditor, Directors focusing particularly on:- the integrity of management and the adequacy of i. Changes in or implementation of major disclosures to shareholders. The opportunity of the accounting policy changes; external auditor to meet with the entire Board of Directors as needed is not restricted, however; ii. Significant and unusual events; and
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eon berhad annual report Report of the Board Audit Committee
iii. Compliance with accounting standards and systems, including systems for compliance with applicable other legal requirements. laws, regulations, rules, directives and guidelines;
4. Review any letter of resignation from the external 10. Review any related party transaction and conflict of auditor of the Company: interests situation that may arise within the Company or Review as to whether there is reason (supported by Group including any transaction, procedure or course grounds) to believe that the Company’s external of conduct that raises questions of management integrity; auditor is not suitable for reappointment; Recommend the nomination of a person or persons 11. Review the adequacy of the scope, functions and as external auditor. resources of the Internal Audit Division and that it has the necessary authority to carry out its work; 5. Review with the Company’s management, internal auditor and external auditor, the suitability and 12. Review the internal audit programme, processes, the adequacy of accounting policies and practices, its results of the internal audit programme, processes or compliance with any regulatory or other external investigation undertaken and whether or not appropriate financial reporting controls and requirements. action is taken on the recommendations of the internal audit function; 6. Review the extent of non-audit services provided by the external auditor and such other responsibilities 13. Review appraisal or assessment of the performance of as may be agreed to by the Audit Committee and the members of the internal audit function, approve any Board of Directors. appointment or termination of senior staff members of the internal audit function and inform itself of 7. Review with management and the external auditor, resignations of internal audit staff members and provide upon completion of the audit, the financial results of the resigning staff member an opportunity to submit his the year prior to their release to the public. This review reasons for resigning; shall encompass the following:
i. The audit report; 14. Consider the major findings of internal investigations and management’s responses; ii. The Company’s Annual Report to shareholders including the financial statements and 15. Discuss with the external auditor, the quality of the supplemental disclosures required by generally financial and accounting personnel, and any relevant accepted accounting principles and approved recommendations, which the external auditor may accounting standards; have, including those in the ‘letter of comments and iii. The Corporate Governance Statement and recommendations’. Topics to be considered during Internal Control Statement in the Company’s this discussion include improving financial controls, the Annual Report to shareholders; selection of accounting principles and management reporting system. Review written responses of iv. Significant related party transactions that may management through ‘letter of comments and arise within the Company or Group; recommendations’ from the external auditor; v. Significant transactions not a normal part of the Company and its subsidiaries’ operations; 16. Discuss with management, the scope and quality of accounting and financial reporting controls in effect; vi. Significant adjustments proposed by the external auditor; 17. Inform the Board of Directors, through minutes and special presentations as necessary, of significant vii. Changes, if any, during the year in the Company’s developments in the course of performing the accounting principles or their applications above duties; and the level of prudence applied in areas requiring judgement; 18. Recommend to the Board of Directors any appropriate viii. The coordination of the audit approach between extension or changes in the duties of the Audit the external and internal auditors; and Committee; and
ix. The effectiveness of management information 19. Where the Audit Committee is of the view that a matter and other systems of control within the Company. reported by it to the Board of Directors has not been 8. Identify principal risks and ensure the implementation satisfactorily resolved resulting in a breach of the Bursa of appropriate systems to manage these risks; Malaysia’s Listing Requirements, the Audit Committee must promptly report such matter to Bursa Malaysia. 9. Review the adequacy and the integrity of the Company’s internal control systems and management information
74 eon berhad annual report Additional Compliance Information
The following information is provided in conformance to ii. Dealer Sales and Service Agreement dated 12 July the Listing Requirements of Bursa Malaysia Securities Berhad: 2005 between Mitsubishi Motors Malaysia Sdn Bhd (“MMM”), a jointly controlled entity of EON and EON 1. Sanctions and/or Penalties Auto Mart Sdn Bhd, a wholly-owned subsidiary of EON During the financial year, there were no sanctions and/ to sell Mitsubishi Motors products and local spare parts or penalties imposed on the Company and its subsidiaries, distributed by MMM in Malaysia and to provide after directors or management by the relevant regulatory bodies. sales services to Mitsubishi Motors products. 2. Non-Audit Fees 4. Recurrent Related Party Transactions The amount of non-audit fees paid and payable to the The Company had at the Annual General Meeting held external auditors and their affiliated companies by the on 30 May 2005 obtained the shareholders’ mandate Company and its subsidiaries for the financial year ended for the Group to enter into recurrent transactions of a 31 December 2005 was RM78,200. revenue or trading nature which are necessary for its 3. Material Contracts day to day operations and are in the ordinary course of There are no material contracts including contracts business with related parties. The said general mandate relating to loans (not being contracts entered into took effect from 30 May 2005 until the conclusion of the in the ordinary course of business) of the Company forthcoming Annual General Meeting of the Company. and its subsidiaries, involving directors’ and major The Company intends to seek a renewal of the said shareholders’ interests, either still subsisting at the end of general mandate and a proposed extension of the scope the financial year or entered into since the end of the of the shareholders’ mandate to apply to recurrent related previous financial year except for the following: party transactions of a revenue or trading nature with new related parties at the forthcoming Annual General Meeting i. Supplemental Sale Agreement dated 9 March 2005 of the Company. The details of the new mandate to be between Euromobil Sdn Bhd (“Euromobil”), a wholly sought are furnished in the Circular to Shareholders dated owned subsidiary of EON, and Audi AG to appoint 3 May 2006 attached to this Annual Report. Territorial Star Sdn Bhd (“Territorial”) as an additional importer of Audi vehicles in Malaysia for the sole purpose of facilitating the import of Audi vehicles into Malaysia for exclusive sale to Euromobil;
Statement of Directors’ Responsibility for Preparing the Financial Statements
The Directors are required by the Companies Act, 1965 (“the • prepared financial statements on the going concern Act”) to prepare financial statements for each financial year basis as the Directors have a reasonable expectation, that give a true and fair view of the state of affairs of the having made enquiries that the Company and the Company and the Group at the end of the financial year Group have adequate resources to continue in and of the results and cash flows of the Company and the operational existence for the foreseeable future. Group for the financial year. As required by the Act and the The Directors have responsibility for ensuring that the Listing Requirements of the Bursa Malaysia Securities Berhad, Company and the Group keep accounting records that the financial statements have been prepared in accordance disclose with reasonable accuracy the financial position with the Malaysian Accounting Standards Board approved of the Company and the Group that enable them to accounting standards in Malaysia and the provisions of the Act. ensure that the financial statements comply with the Act. In preparing the financial statements for the year ended The Directors have overall responsibility for taking such 31 December 2005 set out on pages 90 to 131, the Directors have: steps as are reasonably open to them to safeguard the • adopted appropriate accounting policies, consistently assets of the Group and to prevent and detect fraud and applied and supported by reasonable and prudent other irregularities. judgements and estimates; This Statement is made in accordance with a resolution of • ensured that all applicable accounting standards the Board of Directors dated 22 February 2006. have been followed; and
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eon berhad annual report corporate commitment
Good corporate citizenship and effective community relations are an integral to our holistic growth as a company. We believe in raising the standard of living and the quality of life of the communities we operate in and are committed to implementing corporate social responsibility programmes that make a difference. 78 Serving Communities
79 Tapping Technology for High Performance
80 A Customer-focused Company
81 Mobilising Our Human Capital
82 Statement of Occupational Safety and Health and the Environment
84 Calendar of Major Events Serving Communities
EON believes that good corporate citizen and effective community relations are integral to our business. As such, we are committed to implementing effective corporate social responsibility (CSR) programmes aimed at raising the standard of living and the quality of life of the communities we operate in. In every activity we undertake, we keep in mind our primary goal of building long-term relationship by investing in the communities that support us.
Throughout 2005, we undertook financial sponsorship of EON’s new ambassador for a period of one year. Mawi worthy causes that improved the standard of living and was involved in our joint festive road safety campaign with quality of life of the beneficiaries. Among the many CSR the Road Safety Department to encourage smart and activities implemented was a RM10,000 donation to the safe driving during the ‘DeepaRaya’ festive season. Manjung Dialysis Centre which provides dialysis and medical care for eligible kidney patients.This donation helped the As part of our aspirations to be a caring corporate citizen, centre put up a new building in line with the Ministry of EON hosted a ‘majlis berbuka puasa’ (breaking of fast) for Health requirements for increased quality services to orphans from four different homes throughout the Klang dialysis patients. Valley. A cheque for RM10,000 was presented to Tabung Thalassaemia and ‘duit raya’ was given to the orphans. We also made a RM5,000 donation to the Children’s Spastic Centre, a non-profit organisation that helps spastic As EON builds upon its strong business foundation, we will and poor children in education, medication, therapy and continue to invest in the communities we operate in. Only welfare. This donation also helped to replace the old by giving back to our nation and serving its people, can playground facilities by providing a more comfortable and we expect to grow holistically. safer playground for the children.
In our effort to promote road safety, the Company signed an agreement with “Akademi Fantasia 3” star, Mawi, as
78 eon berhad annual report Tapping Technology for High Performance
At EON, we believe in tapping the power of Information Technology (IT) to enhance business performance and customer experience. Our commitment to harnessing the power of technology throughout all aspects of our business is reflected in our RM38.53 million investment in technology infrastructure and projects since year 2000.
To support and enhance customer service initiatives in to enhance its customer experience and service level, 2005, approximately RM2.9 million was spent on upgrading it also speeds up communication and information flow the IT infrastructure to improve system performance, between EON and FSDs. We can now look forward to availability and reliability. This included the latest server setting new service benchmarks for our customers. technology, storage and backup devices, network equipment, application developments tools and services. EON’s customers also benefit from technology The IT Division also deployed the latest technologies enablement. They now have the option of receiving to drive operational costs down in the areas of data automatic reminders via Short Messaging Service (SMS) to networking, technology maintenance and support costs. ensure they are on track with regular vehicle maintenance instead of the conventional method of contacting The IT Division also focussed its efforts on supporting and customers to remind them on vehicle maintenance and developing new business growth areas for both sales service appointments. and after sales businesses. Among the enhancements implemented was the synchronisation and integration The year under review also saw continual efforts being of customers’ data. This has enabled more accurate undertaken to develop the business processes internally information to be sourced to support target marketing as well as externally with our business partners. Online and campaign management programmes. The back- linkages (including the e-Insurance and e-Eksais systems) end enterprise application system was also enhanced to to statutory bodies such as JKED and JPJ and business include new functionalities that support customer service partners such as financial institutions, insurance companies, improvements and franchise business operations. dealers and principals, were further enhanced to improve efficiency, simplicity and accuracy. 2005 saw enhancements being made to the E-Dex (EON- Dealers Exchange) system to allow EON’s dealers to be more As EON moves forward to realise our vision of becoming responsive to customers’ needs. Dealers are now able to a leading multi-brand automotive retailer and customer- view and select the cars available at any of EON’s stockyards centric organisation, we will continue to tap the latest based on customers’ orders. They can also communicate technological innovations to support business performance directly with the Royal Customs and Excise Department or and enhance customer experience. Jabatan Kastam dan Eksais Di Raja (JKED) and the Road Transportation Department or Jabatan Pengangkutan Jalan (JPJ) to speed up the registration process.
As more FSDs are online via the Franchise Service Dealer Management System (FSDMS), there is effective control and standardisation of processes for the benefit of customers. Information such as vehicle service history, warranty claims and parts stock inventory, amongst others, is now readily available in the FSDMS. Not only does the provision of accurate and timely information enable EON 79
eon berhad annual report A Customer-focused Company
EON firmly believes in providing our valuable customers with consistent enriching experiences that ultimately reinforce our reputation and image and lock in customers for repeat business. We acknowledge that effective customer communication and servicing are key elements to our success. Thus, every customer-centric initiative, from realigning our internal processes and training our people to be more customer-focused, to tapping on leading-edge technologies and utilising sophisticated customer relationship management (CRM) tools are aimed at enhancing customer satisfaction.
EON’s integrated Customer Communications Centre (CCC) • The complaint management process for the multi- is a platform for customers to communicate breakdowns, franchise business was realigned to make it more accidents, concerns and enquiries on a 24-hour 7-day effective and efficient; week. The CCC facilitates a more efficient and effective response to customers’ enquiries through easy access to • Various aggressive target marketing activities aimed product information and customers’ database. at customer retention, recovery and acquisition were implemented throughout 2005. Technology continues to drive innovations at EON. It facilitates online linkages to our various principals, effective In recognition of our commitment to customer relations control at front-end offices and more accurate diagnoses and satisfaction, EON was awarded the IABC Silver Quill of vehicle problems. Our Prospect Management System Award in 2005. CSQD will continue to play a vital role as allows employees to follow up on prospective new business EON’s hub for customer communications and persevere or clients while a data warehousing capability allows to provide high-quality service experiences. follow-up on cross-selling activities and other value added services. A comprehensive customer repository base enables us to undertake customer profiling, personalised campaigns and target marketing, while the e-Insurance and e-Eksais systems help improve transaction processing time.
The following were some of the highlights of Customer Service/ Quality Division (CSQD) initiatives for the year: • EON Berhad received its ISO certification for the second consecutive year;
• Upgrades were carried out on EON’s contact centre to enhance telemarketing and survey capabilities as well as improve human capital competencies and business process efficiencies.
80 eon berhad annual report Mobilising Our Human Capital
In the year under review, Group Human Resources(HR) programmes. Approximately 218 internal and 93 external focused on internalising EON’s core values and engaging training programmes were conducted during the year. The employees to maintain a quality performance-based work soft skills training aims to improve individual’s performance culture, attitude and environment. Learning and development on the job. activities were also strengthened to help employees grow and develop as potential leaders to face the challenges of All employees are encouraged to improve their academic the market place. qualifications to assume greater responsibilities and move on the corporate ladder. Under the Educational Assistance Programme, An Employee Opinion Survey was conducted to assess the appropriate support was provided to 230 employees who sentiments of our employees and to measure employees’ have enrolled on a part-time basis in various certificate, readiness in adapting to future changes and strategies. The diploma, undergraduate and post-graduate programmes. internal feedback survey conducted nationwide, proved to be an effective tool for identifying, monitoring and managing The Company’s technical training centre, Akademi Saga, HR-related drivers for organisational performance. It has specialises in providing training modules and refresher courses. provided an additional platform for communicating Most of the participants were from our service centres, while employees’ views and concerns to the Senior Management. 363 participants were from our FSDs and another 138 from Overall findings revealed that most of the employees have external corporate clients. In October 2005, IMI and MLVK fully embraced the paradigm shift demanded of them as accredited Akademi Saga as an approved assessment they adapt to the new challenges. centre for vocational related qualifications. This was a major achievement and is the first step in promoting Akademi EON is committed to being the “Employer of Choice” in Saga as a Centre for Automotive Education and Training. the automotive industry. As part of our focus on employees The inaugural MLVK certification intake (levels 1 and 2) welfare, an event called “HR Week” was organised. The commenced in January 2006. HR Week was aimed at creating, promoting, supporting and maintaining good workplace practices. The event We firmly believe in recognising loyal employees for their incorporated a health check, blood donations and a book contributions. During the year, a total of 253 employees sale, as well as information on the functions of the Group received their 10-year service awards, while another 214 HR division, continuing education and insurance. staff were recognised for their 20 years of service with EON.
Several career talks were also organised for 200 final The E-HR Newsletter is our internal communication channel year students from local universities. These talks focused that updates employees on human resource-related activities, on equipping students with the skills of resume writing as company’s goals and values as well as safety and health well as handling job interviews. Students were taken on a matters. Channelled through EON’s Intranet, the E-HR Newsletter tour of the EON headquarters after each talk to provide aims to promote a “one-company” culture, facilitate two-way them with an insight of the operations of an automotive communication between employees and management, company. and help build a sense of pride among employees.
During the year, EON’s Leadership Development Programme Over the year, Group HR also played an active role in was implemented to identify, assess and develop a pool of undertaking administrative HR functions. One of the major internal candidates for succession planning. These candidates initiatives was the implementation of EON’s Leave Application are undergoing an integrated curriculum designed to examine System (LAS) for employees whereby application for leave fundamental leadership and managerial issues from a and other leave related matters were automated. multi-disciplinary perspective. The programme provides them with a broader understanding of their responsibilities As EON strives for organisational excellence, continuous as leaders. human capital development plays an integral part in producing high performance workforce. We recognise that EON is committed to increase the employees’ overall our success depends on our employees and fostering a productivity, competency levels and organisational conducive working environment to ensure that corporate performance through structured training and development and individual goals are met.
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eon berhad annual report Statement of Occupational Safety and Health and the Environment
EON ensures the safety and health of its employees while they are at work by complying with the standards laid down by the Malaysian Occupational Safety and Health Act, 1994 as well as the Environment Quality Act, 1974. The Company places great importance on these issues and has developed internal policies and guidelines that Employees are being trained in fire safety and emergency set out the requirements ensuring response by Fire & Rescue Department, Malaysia. workplaces are safe and free from safety and health risks. These requirements also outline the duties of place. The Company requires that that every employee is made aware of every known or different groups of people who play a foreseeable safety or health hazard in the work role in workplace health and safety. area, including bomb threats, threats of violence, noise hazards, radiation hazards, airborne At EON, the Safety and Health Committee, senior contaminants, drug abuse and other workplace management and line management ensure conformance hazards; to the standards prescribed in law as well as Company • a Safety and Health Committee or representative operating procedures. In addition, line management has with information considered necessary in identifying been given the additional responsibility of ensuring safety existing or potential hazards; and health at their respective departments, branches, • air quality monitoring programmes; parts and service centres and its subsidiaries. • constant review of work practices in respect to occupational safety and health; The Managing Director has the overall responsibility in • a statement of the employer’s safety and health coordinating and monitoring Occupational Safety and policy, and any other material; Health at EON. He is advised and assisted by the Safety & • safety and health records in the prescribed manner; Health Committee Members and Safety Officers from the • the Safety and Health Committee or representative Safety and Health Department set up in accordance with with a copy of any written directions or report from the Safety and Health Committee Regulations 1996. a safety officer, and post them for the information of all employees; The Company provides for the following:- • prescribed standards relating to fire safety and • first aid, sanitary, welfare and personal facilities, emergency measures; and health services; • investigate, record and report all known • safety materials, personal protective equipment, accidents, occupational diseases and other devices and special clothing for employees hazardous occurrences; where applicable; • that every employee or visitor knows how to use • information, training and supervision to ensure protective clothing or equipment required in the the safety and health of employees in the work work areas to be occupied or visited.
82 eon berhad annual report Chemical exposure monitoring being carried out to Wastewater monitoring being carried out by professional to measure the hazardous chemical exposure to risk ensure our effluent discharge meet the set standard. employees.
Employees are responsible for taking all reasonable and inspections conducted by the branches. Safety awareness necessary precautions to ensure their own safety and health promotion has been continuously conducted. This year the and that of anyone affected by their work. Employees are event was organized together with EON HR Week 2005. required to undertake the following:- • comply with employer’s regulations and standards Environment prescribed in law on procedures and instructions Good environment practices in conformance to the concerning safety and health while performing their standards set by the Department of Environment and ISO duties; 14000 are high on the agenda at EON. With continuous • co-operate with employer in implementing safety and improvement to our standard practices of environmental health programmes and activities; management system, EON has never received any • report any hazard or accident in the work place to the summon or notice from the related authorities during the employer; and year under review. We ensure all our operations are in • use safety materials, equipment, devices and/or clothing compliance with environmental and legal requirements either furnished by EON or prescribed by regulation. towards preserving the environment. Schedule waste management has been our top priority at EON to ensure it All hazardous work and all work undertaken by contractors is properly managed and disposed. at EON’s premises are controlled by a “permit-to-work”.
Occupational Safety and Health In order to achieve long-term zero injury and illness goals, the Company’s on-going objective is to continuously improve its injury and illness rates. For the year under review, the Company recorded only one occupational accident with 23 lost workdays.
To ensure the risks are controlled and actions are taken for non-compliance, the Safety & Health Department also conducted intensive audit at all EON’s branches and departments on a yearly basis in addition to quarterly
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eon berhad annual report Year 2005 Events
a b
January February May
a 7th b 18th 3rd Part Dearlers Appreciation Dinner Appreciation Dinner was held with EON Bhd received Customer Service, – EON dealers sold RM45 million worth Proton Edar at PJ Hilton. Employee Relations, Best Workplace of genuine Proton parts at Sheraton and overall winner of IABC Silver Quill Subang. Awards Night 2005 that was held at March Sultan Ballroom, Le Meridien KL Sentral. 7th EON won the “Kategori Iklan Radio 2nd 6th 2004” organized by Dewan Bahasa & Workshop for EON Senior Managers Memorandum of Agreement Pustaka held at Palace of the by Mr Roger Konopasek on Disruptive (Strategic Alliance with Insurance Golden Horses. Marketing Strategies at Le Meriden Hotel. Companies) between EON Bhd and Tokio Marine Insurans (M) Bhd/ 3rd Berjaya General Insurance Bhd/ Merit Award for 2005 Chinese New Malaysia National Insurance Bhd/ Year Ad organised by ChinaPress/ Multi-Purpose Insurans Bhd/ Mitsui Nanyang Siang Pau Sumitomo Insurance (M) Bhd/ Kurnia Insurans (M) Bhd/ Takaful Ikhlas Sdn Bhd/ 29th Uni. Asia General Insurance Bhd/ ACCA Mesra Award at Nikko Hotel, Malaysia Assurance Alliance Bhd & whereby EON received a merit award. AM Assurance Berhad.
84 eon berhad annual report c d
June July
c 10th 15th 2nd Taxi launch was held at EON HQ. Handing over of TD2000 to YB Tun MFA Treasure Hunt was flagged off by Mahathir at Yayasan Perdana. YB Menteri Besar Selangor, at EON HQ. d 10th Y Bhg. Tan Sri Adzmi Abdul Wahab’s 17th 18th farewell dinner with Board/ Senior Launch of Audi A6 at Euromobil. Re-Launching of the Mitsubishi brand Management/Union and PR agency by YB Datuk Seri Rafidah Aziz, Minister at Le Meridien, KL Sentral. of the Ministry of International Trade and Industry at Mandarin Oriental Kuala Lumpur.
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eon berhad annual report Year 2005 Events
e f
September October
e 2nd 25th 24th Funtestic Fest Roadshow & 20 years EON sponsored Proton Gen.2 to lucky Mawi was appointed as EON’s Proton campaign. winner for The Malay Mail Big Walk Ambassador. EON also launched which was held at Padang Merbok. the EON Bazaraya and Safety Drive 3rd Campaign. 10 & 20 Years Service Award was 26th held at Ballroom, Sheraton Subang. “Human Resources Week” was held f 24th 253 staff received the 10 years and in EON HQ. It was launched by Berbuka Puasa with 100 Anak-anak 214 staff received the 20 years service En Azmi Ali, on behalf of Deputy Yatim from 4 homes in Klang Valley. award. Human Resource Minister. 24th 19th EON Sponsored RM10,000 to Tabung 1st Prize Giving for “Xplosion Bonanza” Thalassaemia Malaysia. which was held at EON HQ.
86 eon berhad annual report h
g i
November December
g 5th 24th 11th Handing over of loaned Proton Savvy EON sponsored 1 unit of Proton Gen.2 Joint Fire Ups Session with Proton Edar to Mawi. (A) to Express Rail Link for their 10 Millionth After Sales and EON Bhd After Sales Customer Celebration which was held Comprising of 2,400 staff at Legend 14th at Arrival Hall, KL Sentral. Hotel. Mock cheque presentation (RM10,000) was held at Karyawan’s 5th Anniversary 29th 14th Dinner at Dewan Tun Hussuein Onn, EON received a merit award for “Xplosion Bonanza” prize giving was Pusat Dagangan Dunia Putra. NACRA Award in respect of its held at EON HQ. Annual Report’s submission. h 24th i 31st “Xplosion Bonanza” prize giving was EON sponsored 1 unit of Proton Savvy held at EON HQ. 1.2L (M) to lucky winner for – ‘Sempena Festival Pelancongan Melaka Tahun 2005’.
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