ANNUAL REPORT 2014 ANNUAL REPORT TAN CHONG MOTOR HOLDINGS BERHAD • Annual Report 2014 Annual General Meeting of rd TAN CHONG MOTOR HOLDINGS BERHAD will be held at Pacific Ballroom, Level 2, Seri Pacific Hotel Kuala Lumpur, 43 Jalan Putra, 50350 Kuala Lumpur, Malaysia on Wednesday, 27 May 2015 at 3:00 p.m. CONTENTS TAN CHONG MOTOR HOLDINGS BERHAD 2 Annual Report 2014 Corporate Information 02 Audit Committee Report 29 Business Divisions 03 Daily Share Prices & Volume Traded on 32 Report of the Board of Directors 05 Bursa Malaysia Securities Berhad Eight-Year Financial Highlights 09 Financial Statements 33 Profile of Directors 10 Ten Largest Properties of the Group 141 Corporate Social Responsibility Report 13 Analysis of Shareholding 142 Corporate Governance Statement 17 Notice of Annual General Meeting 145 Internal Control Statement 26 Other Statements and Disclosures 28 Form of Proxy Enclosed Personal Data Protection Notice Enclosed 1 TAN CHONG MOTOR HOLDINGS BERHAD Annual Report 2014 CORPORATE INFORMATION DIRECTORS AUDIT COMMITTEE REGISTRARS DATO’ TAN HENG CHEW Dato’ Seow Thiam Fatt (Chairman) Tricor Investor Services Sdn Bhd President Dato’ Ng Mann Cheong Level 17, The Gardens North Tower Dato’ Haji Kamaruddin Mid Valley City DATO’ NG MANN CHEONG @ Abas bin Nordin Lingkaran Syed Putra Senior Independent Siew Kah Toong 59200 Kuala Lumpur Non-Executive Director Telephone : (03) 2264 3883 Facsimile : (03) 2282 1886 DATO’ HAJI KAMARUDDIN NOMINATING COMMITTEE E-mail : [email protected] @ ABAS BIN NORDIN Independent Non-Executive Director Dato’ Ng Mann Cheong (Chairman) Dato’ Haji Kamaruddin AUDITORS DATO’ SEOW THIAM FATT Independent Non-Executive Director @ Abas bin Nordin Dato’ Seow Thiam Fatt KPMG Siew Kah Toong SIEW KAH TOONG Independent Non-Executive Director LISTING DATO’ KHOR SWEE WAH BOARD RISK MANAGEMENT @ KOH BEE LENG COMMITTEE Main Market of Bursa Malaysia Executive Vice President Securities Berhad Siew Kah Toong (Chairman) (Listed on 4 February 1974) LING OU LONG Dato’ Ng Mann Cheong @ LING WUU LONG Dato’ Haji Kamaruddin Executive Vice President @ Abas bin Nordin Dato’ Seow Thiam Fatt HO WAI MING Dato’ Tan Heng Chew Chief Financial Officer (Alternate: Ling Ou Long @ Ling Wuu Long) COMPANY SECRETARIES Lee Kwee Cheng Yap Bee Lee Chang Pie Hoon REGISTERED ADDRESS 62-68 Jalan Sultan Azlan Shah 51200 Kuala Lumpur Telephone : (03) 4047 8888 Facsimile : (03) 4047 8636 Website : www.tanchonggroup.com E-mail : [email protected] TAN CHONG MOTOR HOLDINGS BERHAD 2 Annual Report 2014 BUSINESS DIVISIONS ASSEMBLY t Motor Vehicles 1 SALES AND DISTRIBUTION t1BTTFOHFS$BST t-JHIU$PNNFSDJBM7FIJDMFT t5SVDLT 2 t#VTFT AFTER-SALES SERVICES t4QBSF1BSUT 3 t8PSLTIPQ FINANCIAL SERVICES t)JSF1VSDIBTF t-FBTJOH t*OTVSBODF"HFODZ 4 t.POFZ-FOEJOH PROPERTY t*OWFTUNFOU 5 3 TAN CHONG MOTOR HOLDINGS BERHAD Annual Report 2014 Take center stage with this innovative premium crossover. Its emotive exterior NISSAN design and best-in-class interior roominess evoke an elegant feel; making every ride a special occasion. Engineered with a series of world-firsts in X-TRAIL class-leading technologies to ensure an easy and safe driving experience, the All-New X-Trail is everything you desire in an innovative premium crossover TAN CHONG MOTOR HOLDINGS BERHAD 4 Annual Report 2014 REPORT OF THE BOARD OF DIRECTORS Dear Shareholders, The financial year 2014 was a challenging and bumpy ride for Tan Chong Motor Group. The domestic automotive industry landscape was filled with intense competition and aggressive promotion campaigns by major automotive players. We faced higher operating costs due to a weaker Malaysian Ringgit in the second half of 2014. Banks tightened lending requirements for car loan applicants. Hire purchase loan interest rates increased. Consumers’ spending spirits were dampened due to rising costs of living, continuing subsidies rationalization compounded by broader concerns over uncertainties in the prices of goods after implementation of the Goods and Services Tax (“GST”). The combination of these unfavorable factors had put a drag on the Group’s performance in 2014. The business environment in Indo-China region continues The financial position of the Group remains healthy with to be sluggish. These emerging economies were afflicted by shareholders’ funds at RM2,755 million (2013 : RM2,709 weaker domestic currencies and a stronger US Dollar, and million), cash and cash equivalents of RM341 million (2013 continuing uncertainties in the global economy. : RM313 million), and net gearing ratio of 0.34 (2013 : 0.36) times of shareholders’ funds as at 31 December 2014. Net In spite of the challenging domestic and regional business assets per share increased to RM4.22 (2013 : RM4.15). The environments, Tan Chong Motor Group has pulled together Group undertook a revaluation exercise on its investment to deliver a healthy Profit Before Taxation (“PBT”) of RM171 properties to reflect their current market value. This has million for the financial year 2014. resulted in a net gain on revaluation of RM6.7 million for FY 2014. REVIEW OF FINANCIAL PERFORMANCE Inventories stood at RM1,514 million (down 12% from FY 2013). A substantial portion of the inventories comprises CKD vehicle packs for Nissan Almera, New Nissan Grand Revenue : RM4,760 million Livina and Serena S-Hybrid. Profit before tax : RM171 million Net profit : RM120 million Net assets per share : RM4.22 Return on shareholders’ : 3.9% equity For the financial year ended 31 December 2014, the Group recorded a revenue of RM4,760 million (2013: RM5,198 million) with profit before tax of RM171 million (2013: RM360 million) and net profit of RM120 million (2013: RM236 million). Earnings per share for the year stands at 16.22 sen compared to 38.44 sen in FY 2013. The Group’s businesses saw intense competition in the automotive sector with a slew of new model launches and aggressive sales and marketing campaigns during the year. The intensely competitive trading environment has resulted in lower profit contributions to the Group compared to previous year. 5 TAN CHONG MOTOR HOLDINGS BERHAD Annual Report 2014 REPORT OF THE BOARD OF DIRECTORS DIVIDENDS Elgrand and CKD version of Nissan Serena S-Hybrid to cater for customers looking for motor vehicles in C, D, MPV The Board recommends the payment of a final single tier & luxury MPV segments. dividend of 6% (2013: single tier 12%) for shareholders’ approval at the forthcoming Annual General Meeting. The premium brand Infiniti saw the launch of the new Infiniti Combined with the interim single tier dividend of 6% Q50 expanding the model line-up of Infiniti cars offered in (2013: interim dividend of 12% less tax of 25% and special Malaysia. dividend of 18% less tax of 25%) paid on 29 September 2014, the total net dividend for the year is 6.0 sen per share The Renault brand also received a boost with new models (2013: 17.25 sen per share). The net dividend payment for launch such as Renault Koleos and the Renault Fluence. FY 2014 will be RM39.2 million (2013: RM112.6 million). The latter model is locally assembled in our plant. In line with the lower profitability in FY 2014 recorded by the Group and to retain sufficient funds in the Company for future expansion ensuring sustainable growth of the Group, lower dividend payments were recommended in FY 2014 compared to previous year. REVIEW OF OPERATING PERFORMANCE Revenue (RM’million) 6,000 To complement the value chain in the automotive trade, Tan Chong Motor Group has also embarked on dealing 4,000 in used motor vehicles by establishing the MUV Division where used motor vehicles quality are graded by our team of trained inspectors for customers’ convenience. 2,000 As part of the Group’s continuing efforts to improve customers’ services and after sales experience, we have invested in 3S (sales, services and spare parts) centres throughout Malaysia. New 3S centres have been opened in Glenmarie Shah Alam (Selangor), Tawau (Sabah), Kuching (Sarawak) and existing showrooms and after-sales service 2010 2011 2012 2013 2014 centres have undergone upgrade and expansion. Vehicles Assembly, Manufacturing, Distribution & After On the regional fronts, the automotive sector of Vietnam Sales Services (automotive) has shown signs of recovery with a slightly higher TIV and some signs of economic improvements albeit a fragile The sales of new motor vehicles in Malaysia or Total growth hampered by a weak Vietnamese Dong. Nissan Industry Volume (TIV) in 2014 recorded a high of 666,465 Vietnam Co Ltd (“NVL”) has successfully appealed to the units of vehicles, representing an increase of 1.6% from Vietnamese tax authorities on the customs tax issue for 2013 [source: Malaysian Automotive Association (MAA)]. which the provision of RM56 million (equivalent to US$16.98 The National Automotive Policy 2014 was announced on 20 million) made in prior year was reversed in FY 2014. The January 2014 setting out the Government’s policy on the positive resolution of this issue enables NVL to focus on development of the automotive industry. the business at hand. NVL has also successfully launched the premium brand Infiniti in Vietnam with the introduction Despite the tough competition on the domestic front, the of Infiniti QX60 and Infiniti Q50 to penetrate the premium Group maintained its top 3 position in the non-national car passenger cars segment in Vietnam. The Nissan Sunny market segment in 2014 with a market share of 7%. The (known as Nissan Almera in Malaysia) which is assembled Nissan Almera continues to be a favourite choice amongst in the Group’s assembly plant located in Da Nang City, customers looking for B-segment car. Tan Chong Motor Vietnam continues to be well received since its launch in Group also enhanced its efforts in offering more and fresh mid-2013. The Group’s revenue from Vietnam was RM165 model choices with competitive pricing to our customers.