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KULIM’S CORE INTRAPRENEUR VENTURES SEGMENT CONTINUED TO OPERATE IN A VERY DYNAMIC AND VOLATILE ENVIRONMENT

The Intrapreneur Ventures (“IV”) Division was established as one of Kulim’s principal growth thrusts and plays an important role in the Group’s Balanced Business Strategy. With some 15 companies under its wing, the Division is involved in a diverse range of businesses, including support operations for plantations, O&G,bio fertilizers, agricultural machinery, as well as IT-related and insurance-broking services.

FINANCIAL PERFORMANCE

In 2017, the IV Division recorded a revenue of RM56.23 million, a decline of 2.39% compared with RM57.61 million posted the preceding year. The Division incurred a Loss Before Tax (“LBT”) of RM1.86 million in 2017, from a PBT of RM0.705 million registered previously.

Extreme Edge Sdn Bhd (“EESB”) Group was the most profitable company within the Division, generating a profit of RM2.13 million. The other companies that have recorded a satisfactory performance included MIT Insurance Brokers Sdn Bhd (“MIT”), Perfect Synergy Trading Sdn Bhd (“PSTSB”), Kulim Safety Training and Services Sdn Bhd (“KSTS”), Special Appearance Sdn Bhd (“SASB”) and Edaran Badang Sdn Bhd (“EBSB”).

CORPORATE DEVELOPMENTS

During the year under review, Kulim undertook a number measures to strengthen its IV business to provide a operational base that will provide the desired results. These measures,included amongst others, the cessation of loss-making operations or companies,changing the business model of others, merging and disposing of companies that were under-performing or that are no-longer in line with the Group’s strategic vision and the diversification and outsourcing of certain businesses and activities.

Accordingly, on 1 September 2017,three (3) companies, Jejak Juara Sdn Bhd, SIM Manufacturing Sdn Bhd and Kulim Civilworks Sdn Bhd had ceased their operations and made dormant. In another development, Sindora Timber Sdn Bhd has ceased operations except for oil palm management activities at the Sungai Simpang Kiri Estate. Effective 22 November 2017, the business operations of Classruum Technologies Sdn Bhd were transferred to Yayasan Johor Corporation.

EXTREME EDGE SDN BHD (“EESB”)

Incorporated on 1 January 2010, EESB aims to be a premier information technology solution integrator and business performance enhancer in Malaysia’s competitive Information Communications Technology (“ICT”) business landscape. The company has held its own despite competing with more established players, evolving from a start-up to become a successful technology and networking services provider in its own right.

EESB’s client base cuts across abroad spectrum of businesses that include marine vessel building and repairs,premier parking services, logistics providers, timber works, civil works and maintenance contractors, personal growth and training centres, livestock and fish farming, fast food chains, production houses and Information Technology (“IT”) solutions integrators. EESB also enjoys a strong rapport with its major principals,including IBM, HP, DELL, Microsoft, Cisco and Symantec for better services as well as pricing.

For the year under review, EESB recorded a revenue of RM14.56 million, a decline of 28.71% when compared to RM20.42 million posted in 2016. The decline was attributed mainly to lower sales contribution from a wholly-owned subsidiary, Sovereign Multimedia Resources Sdn Bhd (“SMR”), which has changed its direction to 100% services to JCorp after completion of Kedai Ayamas & Rasamas (“KARA”) projects. Hardware and software products accounted for the bulk of the sales in 2017. In terms of PBT, EESB recorded a marginal decline of 12.89% to RM2.13 million in 2017, from RM2.44 million posted the previous year due to better control of its operational cost.


EESB has positioned itself in the ICT space as a one-stop centre providing networking, communications,consultation services, project management services as well as back-up and recovery solutions. Its networking and communications solutions include planning for network diagrams and equipment, designing and implementing communication equipment deploying the latest technology. In the event of failures, disasters,human error and data corruption, the company provides back-up and recovery solutions that include Seagate, Acronis, Oracle Data guard and RMAN Recovery System. ESSB also offers website designing, development, hosting and management solutions for financial, risk management, human resource management and E-procurement systems. Other areas of expertise include servicing and maintenance of servers, UPS systems and PCs in addition to project management and consultation services.

MIT INSURANCE BROKERS SDN BHD (“MIT”)

MIT prides itself on being “World Class, Home Grown”. Established in 1973, the company has evolved to be a significant player with the capabilities and track record to deliver quality insurance solutions. Apart from offering conventional insurance to a growing client base, MIT is also a licensed of Takaful broker.

In 2017, MIT earned a revenue of RM8.81 million, a decline of 8.13% when compared with the previous year.Concurrently, PBT declined by 24.35% to RM1.11 million, against RM1.46 million recorded in 2016. During the year under review, gross premiums handled by MIT amounted to RM61.04 million, a decrease of 6.96% from RM65.60 million recorded the year before.

MIT considers among its strengths, the linkages it has established with some of the world’s leading underwriters and brokers in the business, based in Singapore, Hong Kong and the United Kingdom, among others. Its network of associates comprises a pool of highly trained engineers and consultants with the breadth and depth of knowledge and experience to handle a varied project portfolio. In terms of skills, experience, expertise and global access, MIT is well-placed to become a leading insurance service provider in the country.

MIT portfolio includes four (4)types of specialist services, namely Financial Solutions (“FINSOL”), Specialty,Commercial and Employees’ Benefits. In providing FINSOL services, specialist lawyers and economists are engaged to assess a company’s exposure, as liability risks are often complex and extensive. Specialty services cover the provision of solutions for the infrastructure, power and utilities, marine and energy sectors, including political risk exposures. In the commercial sector, MIT designs, manages and administers insurance programmes for growing organisations that are expanding. In addition to providing needs-based planning under employee benefits, MIT also provides its corporate clientele a tailor-made and cost-effective health care programme. As a value-added service, MIT will also provide ongoing consultancy services on employee health care trends and updates in an ever evolving environment.

MIT is venturing into Captive Insurance to diversify its earnings base. A ‘captive’ is an insurance company that is set up and wholly-owned by one or more non-insurance companies to insure the risks of its owners. It is essentially a form of self insurance as the insurance is owned wholly by the insured parties. With captive insurance,the benefits include lower insurance costs, improved cash-flow, broader coverage, more attractive risk management elements, access to the lower cost re-insurance market and tax advantages. Presently, MIT has established its captive insurance company, MIT Captive, on the island of Labuan, offshore Sabah,which has a well-established reputation as a captive domicile.

PERFECT SYNERGY TRADING SDN BHD (“PSTSB”)

PSTSB was incorporated on 8 July 2010 as a trader and supplier of fertilizers and chemicals. Operating at Kota Tinggi Industrial Area, the company’s main customers are estates within JCorp and the Kulim Group. As an assurance of quality, PSTSB’s products meet the stringent requirements set by the Malaysia Standards Department and are also certified to MS ISO/IEC 17025:2005 under the Malaysia Laboratory Accreditation Scheme(“MLAS”).

Recovering from a set-back in 2016, PSTSB’s revenue in 2017 has improved 16.98% to RM9.61 million.Concurrently, PBT improved to RM865,825, an increase of 17.90% compared to the previous year.

KULIM SAFETY TRAINING & SERVICES SDN BHD (“KSTS ”)

KSTS was incorporated on 1 January 2013, as a subsidiary of Kulim’s wholly-owned EPA Management Sdn Bhd. Guided by its motto, “Safety Make a Difference”, KSTS offers a growing clientele specialized Occupational, Safety and Health (“OSH”) services, with the emphasis on OSH training, human resource development, motivation and quality related field works.

For the financial year under review, KSTS generated a revenue of RM3.42 million, representing an increase of 3.88% from RM3.29 million posted in 2016. PBT increased by 18.29% to RM788,579 compared to the previously recorded RM666,640. The company has also extended its customer reach with the setting up of an additional outfit to tap into the fast-developing RAPID project in Pengerang, Johor.

KSTS area of expertise is in providing advisory services on matters related to Occupational, Heath and Safety Management Systems (“OHSAS 1800”) and ISO Quality Management Systems. It also undertakes auditing and inspection, looking into cases relating to deaths,accidents and dangerous occurrences at the workplace and making recommendations for improvements.

Other services provided include health screening (medical surveillance), noise monitoring, gas testing, as well as administering urine and drugs tests. KSTS also takes on the role of a visiting medical officer and a foreign workers’ medical screening expert on behalf of the Foreign Workers Medical Examination Monitoring Agency (“FOMEMA”).Its other expertise include purchasing, supplying, installation and maintenance of fire-fighting equipment, providing advisory services on road safety,security and the eradication of pests such as bats and termites.

SPECIAL APPEARANCE SDN BHD (“SASB”)

SASB was incorporated on 4 December 2008 and its corporate motto is “Let’s Turn Ideas Into Treasure,Sketches to Cash, Benefits to Profits”. The company’s expertise is on replanting contracts, estate management as well as event management.

In 2017, SASB earned a revenue of RM7.69 million, a decline of 9.53% compared to RM8.50 million posted the previous year. However, PBT was recorded at RM599,671, a hefty 151.10% hike from 2016. The significant increase in profitability was attributed mainly to the contract secured during the year to manage the Mersing Hill Estate as well as the recovery of debts.

For the coming financial year 2018, SASB has been awarded a contract by JCorp to manage 218 hectares of oil palm estates at Bakri, Muar. As in all its business undertakings, SASB aspires to be a strategic partner to its customers by offering value-added services with a view towards a long-term relationship.

EDARAN BADANG SDN BHD (“EBSB”)

EBSB’s mission is to help overcome the plantation industry’s over dependence on human labour through mechanisation. The company strives to set itself apart by providing its customers not only with the best products and services, but also exceed their expectations through a well-established distribution network.

FY 2017 was a good year for EBSB, which saw revenue improve by 18.24% to RM25.16 million. Correspondingly, PBT surged substantially to RM802,616 from a LBT of RM299,525 in 2016.

The invention of a three-wheeled multi-purpose “mechanical buffalo”, called Badang, has carved a niche for EBSB in the market. Badang is used in FFB evacuations and other field works such as manuring and mulching. EBSB has expanded its business activities to include dealer ship for other agricultural tools and equipment. It is presently an authorised dealer for tractors bearing well-known names like EUROSTAR, KINTA, Cummin,Hansen, TRP Chain, Renold Chain, Sime Pole, Kingoya Pole, among many others.

To further penetrate the local market, EBSB has opened three (3) product distribution centres at Lahad Datu, Bintulu and Kuantan. Apart from Badang, the Lahad Datu centre is also the sole distributor in Sabah for a range of agricultural equipment bearing the Beluga, Rhyno,Tiger and Lion trademarks imported from Korea.

Looking to the future, the challenge for EBSB is to keep abreast with the latest developments in mechanisation that will benefit the oil palm and the agricultural sector as a whole. In the face of a persistent labour shortage, large scale estates are increasing turning to mechanization to improve productivity and efficiency as well as to reduce costs.

AGROFOODS

Cattle Project

Kulim has built a strong portfolio anchored in three (3) business segments : Plantation, O&G and IV. Nonetheless, the Group is continually exploring opportunities to invest in new businesses that are synergistic with its core operations. Our foray into Agrofoods meets a two-fold  objective.Firstly, in line with our sustainability agenda, it enables us to promote green activities through the recycling of compost and fruit waste to support our feedlot and cattle integration activities. Secondly, it helps support our partners and out growers in building successful ventures, thereby contributing to the national food security programme.

During the year under review, Kulim made significant strides in its Agrofoods business. Cattle projects generated over RM8.30 million in revenue from the sale of cattle, whilst our pineapple plantation continued to prosper with revenue of RM4.70 million.

Kulim’s involvement in the Agrofoods business was a logical offshoot of its traditional palm oil business.It started with small-scale cattle rearing in the oil palm estates as a biological control under the weeding programme. Today, there are over 6,000 heads of cattle grazing on Kulim’s 12 estates. Estate owners have been encouraged by the Government to implement a cattle breeding and rotational grazing programme in compliance with Good Animal Husbandry Practices (“GAHP”).

Feedlot is the other aspect of Kulim’s cattle-rearing programme. As of 1 January 2017, Kulim Livestock Sdn Bhd (“KLSB”), a wholly-owned subsidiary of Kulim, has taken over the management of JCorp’s feedlot business previously under the care of Ihsan Permata Sdn Bhd (“IPSB”). This development involved two (2) feedlots in Lubuk Bakul which was funded by TERAJU under a Government grant and later the operations were transferred under KLSB’s management in July 2017. KLSB’s key activity is the rearing and fattening of cattle for one (1) cycle of four (4) months before they sold or slaughtered.

As at 31 December 2017, the feedlots housed a total of 653 heads of cattle, of which 374 were housed in Feedlot Bukit Nyamuk, 49 heads in Feedlot Lubuk Bakul and 230 heads in Feedlot Peta Temalik. Under the integration segment, the total head count was 6,277 at end-2017, versus 7,208 heads at end-2016. As at year end-2017, we had a total cattle population of 6,930 heads, decreased of 8.39% (2016: 7,565 heads). The decrease in population size was attributed to the sale of culled cows that are no longer productive and also the removal of 141 heads of unhealthy cattle.

Pineapple Business

Kulim has involved in the pineapple industry since 1994. The MD2 pineapple farms production run by Kulim Pineapple Farm (“KPF”) which located at Ulu Tiram, Johor. As at 31 December 2017, Kulim has some 200.15 hectares planted with the premium MD2 variety of pineapples. Total production of pineapples in 2017 amounted to 2,176 tonnes of this,83% were sold domestically with the remainder exported to countries such as the Middle East, South Korea and Europe. Marketed under the brand name of Melita,the demand for MD2 pineapples in both local and overseas markets is good.

KPF aims to be a cost leader in the pineapple business, promoting Melita as a premium yet affordable brand. In addition to producing premium fruits and suckers, the Group will focus on optimizing land usage with a higher density of plants per acre.

Adding value to the production of fresh fruits, we have also ventured downstream to produce a variety of pineapple-based products. These include tarts, jam, frozen yogurt, chips and drinks retailed under the Melita brand.