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Chairman's Statement

On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of Reliance Pacific Berhad (RPB) and its group of companies (Group), for the financial year ended 31 March 2011.

INTRODUCTION

After the extremely challenging conditions for much of 2009/10, RPB saw some improvements in our business in the financial year 2010/11.

During the financial year ended 31 March 2011, RPB shareholders approved the divestment of certain Malaysian travel subsidiaries at the EGM held on 31 March 2011. With this divestment, RPB will put more emphasis on hotel and property development businesses.

GROUP PERFORMANCE

For the financial year ended 31 March 2011, RPB recorded a Group turnover of RM504 million, an increase of 10% from the previous year. RPB returned a positive bottom-line in spite of the challenging operating environment marred by the slow economic recovery in Europe and the US , the Japan tsunami tragedy in March 2011 and high fuel prices throughout most of the financial year under review. The Group recorded a profit after tax and minority interest of RM1.5 million, up from a loss of RM408,000 in the previous year.

Having said the above, I am pleased to announce that our delivery and service standards remained strong. We are proud to mention that Avillion Hotel had again won 3 international awards in 2010, namely World Luxury Awards 2010, Outstanding Beach Resort 2010 and the top 10 Health Resort 2010. It is also my pleasure to inform that Avillion Hotel has also won the World Luxury Awards 2011 for the second consecutive year.

We are one of the few home grown Malaysian hotel brand to have been continuously recognized internationally for consistently delivering great value to customers. These awards together with many other accolades that we received over the years are testaments to our product quality and consistent levels of services in providing unique experiences.

DIVISIONAL PERFORMANCE

Hotel Division

Our revenue and earnings are derived primarily from the hotel operations which include the management and other fees earned from hotels we manage and the operation of RPB owned hotels.

Our hotel business model derives its revenue primarily from the operation of hotels and resorts positioned in the upscale and mid-end segment of the industry. As at 31 March 2011, we have 5 properties under the Avillion brand namely Avillion Port Dickson, Avillion Admiral Cove, Avillion Legacy Malacca, Avillion Layang Layang and Admiral Marina & Leisure Club. In total the room inventory is approximately 900 rooms.

Due to the global economic crisis in US and Europe and its impact on the long term growth outlook for the industry during the year under review, the Hotel Division performance did not record growth. Top-line performance was the same as the last financial year ended 31 March 2010 due to the drastic curtailment of long haul travel into Malaysia particularly from Europe for the aforesaid reasons.

There was also a decline in profits primarily due to expenditure in upgrading works of Avillion Port Dickson. During the period when upgrading works were underway, rooms were closed on a scheduled basis resulting in reduced inventory for sale.

Avillion continues to make determined effort not to diminish the brand experience it provides to our customers. We are working hard to take the product, service and experiential offerings to new levels. Hence, the maintenance and upgrading works were necessary as our customers want to feel that they are gaining real value that extends beyond personalized, thoughtful delivery of services and world class experiences which are the fundamental philosophies of our business.

In the new financial year of 2011/12 we are launching Avillion Private Collections. It is a collection of private residences and homes located in various locations within Asia. It's core business model is to manage and market these private residences and luxury homes to leisure and corporate travellers throughout Asia.

In the second half of the 2011/12 financial year, we look forward to the launch of Avillion Private Collections in Malaysia and Bali. Moving forward, these initiatives are expected to be positive for the Hotel Division to maximize profits and strongly positioning us to expand the Avillion brand in the region.

Property Division

During the year under review, the Property Division recorded a profit before tax of RM7.0 million primarily as a result of positive contribution from its wholly owned subsidiary, Admiral Marina Berhad and the gains from property sales.

Moving forward into the new financial year, property development will be the main business focus of RPB. In line with this plan, the Property Division has acquired several pieces of land with development potential.

In March 2011 we successfully acquired 100% equity in Golden Envoy (M) Sdn Bhd ("Golden Envoy") a company principally engaged in property development. Golden Envoy has entered into an agreement with Lembaga Kemajuan Johor Tenggara ("KEJORA") to develop a piece of land in Johor. The land measuring 165 acres of integrated mix development comprises of residential homes, commercial shophouses, schools, college, community hall and recreational facilities. This marks our foray into the high growth state of Johor, the home of Iskandar Region Development.

This new positioning will complement the Property Division's strong track record of developing vast mixed development having had successfully developed it's 100-acre flagship integrated international marina resort in Admiral Cove, Port Dickson in the 1990s.

Plans are also afoot in planning for parcels of prime location land it has acquired in Kuala Lumpur and Langkawi.

Travel Division

Although the Travel Division recorded healthy top-line growth of 25% during the financial review as compared to the previous year, it recorded a before tax loss of RM2.3 million. The loss is attributable to an aggressive market share acquisition strategy where higher marketing expenditure was incurred particularly for online marketing and technology investments.

PROSPECTS

Looking ahead, the Government is optimistic that Malaysia will achieve a GDP growth of 6% for 2011 and the Economic Transformation Programme ("ETP") will be a vital component to spearhead this growth. While the global economy will continue to be unpredictable, the Group remains confident that China and India will continue to be the engine of economic growth for this region with its growth momentum projected at 9.6% and 8.4% for 2011 respectively. If present trends continue, we expect our financial results to improve in the new financial year 2011/12.

Barring any unforeseen rapid change in conditions, we remain confident in the future of the Hotel Division.

As for the property sector, we are developing a mid end township, Golden Envoy which should receive good take up rate. Coupled with our proven track record and ability to provide a wide range of products to suit the market demand, confidence level of our consumers and capable management team, we are confident of a generally better performance.

DIVIDENDS

For the financial year ended 31 March 2011, the Board of Directors is not recommending any declaration of dividend.

APPRECIATION

On behalf of the Board, I would like to extend my heartfelt gratitude to each and every one of our employees who has remained committed and dedicated to the company and continue to persevere with the company throughout the years. To them, I would sincerely like to say thank you.

Our utmost appreciation must also go to our business partners for their continued support.

My appreciation also goes to my fellow Board members who have been instrumental in providing guidance and valuable insights to the management throughout the year.

To our shareholders and customers, we thank you for your confidence and support. We have built our business with you in mind and will continue building value for shareholders and customers alike.