Summary of key matters discussed at the 51st AGM of PPB held on 12 June 2020
PPB’S REPLIES TO MSWG’S QUESTIONS
- Current economic conditions and the impact of COVID-19
The Group has seen macro-economic uncertainty with regards to prices and demand of its products and services as a result of the COVID-19 (coronavirus) outbreak. Recent global developments and uncertainty in the market have caused further disruption and large-scale volatility in the commodity markets. The scale and duration of these developments remain uncertain but could impact the Group’s earnings, cash flows and financial condition going forward. The Group is monitoring the situation and taking necessary measures to support and enable its business operations to continue. (Note 44, page 193 of Annual Report)
How will the current challenges presented by Covid-19 affect the Group’s activities and business strategies going forward?
Over 80% of the Group’s revenue is derived from the manufacturing and supply of essential goods and services, mainly Grains and agribusiness, and Consumer products.
Whilst the demand and supply chain was affected during the movement control order (“MCO”), it is expected to recover as the MCO eases over time. We will be adjusting to the new normal of doing business, and are cautiously optimistic that these business segments will remain relevant and perform satisfactorily.
- What are the specific areas or activities of the business operations that will be affected?
What are some of the measures being considered to ensure that business operations are not significantly disrupted?
Our Film exhibition and distribution segment has been significantly affected by the cinema closure and postponement of blockbuster movies during the MCO.
Management has taken various cost-saving measures and stringent cash flow management, including deferment of certain capital expenditure on new cinema openings and refurbishment. New promotions and initiatives are planned to bring customers back to the cinemas when they re-open.
- Group Capital Expenditure
During the financial year ended 31 December 2019, the Group incurred total capital expenditure of RM193 million. Major areas of expenditure included RM50 million in grains and agribusiness segment, mainly for construction of flour milling new plants and upgrading of existing plants, RM110 million in film exhibition and distribution segment for the opening of new cinemas and upgrading of existing cinemas, RM20 million in its property segment, mainly for the construction, upgrading and refurbishment of investment properties and RM12 million in consumer products segment, mainly for the construction of a frozen food production factory. (Page 33 of Annual Report)
What is the expected contribution from these capital expenditures?
The construction of a new 500mt/day plant in Vietnam will increase production capacity by 32% to 2,050mt/day. The upgrading of our existing plants, which also includes the construction of grain silos and a warehouse, will further enhance production efficiency of our flour mills across the region. The construction of a new halal-certified frozen food plant in Pulau Indah, Selangor will improve the manufacturing process and production efficiency of this business.
The opening of two new cinemas in EkoCheras, Kuala Lumpur and Mid Valley Southkey, Johor Bahru together with the introduction of the ultra-luxe boutique cinema, namely The Aurum Theatres at the Gardens Mall, Kuala Lumpur and Mid Valley Southkey have brought the latest cinematic technology and more comfortable seating to our viewers. With these additions, our cinema locations have been increased to 37 locations, bringing the total number of screens and seats to 361 and 56,602 respectively nationwide.
The construction, upgrading and refurbishment of our Investment Properties is aimed at enhancing their value.
The above capital expenditure will boost our business competitiveness, and enable us to achieve better performance in the future.
Will there be further capital expenditures in the coming year? If yes, what is the expected amount?
As stated in note 35, page 170 of the Annual Report, the Group has set aside total capital expenditure commitment amounting to RM464 million over the next 3 to 5 years.
- Position of the Group’s Employees
The Group employs slightly more than 6,000 people, of whom two thirds are permanent full-time employees. Its’ cinemas division accounts for the highest proportion of workers (38% of the Group’s total workforce), of whom, more than half are on part-time basis. (Page 76, Sustainability Statement, Annual Report).
What is the effect of the current challenges with of the COVID-19 pandemic to the Group’s employees? What will the impact be on its operations and expenses, in its cinemas division?
We have implemented the necessary initiatives and precautionary measures to ensure the safety and well-being of our Group employees during this challenging time.
Despite the closure of cinemas as mandated by the MCO, our full-time employees have been kept busy with training, maintaining and preparing the cinemas for re-opening post-MCO.
As a measure to manage our manpower more effectively, our contract workers are on temporary furlough in view of the long closure of the cinemas. We will rehire these workers when the cinemas reopen and the situation improves. We do not expect any of our cinema locations to be closed with the easing of the MCO.
We have put in place various cost-saving measures to ensure that our expenses are contained and our cash flow remains healthy.
- Increase in freight costs
In relation to the transactions related to subsidiaries of associates, the freight costs increased from RM52 million to RM131 million. (Page 169 of Financial Statements)
Freight costs are incurred for the import of grains by our major subsidiary, the FFM Group. The increase in freight costs was mainly attributable to the following :
- Increase in the volume of grains purchases during the year by 14% from 2018; and
- Higher volume of grains importation which were priced based on free on board, whereby the importer hires vessels for the shipment and incurs freight charges directly, as compared to cost and freight, whereby costs of sea carriage to ports are borne by the seller and included in the pricing. This arrangement allowed FFM to improve its grains logistics management.
Corporate Governance Matters
- Board evaluation and associated disclosures
Practice 5.1 of the Malaysian Code of Corporate Governance (MCCG) requires the board to undertake a formal and objective annual evaluation to determine the effectiveness of the board, its committees and each individual director. The board should disclose how the assessment was carried out and its outcome. For Large companies, the board should engage independent experts periodically to facilitate objective and candid board evaluations.
The Board considered the engagement of independent experts to conduct board evaluations at periodic intervals, and decided that this is not required for the time being. (Page 18, Corporate Governance Report).
When, and under what circumstances would the Board engage Independent experts to conduct board evaluation?
The Nomination Committee and Board considered whether to utilise an independent expert at periodic intervals to conduct the board evaluation, taking into account various factors. It was agreed that the present board self-assessment carried out internally is adequate. At this juncture we do not see any potential circumstances which would give rise to such need, but this will be reviewed annually.
Neither the CG report nor the Annual Report of the Company disclosed the criteria used in evaluating the effectiveness of the board, committees and each director.
Please refer to Guidance 5.1 of the MCCG for the information required to be disclosed relating to the board evaluation.
As disclosed in Practice 5.1 of the CG Report, the Board’s performance assessment, including the assessment of the independent directors was carried out internally by way of performance self-assessment forms, under the following categories :
- Board mix and composition
- Board roles and responsibilities
- Board meeting procedures
- Effectiveness of the board committees
- Board’s relationship with management
- Assessment of independent directors
The assessment, together with the questions and evaluation factors, were based on the Corporate Governance Guide issued by Bursa Malaysia Berhad. The respective responses were compiled to assist members of the Board and Nomination Committee to discuss and evaluate the effectiveness of the board, committees and each director.
- Policies and Procedures to determine the remuneration of Directors and Senior Management
Practice 6.1 of the MCCG requires the board to have policies and procedures to determine the remuneration of directors and senior management, taking into account the demands, complexities and performance of the company as well as skills and experience required.
The Company has disclosed that there is no formal Group policy on board and senior management remuneration. (Page 19, Corporate Governance Report).
Does the Board plan to formulate policies and procedures for the remuneration of directors and senior management? If no, why?
The Board approves or recommends the remuneration of executive and non-executive directors annually based on the Remuneration Committee’s (“RC”) review and recommendations. The Managing Director’s remuneration is reviewed annually by the RC taking into consideration his duties and responsibilities, and the Company’s performance, for Board approval.
Senior management remuneration is determined by taking into account their roles and responsibilities, experience and performance; and for those in the business units, factors considered include their diverse business activities, operating environments and the employees’ roles and responsibilities.
The Board is of the opinion that the present procedures are fair, and commensurate with the respective employees’ duties and responsibilities. Nonetheless the Company will continue to review regularly the need to formulate policies and procedures.
12 June 2020
Summary of key matters discussed at the 51st AGM of PPB held on 12 June 2020
|No. of shares
||No. of shares
|Ordinary Resolution 1
||To approve the payment of Directors' fees.
|Ordinary Resolution 2
||To approve the payment of Directors’ benefits.
|Ordinary Resolution 3
||To re-elect Tan Sri Datuk Oh Siew Nam as a Director.
|Ordinary Resolution 4
||To re-elect Mr Lim Soon Huat as a Director.
|Ordinary Resolution 5
||To re-elect Encik Ahmad Riza bin Basir as a Director.
|Ordinary Resolution 6
||To re-appoint Ernst & Young PLT as auditors of the Company.
|Ordinary Resolution 7
||To approve the continuation of Dato’ Captain Sufian’s tenure as an Independent Director.
|Ordinary Resolution 8
||To authorise the Directors to allot and issue shares.
|Ordinary Resolution 9
||To approve a shareholders’ mandate for recurrent related party transactions of a revenue or trading nature with persons connected with PGEO Group Sdn Bhd.
|Ordinary Resolution 10
||To approve the Proposed Share Buy-back.
12 June 2020