FHL Performance

fhl-annual-report-2016_029

It is a pleasure to report on the progress Fijian Holdings Group has made during the financial year ending 30th June 2015. As ever, it has been a busy year as we strive to better serve our customers and partners across our many businesses and deliver value to our shareholders. The year started with a hard look at our strategy, where we wanted to be as a Group by 2020 and how we could deliver the required growth. As we analysed our strengths and capabilities, we quickly came to recognise the importance of focusing on our core competencies in different sectors.

Review and refinement are key elements of growth, and during the past year, your company has done both, reviewed the areas in which we operate and refined our focus to those in which we can be the most effective, and do the best. In keeping this report concise and pertinent to the year under review, whilst being comprehensive and detailed, we have ensured the commentaries are of a helicopter view of the events and progress within the year.

Group Performance

Despite challenging industry landscapes in several of the Group’s key business lines, the diversity of its operations enabled the Group to demonstrate stability in its earnings profile. The FHL Group turned in another year of strong financial performance with consolidated profit after tax before discontinued operations for the year surging 33% to reach $15.13 million. The Group’s consolidated revenue grew by 9.2% to record $ 276 million during the financial year. Growth was broad-based with all sectors recording top line growth. As
per accounting standards, operations of PNG-based Media Niugini Ltd (MNL) was considered discontinued operations for the financial year ending 30th June 2015. The key contributors to the Group’s revenue during the year were RB Patel Group Ltd (33.7%), Basic Industries Ltd (16.0%) and South Sea Cruises Ltd (14.2%).

The Group’s revenue streams are well diversified with the contribution of an individual sector not exceeding 20% of consolidated revenue except for retail sector. Export-oriented business interests have also enabled the Group to be geographically diversified with revenue streams originating from multiple countries in the Pacific
region.

Group operating profit before tax increased by 10.8% to $24.1 million during the financial year supported by revenue expansion, whereas growth in other income was marginal. While staff costs increased by $1.51 million, other operating expenses decreased by $2.1 million. Primary contributors to the Consolidated Profit were Merchant Finance Ltd with 23% followed by RB Patel Ltd and South Sea Cruises Ltd with 15% each.

During the financial year, FHL Group, excluding Merchant Finance Ltd, paid a total of $6.17 million as finance cost. In addition, an impairment loss on goodwill was recorded at $6.1 million arising out of South Sea Cruises acquisition. In addition, at holding Company level too, a provision to the value of $8.9 million was made in terms of diminution value of investments. Total group assets reached $459 million during the year, as the Group continued to strengthen its market positions and geographical reach through acquisitions and organic growth. Total group liabilities stands at $255 million, a 1.4% decrease compared to the previous year.

Performance of Group Companies

Each of these companies have strong macro drivers and are well positioned for growth going forward. Fijian Holdings Ltd as a holding company recorded a 38% growth in revenue leading to a 32% increase in after tax profits for the financial year. FHL has achieved an average annual revenue growth of more than 15% for past 4 years. Total investment portfolio at holding company level grew by 9% to reach $231 million. Merchant Finance Ltd (MFL) recorded a pre-tax profit of $10.0 million for the year based on a revenue of $19.7 million. MFL derived a total interest income of $18.9 million from a lending portfolio of $101 million while contributing the largest dividend payment to the holding company during the year. With a branch network of 7, the company has been in preparation mode for a public listing. With a solid business model which is largely based on asset financing, MFL would be an attractive proposition for investing in the coming years.

Notwithstanding challenging operating environment in the Licensed Finance Institution industry, Merchant Finance recorded a strong performance aided by growth across all businesses with both deposit and credit growth trending above industry average. The company is in the planning stages of new products in line with our innovative business strategies. The turnaround of Basic Industries Ltd after several years of poor performance was a key achievement reflecting the spirit of the FHL Group. From a moderate 11% revenue contribution to the group in 2013 to 16% of contribution to increased group revenue in 2015 is a remarkable achievement. This is on the backdrop of improved demand for aggregates, concrete, cement blocks and other concrete products.

A 27% growth in the annual revenue indicates the potential of the sector and will become a contender for the group’s highest revenue contributor in the years to come. The re-engineering process is not yet completed but will continue until such time, when we achieve optimum results. We will emerge stronger with a sharp focus on innovation to deliver higher value additions. Pacific Cement Ltd (PCL) experienced the first full year under competition, which otherwise used to be a monopoly business in the country. While we welcome competition, we are contained with the level of customer service provided by the company in order to ensure PCL delivers a superior product with excellent customer service. A recent management change coupled with shareholder change has led to a new direction in terms of investment in modern machinery.

The same will improve efficiency in production in the coming years. While RB Patel continues to be the most consistent company in the group in terms of performance, any significant growth in the retail arena would require major investment outlay. We do recognise the fact that the only way to improve the revenue contribution from the retail chain would be to increase the number of stores. Potential acquisition of a chain with few stores or stand-alone stores are possible in the coming years.

Acquisition of South Sea Cruises Ltd now proves to be a success with a cumulative growth of 20% in revenue despite the impact of Tropical Cyclone Evan. SSC has recorded a pre-tax profit of $6.6 million on a revenue of $45 million. Refurbishment of Fiji Princess and acquisition of the new vessel, Couger II have paved the way to enhance the shareholder value in the coming year. SSC chartered one vessels owned by Blue Lagoon Cruises Ltd and will be planning a major refurbishment for Mystique Princess within the next 18 months.

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