KUB revamp gathering steam

Group focusing on 3 core businesses for better growth and margins

Monday July 13, 2009
By YAP LENG KUEN
PETALING JAYA: The transformation process at KUB Bhd, which was once a highly-politicised and loss-making company, is gathering steam.

“Prominent players are approaching us for joint ventures in two of our core businesses – information and communications technology (ICT) and power, engineering and construction (PEC),’’ managing director Datuk Nazar Samad told StarBiz.

In fact, starting from last year, the company was able to attract new talent and people with expertise as contracts came in for the ICT and PEC divisions while a major rebranding and refurbishment of its A&W chain of restaurants had commenced.

“We are building businesses with recurring income and strengthening our cashflow,’’ Nazar said, pointing out that businesses purely based on projects would not ensure sustainable income.

KUB has an ongoing RM300mil schools construction project for which 32 additional blocks and four new schools in Selangor, the Federal Territory and Negri Sembilan will be built by April next year. “Awarded in October last year, this is the first industrialised building system (IBS) project under KUB,’’ Nazar said. “We hope to bid for more such projects in line with our aim to be on the government supply panel for IBS.’’ KUB has targeted the IBS business, relating not just to construction but also supply of pre-fabricated components, to be a pillar for the group as the bulk of government projects are based on this modern and cost-saving technology.

Within the PEC division, which has RM500mil worth of contracts in hand, facilities management is another area that KUB intends to target aggressively. After 12 consecutive years of losses, KUB reported its first net profit of RM36.9mil for the financial year ended Dec 31 (FY08) and declared a 6% dividend to the delight and disbelief of many of its long-time shareholders.

“At our recent AGM, we were bombarded with questions from frustrated shareholders, and even a few had come in wheelchairs and from as far as Kedah and Johor,’’ said Nazar. About 970 shareholders had turned up.

Within the ICT sector, the new focus is on building inherent skills based on a recurring income model for managed services and system integration in the long term. It will no longer be based just on trading and supply of equipment. KUB, which has RM120mil worth of ICT contracts in hand, is bidding for projects worth RM150mil to RM200mil.

KUB Telekomunikasi Sdn Bhd completed the RTM digital pilot project in March last year after being overdue for two years. As a result, it managed to secure a new project – RTM’s digital migration – last year which was completed in March. The company is aiming for more projects with the Government’s latest aim for a national rollout.

When Nazar joined KUB in 2007, he saw that A&W with its 32 outlets could be a stable business for the group. “I convinced the board not to sell the food business and we have been slowly investing in assets,’’ he said. Another five outlets are coming up and the target is for 100 each in Malaysia and Thailand by 2015. “The A&W brand, which has been around for 45 years in Malaysia, can be good brand-building platform for KUB. It took us a year to convince the franchise holder Yum! Brands that KUB was the right partner and, last year, it agreed to our 10-year plan,’’ said Nazar.The food division under the A&W chain of restaurants recorded RM42mil in revenue in FY08. Up to June 30, it had seen a 20% growth in revenue compared with last year. KUB is targeting for A&W, which was incurring losses when KUB took over in 2001, to break even this year.

Nazar also convinced the board to keep the plantation business which gave good returns last year and represents a source of stable income for the group. KUB owns 2,655ha in Johor and 4,680ha in Sarawak. (tot=5,335ha)

So far, only the food-related business has been retained and represents one of the three core areas that include the ICT and PEC divisions. “When we joined KUB in 2007, it had a lot of businesses all over and management was spread very thin,’’ he said. KUB sold its non-core businesses that were mostly housed under 70 companies and landed with cash and cash equivalents of RM215mil as at end-2008.
Nazar’s focus is to strengthen the operations of these three core areas so as to reap the growth and margins, while seriously tackling costs. “We have moved into a much simpler office in Petaling Jaya and our senior management staff drive their own cars to work,’’ he said. In April last year, the company had sold its KUB.com building in Kuala Lumpur to Park Residence Sdn Bhd for RM86.5mil as part of its efforts to unlock the value of its assets and use the proceeds to repay borrowings.

To retain talent, an employee performance share scheme was introduced last year, while bonus payments were also based on performance.To ensure staff support for the turnaround plan, Nazar, who was previously running a public-listed building materials and manufacturing company in Johannesburg, implemented a fully hands-on approach to personally inspect work progress and other facilities on the ground. He meets up with staff to listen to their grouses and organises motivation monthly sessions for them.

“We hope to build more credibility,’’ he said, noting the completion of two projects – Institut Latihan Memperkasa Umno in March at Janda Baik, which was overdue for two years, and the RTM digital pilot project.

Nazar aims to make KUB an attractive company that counts non-bumiputras and funds such as Citigroup and HSBC Nominees among its top shareholders.

On the non-reelection of audit committee chairman Omar Ahmad at the recent AGM, he said: “That is a shareholder issue and we, as professional managers, do not get involved. Following that, Bursa Malaysia had come and looked at our processes as part of its surveillance work.’’

Bursa’s corporate surveillance activity covers resignation or non-reelection of audit committee chairman, audit committee member or independent director.
KUB chairman Datuk Nordin Baharuddin had said that Umno-linked Gaya Edisi Sdn Bhd, which owns 29.6%, had asked for a ballot counted by the number of shares. “When a major shareholder did not vote for him, he lost. There is nothing wrong,’’ he had said.