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Chairman's Statement

Dear Shareholders,

This is the first year that I am presenting the results of the Group in my capacity as Chairman and this is also the first year of a new decade Hai-O is in operation after undergoing a series of highs and lows over the past four (4) decades. I look forward to leading and building the team towards continuous growth in the years to come. On behalf of the Board of Directors ("Board"), I would like to present to you, the Group's Annual Report and financial statements for the financial year ended ("FYE") 30 April 2016.

Briefly, I will share with you, our milestones for the financial year 2015/2016 which include what we have achieved in the last financial year and what we plan to achieve in the next financial year. Our newly appointed Managing Director will provide a detailed discussion of our Group's performance and business plans in the "Managing Director's Statement".

To many business entrepreneurs, the greatest challenges are factors beyond our control. Malaysia remains in a period of uncertainty on many fronts. The external headwinds add uncertainties to the country's economy. High household debts, soft consumer spending alongside with a weak and vulnerable Ringgit, are some of the thorny problems we are currently facing. The weaker Ringgit exchange rate has affected the cost of living of households despite the impact of the overall inflation remaining manageable. Headline inflation declined to 2.1% in 2015 (2014: 3.2%) as the impact of a weaker Ringgit exchange rate was offset by a heavily deflated global energy and commodity prices. Despite the challenging economic environment in 2015, the Malaysian economy registered a growth of 5% (2014: 6%), supported by domestic demand driven by private sector.

None of the challenges that we are facing now are new to Hai-O. We believe that we will be able to weather the challenges ahead with the support of the Board and our dedicated team in the Hai-O family.

Financial Performance

FYE 30 April 2016 was indeed a fairly good start for Hai-O in its first year of a new decade after celebrating its 40th anniversary in 2015. Despite having a fair share of economic challenges in FYE 2016, we managed to chart a very respectable year of financial growth for the year. After two (2) years of stagnant financial performance in FYE 2014 and FYE 2015, we saw an improvement of 24.09% in the Group's revenue from RM239.85 million in FYE 2015 to RM297.63 million in FYE 2016, led by our core businesses in Multi-Level Marketing ("MLM"), Wholesale and Retail. Profit before tax ("PBT") improved by approximately 15.00% from RM42.67 million for the FYE 2015 to RM49.07 million for the FYE 2016. The degree of improvement in PBT in terms of percentage albeit lower than revenue, was mainly impacted by escalating cost pressures and a weaker Ringgit where majority of the Group's import purchases were transacted in US dollars ("USD") and Renminbi ("RMB"). Net earnings per share ("EPS") for FYE 2016 increased by approximately 3.48 sen to 18.70 sen (2015: 15.22 sen) and return on shareholders' equity for FYE 2016 was about 14.12% on the back of shareholders'equity of RM257.37 million as at 30 April 2016. Our working capital and liquidity remained healthy with a closing cash balance and short term investments of RM107.52 million (2015: RM104.41 million) with minimal gearing. I invite you to read the following pages to find out on the discussion and analysis of the respective operating segments.

Share Buy-back

The Company first sought authorisation to purchase its own shares of up to 10% of the issued and paid-up share capital of the Company at the extraordinary general meeting held on 29 October 2002. The mandate for share buy-back was renewed on 13 October 2015 and shall lapse upon the conclusion of the forthcoming Annual General Meeting ("AGM"), unless otherwise renewed. The intention to renew the share buy-back mandate was announced on 29 June 2016 and shareholders' approval for the mandate will be sought at the forthcoming AGM.

The Company purchased 1,686,900 shares from the open market during the FYE 2016. As at 10 August 2016, being the latest practicable date prior to the printing of this Annual Report, the Company held in total of 9,171,588 shares of RM0.50 each as treasury shares which is equivalent to 4.54% of the issued and paid-up capital of the Company. Subject to the evaluation of the Board and in the best interest of the Company, the treasury shares may be resold in the market to stabilise the supply and demand of the Company's shares or may be distributed as share dividends to shareholders as and when the Board deems fit.


Since the Company adopted a dividend policy to distribute at least 50% of the Group's profit after tax as dividends in September 2006, we have kept to our commitment and continuously deliver attractive returns to our shareholders via dividend payout whilst striking a balance between dividend payout and the capital requirements of the Group. In conjunction with Hai-O's 40th Anniversary, the Company commemorated the occasion by rewarding shareholders with an almost 100% dividend payout for FYE 2015.

During the FYE 2016, the Company had declared and paid an interim single tier dividend of 4 sen in March 2016. Our Board proposed a final single tier dividend of 11 sen, which is subject to the approval of shareholders at the forthcoming AGM. If approved by the shareholders, the total dividend declared for the FYE 2016 (including the interim dividend) is 15 sen (2015: 15 sen) reflecting a dividend payout ratio of approximately 80%.


Upholding and implementing the highest level of corporate governance has always been a commitment of the Board and the management. I am grateful that our commitment in this area has been recognised. Hai-O has been awarded the "Best Under Billion Awards - Best in Transparency" from Focus Malaysia and "Asean Corporate Governance Transparency Index, Findings & Recognition 2015 - Merit Award for AGM Conduct & Minutes Disclosure" by the Minority Shareholders' Watchdog Group.

In addition, I am very pleased that recognition has been given for our corporate responsibility initiatives, whereby Hai-O was awarded the "Asia Responsible Entrepreneurship Award" under Social Empowerment Category by Enterprise Asia.

Both our Board and management are encouraged by the recognitions given and will continue to uphold our duty and responsibility in corporate transparency and community empowerment.

Outlook and Prospects

The Malaysian economy continues to be in a period of adjustments. Bank Negara Malaysia in its 2015 Annual Report, anticipates the Malaysian economy to grow by 4.0% - 4.5% in 2016. Private consumption growth is expected to trend below its long-term average, reflecting largely the continued household adjustments to an environment of higher prices and greater uncertainties. In an environment of prolonged uncertainties and cautious business sentiments, private sector investment growth is also projected to be slower.

Taking into account the negative factors surrounding the environment that are expected to linger in the year 2016/2017 and there being no catalyst in sight, we will proactively manage our businesses to ensure sustainability.

For the MLM division, continuous efforts will also be placed for products development, member recruitment and retention, digital marketing as well as enhancing both traditional and e-commerce distribution platforms for efficiency. On the Wholesale and Retail segment, we see opportunities during this period of strong bilateral-ties between Malaysia and China, to work closely with our principals and business partners in China to do business effectively and economically. This may include enhancing trade settlement arrangements and acquisition of new distributorship for new products and brands.

Hai-O has been through some tough times in the past two (2) financial years with stagnant results, but we have demonstrated resilience. The Group will continue to leverage on its competitive strengths and strong fundamentals to brace the challenges ahead. Passing the baton to the next generation of management, I am confident that we are prepared for our next phase of growth.

Appreciation and Acknowledgement

On behalf of the Board, I would like to extend my sincere appreciation to our customers, business partners, associates, and authorities for their support. To our shareholders, thank you for your confidence in the Group.

During the financial year, Tan Sri Osman S. Cassim retired from the Board having been a long standing member for 11 years. The Group has benefited immeasurably from his experience and knowledge in the past. On behalf of the Board, I would like to express our gratitude for his leadership and wish him a happy retirement.

I would also like to take this opportunity to extend my warmest welcome to Mr. Soon Eng Sing on his appointment as the Independent Non-Executive Director on 1 December 2015 and Mr. Hew Von Kin who was appointed as the Executive Director on 1 February 2016. With the diverse mix of skills, experience and knowledge of Mr. Soon in strategic human capital and talent management together with Mr. Hew's vast experience in corporate management and strategic planning having served the Group for more than 25 years, and the re-designation of Mr. Tan Keng Kang as the Managing Director, I am confident that under their leadership, the Group will achieve greater success.

Within the Hai-O family, there is a shared purpose to strive to outperform and to uphold our enduring tradition of integrity. I wish to express appreciation to all our staff and our MLM distributors for their dedication and commitment in meeting all Hai-O's expectations. I am grateful to the members of the Board for their ongoing support and guidance. I am confident that with the strong fundamentals and capacities built over the years, Hai-O is well equipped to advance forward with every potential to deliver its best in the years to come.

Thank You.

Tan Kai Hee

10 August 2016