On behalf of the Board of Directors, I am pleased to present the Annual Report of DeGem Berhad ("the Group") for the financial year ended 31 December 2009 ("FY2009").
Stronger Financial Performance Despite Recession Year
Despite the global economic downturn affecting the first half of the financial year 2009, the Group has managed to achieve satisfactory results in FY2009. For FY2009, the Group registered lower revenue of RM189.386 million, a marginal decrease of 9.5% from RM209.214 million in the financial year ended 31 December 2008 ("FY2008").
Profit before taxation was, however, higher at RM22.168 million in FY2009 compared to RM20.033 million in the previous year, an increase of 10.7% y-o-y. The Group registered a higher net profit attributable to shareholders of RM15.370 million in FY2009 against RM13.997 million in FY2008, which translated into earnings per share of 11.47 sen against 10.45 sen in FY2008. The Group shareholders' fund has further strengthened to RM144.748 million as at end 2009 from RM132.284 million as at end 2008, a further improvement of +9.4%.
Net assets per share increased further to RM1.11 per share from RM1.00 per share, a consistent improvement for the past 3 years. The total debt to equity ratio remained at a healthy level, fairly close to the previous financial year end of 0.23 times.
More Resilient Consumer Sentiment Than Expected
Overall, the demand for basic jewellery item remained resilient; the spending allocation for this jewellery has not been compromised significantly. Improved market sentiment and strong demand for fine jewellery towards the end of 2009 have contributed to impressive earnings performance in 2009.
Reward to shareholders - Dividend
The Board of Directors recommends a first and final gross dividend of 4% (2.0 sen per share) less 25% taxation, subject to the approval of the shareholders at the thirteenth Annual General Meeting.
Prudent Financial Management
The Group has focused on cash conservation, except for selected products range that witnessed robust demand from consumer. The Group's financial liquidity remained healthy with positive operating cash inflow of RM4.108 million, which was substantially lower than last year's mainly due to higher repayment to creditors of RM13.412 million in FY2009. The investing cash outflow has reduced sharply to RM2.102 million in FY2009 against RM7.558 million in FY2008. Overall, the cash balance as at end of FY2009 was RM25.503 million against RM20.915 million as at end of FY2008.
Share buyback programme
The Group embarked on a share buyback programme in 20 November 2009 to manage its capital structure actively, given the Group's strong cash flow and financial position. As at 1 May 2010, a total of 1,527,100 ordinary shares have been bought from the open market to improve the Company earnings per share and return on equity.
The Group believes that DeGem Berhad's prevailing share price is trading at a discount to its intrinsic value and its share buyback programme aims to enhance the shareholders' value in the long term.
More Stable Outlook Moving Forward
Towards the end of 2009, the market witnessed a broad recovery in the prices of raw material. The recovery of global equity markets, improved consumer sentiment, a more stable economy recovery outlook and job prospects, is expected to instil stronger confidence for the jewellery industry and will eventually augur well for the Group performance in the ensuing year.
Acknowledgement
On behalf of the Board, I would like to extend my heartfelt gratitude to our shareholders, bankers, customers, business partners and regulatory authorities for their continued support, guidance and assistance extended to the Group. The Board would like to express its appreciation to the management and employee of the Group for their hard work and dedication.
Dato' Hasan bin M. Taib
Chairman