On behalf of the Board of Directors, l am pleased to present the Annual Report of Mithril Berhad (“Mithril”) and its subsidiaries (“the Group”) for the financial year ended 30 June 2009.
REVIEW OF FINANCIAL PERFORMANCE
The global financial crisis has affected the Group severely. During the second quarter of this financial year, we experienced a sudden and drastic drop in demand for our polyurethane (“PU”) products from the United States and Europe. As a result, for the financial year ended 30 June 2009, the Group’s revenue decreased by 34% from RM38 million achieved in the previous financial year to RM25 million for the current financial year.
Nevertheless, despite the drop in revenue, the Group has recorded a lower loss for the financial year of RM3.5 million as compared to RM17.2 million reported in the previous financial year. The improvement was attributed to the continuous cost control measures taken by the Management, the disposal of a non contributing business and the securing of a waiver of interest and charges on loans granted by a related party.
REVIEW OF OPERATIONS
Our Group’s revenue continues to come from the investment properties and the PU manufacturing operations. For the financial year ended 30 June 2009, the rental income and the sale of PU products contributed RM6 million and RM19 million respectively. As announced on 22 May 2009, we are exiting from the brick manufacturing operations by selling the unproductive assets for RM13.6 million in cash. Apart from raising the cash to reduce our debts, the disposal also ends the continuous operating losses suffered from the brick manufacturing operations.
CORPORATE EXERCISES
As part of the initiatives to improve the performance and financial position of the Group, we have announced a series of corporate exercises during the financial year, as follows:
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1. Early Partial Redemption of Redeemable Convertible Secured Loan Stocks (“2004/2012 RCSLS”)
Following the Securities Commission’s approval obtained on 17 April 2009, our company has, on 5 June 2009, obtained the approval from the 2004/2012 RCSLS Holders to vary the trust deed and deeds of assignment governing the 2004/2012 RCSLS. The variation has allowed us to make an early partial redemption of the 2004/2012 RCSLS by utilising the sinking fund. Accordingly, on 3 July 2009, we have redeemed RM12.98 million of the 2004/2012 RCSLS and hence, reduced the nominal amount of the 2004/2012 RCSLS from RM59 million to RM46.02 million. This exercise has improved our gearing ratio as well as reduced the burden of future interest payments.
2. Disposal of brick manufacturing operations
As highlighted above, we have entered into the sales and purchase agreements to dispose of the brick manufacturing operations consisting of 13 parcels of freehold lands, factory buildings and the related machineries and equipment. On 3 August 2009, subsequent to the financial year end, we have obtained your approval to sell the operations. The proceeds from the disposal will be substantially utilised to reduce the Group’s debts. This step will improve the Group’s gearing and reduce the burden of interest payments further.
3. Par value reduction and share premium reduction
Together with the disposal of brick manufacturing operations, we have also obtained your approval to reduce the par value of the authorised and issued ordinary shares of Mithril from RM1 each to RM0.25 and to reduce the entire share premium on the same date. This exercise allows us to eliminate RM217 million against the accumulated losses carried forward and hence rationalise our balance sheet that is unrepresented by the available assets.
On 29 September 2009, we have lodged with the Registrar of Companies the sealed order from the High Court of Malaya, thereby effecting the par value reduction and share premium reduction on that date.
In addition to the above exercises, we have also disposed of a loss making subsidiary, Mithril FRP Industries Sdn Bhd, which was involved in the manufacturing and trading of fibre reinforced plastic products and fabrication of luxury yachts.
I also wish to highlight that the following loan stocks have matured and been converted into ordinary shares:
1. Irredeemable Cumulative Convertible Preference Shares (“ICCPS”)
On 12 March 2009, pursuant to the maturity of the ICCPS, 12.5 million of ICCPS have been converted into 12.5 million
of new ordinary shares of RM1 each.
2. Irredeemable Convertible Unsecured Loan Stocks (“ICULS”)
On 7 April 2009, pursuant to the maturity of the ICULS, 59.8 million of ICULS have been converted into 59.8 million of new ordinary shares of RM1 each.
Following the maturity of the above ICCPS and ICULS, the company has fully discharged all its interest payment obligations over the last five years. The conversion also means that there will be less interest bearing loan stocks to be serviced in the coming year.
FUTURE OUTLOOK
Given the weak economic outlook, the Management expects that the coming financial year will continue to be challenging. However, the Management will continue to identify new markets to combat the decrease in demand from the United
States and Europe for PU products.
In addition, to strengthen the Group’s balance sheet further, the Management will continue with its initiatives to improve its manufacturing operations and to dispose of non-performing assets to reduce the Group’s gearing; fund the working capital requirements of the Group and meet its debt settlement obligations.
ACKNOWLEDGEMENT AND APPRECIATION
On behalf of the Board of Directors, l would like to take this opportunity to express my gratitude to my fellow Directors, Management and all members of the Mithril team for their dedicated efforts and valuable contributions to ensure the continued growth of the Group.
Finally, I would like to thank our valued shareholders, customers and business associates for their support, trust and confidence placed upon us.
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