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On behalf of Hai-O's Board of Directors, it is with great pleasure that I present our annual report and satisfactory financial statements of the Group and Company for the financial year ended 30 April 2009. I am proud to report that Hai-O continues with its consistent track record of registered growth for the past 5 years, albeit the rising cost, more intense competition and prolonged uncertainties in the global economy.

Introduction

For the year under review, I am delighted to report that the Group's sales recorded again a double digit growth of 16% to reach an alltime high of RM435.22 million from RM373.82 million achieved during the previous financial year. In tandem with the higher revenue achieved, the profit before tax expanded from RM67.72 million in FY2008 to the current FY2009 of RM75.89 million.

The improvement in sales revenue and profit performance was buoyed by strong newly recruited distributor force, increased productivity and was also mainly driven by enhanced marketing and recruitment programs initiated by the Company.

The principal subsidiary, the MLM division continues to be the key contributor to the Group's results and contributed over 80% and 78% to the Group's revenue and profit respectively. It was mainly due to the increased sales for wellness and hi-tech products i.e. Bio-Aura water filtration system, and continuous increase in the distributor force amounting to about 20% as compared to FY2009 and FY2008. Besides, the Group emphasized the A&P cost on billboard, TV advertisement and more sales campaign had also boosted the member's productivity.

The slowdown in the domestic consumption as consumer becomes more cautious in their spending resulted in a drop in sales in the wholesale division.

Share Buy Back

During the FY2009, the Company had purchased 1,317,600 Hai-O shares from the open market.

As a reward to shareholders, on 26 June 2008, the Company had declared a distribution of one (1) treasury share for every twenty five (25) existing ordinary shares of RM1.00 each ("Share Dividend") to the shareholders. A total of 3,225,542 treasury shares were distributed to entitled shareholders in relation to this Share Dividend on 11 August 2008.

As of 15 September 2009, the date prior to the printing of this Annual Report, the treasury shares held by the Company amounted to 1,268,344 shares. The Company has announced on 3 September 2009 that it is seeking a renewal mandate from shareholders pertaining to share buy back in the forthcoming Annual General Meeting to be held in October 2009.

Employees Share Option Scheme (Esos)

During the FY2009, the Company had purchased 1,317,600 Hai-O shares from the open market.

As a reward to shareholders, on 26 June 2008, the Company had declared a distribution of one (1) treasury share for every twenty five (25) existing ordinary shares of RM1.00 each ("Share Dividend") to the shareholders. A total of 3,225,542 treasury shares were distributed to entitled shareholders in relation to this Share Dividend on 11 August 2008.

As of 15 September 2009, the date prior to the printing of this Annual Report, the treasury shares held by the Company amounted to 1,268,344 shares. The Company has announced on 3 September 2009 that it is seeking a renewal mandate from shareholders pertaining to share buy back in the forthcoming Annual General Meeting to be held in October 2009.

Changes In The Composition Of The Group

As part of the process in streamlining the Group operations and reallocating the resources to more profitable business segment, the Company had disposed off its entire equity in the dormant companies, Chop Aik Seng Trading Sdn Bhd and Dawin Trading Sdn Bhd for a total cash consideration of RM20,000.00 and RM88,800.00 on 22 May 2008 and 20 April 2009 respectively.

During the year, the Group had also reshuffl ed its organization by transferring its sub-subsidiary, PT Hai-O Indonesia ("PT Indonesia") to its subsidiary company, Hai-O Marketing Sdn Bhd ("Hai-O Marketing") and thereafter the paid-up capital for PT Indonesia had been increased from USD100,000.00 to USD200,000.00. Consequently, Hai-O Marketing's equity interest in the issued & paid-up capital in PT Indonesia represents 60% of the enlarged paid-up capital. PT Indonesia had obtained all necessary licenses from the local authorities and had started its business in August 2009.

Besides, during the financial year, the company had also via its wholly-owned subsidiary, Hai-O (Hong Kong) Investment Limited subscribed for 200,000 ordinary shares for USD1.00 each, representing 100% equity interest in Hai-O (Guangzhou) Trading Ltd for total cash consideration of USD200,000.00, with objectives to tap new business opportunities.

Dividend

The Group is adhering to its dividend policy by paying not less than 50% of Profit After Tax as dividends to shareholders.

For FY2009, in addition to the interim dividend of 10 sen per share (less tax 25%) amounting to RM6.247 million paid on 26 March 2009, the Board is pleased to recommend a final dividend of 32 sen less tax of 25%, which is subject to the approval of shareholders at the forthcoming Annual General Meeting. This equivalent to a total of gross of 42 sen cash dividend proposed in respect of the financial year 2009.

Awards & Recognition

Hai-O was once again picked as one of the companies in the 2009 edition of OSK's "Top Malaysian Small Cap Companies" (The 50 Jewels) handbook. As opposed to last year, OSK reduced the number of companies featured in the latest edition from 100 to 50, which in their opinion make up the 'best-of-breed' that are able to endure the economic storm and emerge from a position of strength. This handbook, released by OSK Holdings Bhd, is a compilation of research reports on its top 50 picks of small-cap (small-capitalised) companies in a publication targeted at fund managers. Its aim was to identify undervalued stocks of small cap companies with sound fundamentals, proven track records and growth potential that could likely be the "stars" of tomorrow. We are proud and honored to be ranked among "The 50 Jewels".

Hai-O Enterprise was once again selected for the 2nd consecutive time as one of the 13 Malaysian companies that made it to the 2008 Forbes Asia 4th Annual "Best Under A Billion List" with sales under US$1 billion. We are among 200 companies drawn from over 24,155 listed companies in the Asia-Pacific region. According to Forbes, each of the listed companies is screened for consistent profitability and growth over 3 years, resulting in an honor roll of highpowered outfi ts that far outperform the market.

Hai-O Enterprise emerged as one of the Top 100 winners in the KPMG Shareholder Value Award 2008, the Company was ranked 6th as published in The EDGE Malaysia on 22 August 2009. The KPMG Shareholder Value Award is an annual award where all listed companies in Bursa Securities are evaluated in terms of value creation to their shareholders in the year of review. This award is designed to promote corporate excellence through enhancing levels of disclosure and setting exemplary best practices. Companies were ranked according to economic profit (EP), a financial indicator which integrates a company's income statement, balance sheet and market expectations to provide an estimate of true economic earnings after covering the cost of capital.

On 11 November 2008, 2 of our subsidiaries, Hai-O Raya and Hai-O Marketing were both awarded the Business Ethics Excellence Award 2008. The award was organized by the Business Ethics Institute Malaysia, the Malaysian Institute of Integrity and the Ministry of Domestic Trade & Consumer Affairs. The award was introduced to recognise responsible and outstanding business practices among the local and international companies in Malaysia.

On 31 March 2009, Hai-O Raya Bhd was awarded The BrandLaureate Award 2008-2009 under the Product Branding for Traditional Chinese Medicine category. The BrandLaureate Awards is organized by the Asia Pacific Brands Foundation (APBF). APBF aims to recognise and honour branding excellence amongst the multinationals, public listed and government linked companies in Malaysia and the Asia Pacific region.

On 10 September 2009, just a couple of days before this publication went to print, Hai-O Enterprise was selected for the 3rd consecutive time as one of the 8 Malaysian companies that made it to the 2009 Forbes Asia 5th Annual "Best Under A Billion List" with sales under US$1 billion. The Group is extremely honored by this, we have fulfi lled our commitment in striving for 3 consecutive listings.

Prospect Of The Company

Economic growth has slowed down globally and industry projections by several financial services firms and industry associations for year-end 2008 through 2009 have been generally pessimistic. According to the International Monetary Fund, the global economic slowdown is so severe that the worldwide economy has contracted for the first time in 60 years. This will inevitably affect consumers' income and living standards. The second stimulus package or mini-budget proposed by the Ministry of Finance that was unveiled on March 10th is expected to make the Malaysian economy stronger and more resilient to withstand the external pressures and challenges. Moreover, the expected increase in import purchase price due to weakening of the Ringgit against the US Dollar, higher transportation and operating costs will further take a toll on profit margin. The Group is taking necessary action to refocus its resources on its core business, emphasize more on house brand products and carry out more sales promotion, to intensify distributors recruitment activities, and moving towards a promising path of science and technology.

Business challenges are inevitable in today's ever highly competitive and challenging global business arena. However, I am happy to say that our dedicated management team has continuously put in relentless efforts in ensuring the smooth running of our daily operations, continue to improve and working towards betterment by undertaking effective measures to overcome challenges and obstacles. In view thereof, the Board of Directors is of the opinion that the Group's performance for the next financial year will remain a challenge of improving in a climate of uncertainty but is confident that a sustainable development is possible through the cooperation between the management, employees and our business partners.

Investors Relations

The Company is conscious of the importance of information and will not divulge any undisclosed material information to any single shareholders or individual and also recognized the importance of being accountable to its investors and as such has in place a communication policy that enables the Board and management to communicate effectively with its investors and public generally via a structural approach on the communication of material information to investors and the general investing public.

In addition to the Annual General Meeting, which is the principal channel of communication with shareholders, the Directors and senior management have also taken the initiative to organize regular press conferences, regular updates on our Website's Investor Relations section, dialogues and company visits to fund managers, institutional investors and analysts to keep them updated on the Company's business operations, financial performance, major developments as well as our future growth, displaying the Company's emphasis on shareholder value and the recognition of their rights.

As part of the efforts to enhance investors relations, the Company had participated in the Investors Relations Programme "Investors Expo 2008", held at Kuala Lumpur Convention Centre on 16 Oct 2008, jointly organized and sponsored by MIRA, Share Investors, CIMB Bank and OSK Investment Bank. Hai-O was selected as one of the companies to slot in a presentation as one of the top pick small capital companies.

Changes To The Board Of Directors

22 November 2008 witnessed the passing of one of our leaders, Independent Non Executive Director Dr. M.K. Rajakumar A/L M.R.K. Nayar after having served the Board since 6 September 1996. On behalf of the Board, it is with a heavy heart I bid him farewell and may he rest in peace, and also wish to record my heartfelt thanks for his contribution to the Board. The wealth of experience and philosophy he brought with him to the Board was invaluable.

Tan Keng Kang had resigned from the position of Executive Director on 18 September 2008. He was appointed to the Board on 26 December 2001.

I also wish to welcome two (2) new members to our Board; Datin Sunita Mei-Lin Rajakumar as Independent Non Executive Director and Chia Kuo Wui as Non Independent Executive Director. The Board now has new bloods, ensuring the sustainability of the management and the integration of tradition and modernity. The Board now has four (4) Independent Directors displaying our commitment to continued transparency and good corporate governance for the benefit of the shareholders.

Appreciation

I would like to take this opportunity to express my sincere appreciation and gratitude to all our existing shareholders for maintaining the trust, support and confi dence in building a good relationship with various parties.

To our business associates, customers, suppliers, governmental bodies, bankers, business analyst and fund managers, we would like to thank you for your contributions and initiatives taken to enable us to make the year 2008 a successful year for all of us. I would also like to thank the management and staff of Hai-O Group of Companies who have played an important role in contributing to the continuous growth of the company.

Last but not least, I would like to express my gratitude to all who has supported Hai-O in all our business endeavors and we are confident, we will be able to continue to grow and expand.

Thank You.

Y. Bhg. Tan Sri Osman S Cassim
Chairman