6
Mencast Holdings Ltd
| Annual Report 2014
Acquisitions allow our Group to leverage significant
economies of scale and improve our cost efficiency. Our
core systems and infrastructure are already deployed
and the costs related to management and administration
are being spread over a much larger earnings base. As
part of the continuous process to optimise capital and
operational efficiency, during the year 39 Tuas Avenue 13
Singapore was sold for $6.5 million, and operations
relocated to our other properties.
The Impact of Low Oil Price
The price of a barrel of Brent
tumbled from US$110 in mid-2014
to around US$50 at the current
time. This decline shocked the oil
industry and has driven significant
spending
cutbacks
amongst
national (NOCs), international
(IOCs) oil companies and other
market participants.
Fortunately, the impact of low oil
prices on our business has been
limited so far. Our strategy to build
Mencast into a leading MRO
business aligns our business with
oil output. As such, the amount of
oil produced and moved is as
important as oil price in
determining the demand for our
MRO services.
Nonetheless, oil price is
unquestionably the greatest
uncertainty in the year ahead. A
severe or protracted decline in oil
price leads to an environment of
cost cutting and would inevitably
affect our business.
Appreciation and Thanks
It’s been a challenging year, and I thank our customers, management,
staff, investors and directors for their support and spirit of teamwork.
In light of market conditions, as in most years, we are not proposing a
special dividend in 2014. Nonetheless, to recognise our progress and
thank our shareholders, I have recommended a final dividend of 1.0 cent
per share. Adjusted for the 1:5 rights share issue in July 2014, this
represents a 25% increase in ordinary dividend from prior year.
The outlook for FY2015 will be challenging. Until oil prices find a new
equilibrium, it is difficult to reliably estimate how this will affect our “Big
Hairy Audacious Goal” of $1 billion market capitalisation and $50 million
net profit by 2020.
Nonetheless, we have been gratified by the resilience of the Mencast team
to the market challenges. In the year ahead, we will focus on factors
within our control such as strengthening our business, generating cost
efficiency and prudent risk management.
With your support I am confident we will move even closer to achieving
our goal and vision of becoming the most admired MRO partner and
employer in the world.
Sim Soon Ngee Glenndle
Executive Chairman
and Chief Executive Officer
