CEO Update

The diversification of our business from that of a pure play contact centre outsourcing proposition to that of an integrated solutions player in Customer Life cycle Management, Education,  e-Government associated e-Commerce has provided Scicom with an opportunity to leverage on typically higher margins for these solution sets.

Dato' Leo Ariyanayakam
Chief Executive Officer /
Group Executive Director

Dear Fellow Shareholders,

DELIVERING IN FINANCIAL YEAR 2016

In fiscal year 2016 SCICOM, again; delivered profitable growth, increased revenues, achieved double-digit EPS growth, generated solid cash flow and significantly increased dividend payments to shareholders.

Here are some highlights:

  • We delivered record annual revenues of RM196.29 million. Revenue increased by RM19.46 million or 11.00% in comparison to the preceding financial year.
  • We delivered RM41.60 million in net profit - an all-time high representing an increase of RM7.44 million or 21.76% as compared to the preceding financial year.
  • Our net profit margin improved to 21.19% for this financial year as compared to 19.32% in FY 2015.
  • Basic Earnings Per Share (EPS) was at a record 11.80 sen, as compared with 9.76 sen in the preceding financial year, representing an increase of 20.90%. Compound Annual Growth Rate for the Group’s EPS over the last 5 years is 25.84%.
  • We generated free cash flows of RM41.44 million and maintained a very strong balance sheet, ending the year with RM37.00 million in cash and a zero debt position.
  • We continued to return cash to shareholders through our consistent dividend policy. Total dividend declared during the financial year 2016 was 9.0 sen per ordinary share, tax exempt; resulting in a dividend payout ratio of 76.27% of FY 2016’s net profit attributable to the owners of the Company.
  • Shareholders also saw an increase in their return on investment value as Scicom’s share price increased from RM2.04 per share on 1 July 2015 to RM2.27 on 30 June 2016. As a result, market capitalisation for Scicom increased by 11.275% to RM806.88 million by the end of FY 2016.
  • Since our IPO in 2005, Scicom shares have delivered a compound annual total return to shareholders (including dividends reinvested at spot prices) of 969.12%.

We continue to show solid earnings growth, combined with our focus on returning cash to shareholders. We extended our track record of creating exceptional shareholder value through the provision of a high dividend payout and by the capital appreciation in the value of our shares.

Evolution of services, risk and margin diversification

We operate in three distinct yet integrated business segments:

  • Customer Lifecycle Management Solutions (BPO solutions)
    • We provide premier customer care and technical support services along with associated fulfillment via our multi-lingual and multi-channel customer contact management centres. Our understanding of all aspects of the customer life cycle across every touch point and our experience in delivering quality services coupled with our domain expertise in multiple industry verticals positions us well in our target markets. Our target clients include conglomerates and multi-nationals that have a customer base in Asia Pacific and beyond.
  • Education Solutions
    • Our education solutions are centred on vocational and corporate training primarily in the Services Management sector. The ability to conduct large scale customised training engagements for large corporations and governments sets us apart from other providers. We have plans to enhance our suite of offerings in the markets we operate in and step up business development for opportunities in selected emerging markets around the world.
  • e-Government Solutions
    • Governments around the world are embarking on ambitious e-government programs, and the benefits of these are well known, enabling stakeholders to exchange information and the public to access services electronically such as tax, land management, business registration, e-health, e-procurement, border management and electronic payment etc. Bringing these programs and stakeholders together is a complex challenge that requires experience, local knowledge, and technological expertise.

Our focus markets are that of emerging markets around the world who are increasingly becoming cognizant of the value of outsourcing in providing efficiencies as well as offering an innovative product suite to their citizens. Our integrated approach to this challenge has generated much interest from governments in emerging markets around the region. Government digital services have evolved into a highly mobile and transactional online environment, therefore our suite of services invariably must include an e-Commerce component. To that end we have invested in an in house capability to provide a comprehensive suite of e-Commerce platforms to enable through the provision of payment gateways etc the collection of government revenue in the digital age. Global clients and governments expect us to provide on-line services, payment options and support and we are now in a position to do this from both a transactional and social media perspective.

The diversification of our business from that of a pure play contact centre outsourcing proposition to that of an integrated solutions player in Customer Life cycle Management, Education, e-Government associated e-Commerce has provided Scicom with an opportunity to leverage on typically higher margins for these solution sets. This is evidenced by our increase in profit margin from 19.32% in financial year 2015 to 21.19% in financial year 2016.

We have diversified significantly over the last two decades and today provide solutions that are complex and integrated. These solution sets offer a high barrier of entry to our traditional competition and augers well for our traditional business in Customer Lifecycle Management. Our transition to also that of a software and services solutions company for our government clients allows us to participate in the e solutions space. The flexibility to provide such solutions provide us with the ability to mitigate risk through diversification of service offerings, margin differentiation and enhanced market penetration.

In FY 2016, 44.57% of our revenue was derived from outside Malaysia and this is expected to rise as we enter into projects in the markets that we operate in.

Malaysia continues to be at the heart of our service propositions and is our operational HQ. We have consolidated Treasury, Human Resources and some IT functions in Kuala Lumpur. The associated applications used by these shared services are delivered via our internal cloud infrastructure. This gives us the advantage of being able to deploy rapidly at a lower cost for our clients and future prospects.

 

Investing in our people

Our people are our most important asset, and we are deeply committed to their ongoing development.

With 2,825 employees as of 30th June 2016, Scicom is strongly positioned as one of Malaysia’s largest and most experienced providers of integrated solutions. Our service offerings remain centred on the principles of customer acquisition, customer retention and customer value across multi-lingual touch points and channels for our clients.

We have a strong foundation reinforced by comprehensive delivery capabilities, breadth and depth of service offerings, a diverse vertical mix, a low-risk profile and a solid balance sheet. Coupled with the continued success of our operational optimization eff orts and sustained investments in our service offerings we are confident that we will be able to seize opportunities and continue to drive value creation for our shareholders.

In closing, I want to thank our people around the world for their continued commitment and dedication to serving our clients. I am convinced that we are executing the right strategy and making the right investments to win in the marketplace. I am confident that by working together and making a difference, the Scicom way, we will continue to deliver value for our clients and our shareholders in the coming financial year.

Thank you for your continued support.