Strong growth trajectory: Given its strong fundamentals, Fariz says KPS has full confidence that its performance will continue to ascend.
THE proactive measures taken by Kumpulan Perangsang Selangor Bhd
(KPS) in its business strategy before and throughout Covid-19 have evidently paid off. Yet this global investment holding company remains committed to further strengthening its fundamental resilience.
KPS’ performance is evident from its strong financial achievements even during the height of the pandemic, despite unprecedented challenges such as supply chain disruption and raw material shortage, to name the least.
For the six months ended June 30, 2021, the group posted a 38.7% increase in revenue to RM632.1mil, compared with RM455.9mil recorded in the previous year. Its manufacturing businesses grew by 49.5%, contributing RM543.6mil or 86% to group revenue.
KPS also more than doubled its operating profit to RM40.2mil, compared with RM16.3mil, while profit before tax and zakat leapt to RM28.7mil from RM2.8mil in the corresponding period last year. This is on top of crossing a new milestone in achieving RM1.1bil in revenue for its 2020 fiscal year.
Clear vision: Zul stresses the importance of ensuring that the group moves in line with the overarching vision, missions and long-term corporate objectives.
According to its managing director and group chief executive officer Ahmad Fariz Hassan, this shows KPS’ success in balancing tactical decisions to build operational and financial capacity, while staying focused on its long-term strategic goals.
“Our financial performance for the first half of the year in 2021 is a testament to the potential for KPS in the coming future, as it illustrates the potential and agility of the industries we are in.
“KPS has its core focus on investments with businesses in the manufacturing, trading, licensing and infrastructure. Our subsidiaries are well prepared to manage the challenges and risks of the pandemic. Addressing such challenges requires a concerted effort by every single personnel. The effectiveness of the management team in KPS and its subsidiaries has enabled us to steer our way and rise above the challenge.
“These are all exciting reasons for existing as well as future investors to look forward to KPS’ future, since we’ve got a clear plan on how to grow our earnings based on strong fundamentals and commitment,” he explained.
Success in enhancing business focusSuch resilience traces back to the group’s efforts in diversifying its business across various sectors and geographies worldwide, reflecting the success of its business transformation plan (BTP) that started in 2016.
KPS has since transformed into a global player with activities not only in Malaysia but also in China, Vietnam, Indonesia and the United States, alongside shifting its business focus to one that creates value for its stakeholders through sustainable financial performance.
Moving away from its beginnings as an infrastructure and utility investment player limited to Selangor, KPS has expanded most of its business activities beyond the state.
Today, KPS’ manufacturing subsidiaries make up about 85% of its business. This includes Toyoplas Manufacturing (M) Sdn Bhd, a one-stop solutions provider for mould fabrication, precision injection moulding and secondary processes and assembly at its seven manufacturing plants across Malaysia, China, Indonesia and Vietnam; integrated thermoplastics injection moulding CPI (Penang) Sdn Bhd; integrated packaging solutions provider Century Bond Bhd operating from its plants in Senai and Ipoh in Malaysia and Medan in Indonesia; as well as King Koil Manufacturing West LLC in Arizona, the US, which manufactures one of the long-standing and established brand for mattress and bedding, while King Koil Licensing Company Inc operates the King Koil brand licensing over 89 countries.
KPS also owns 51% stakes in Aqua-Flo Sdn Bhd, which supplies water chemicals and provides technical services to water, waste and sewage treatment plants.
No plans to slow down
Reinforced by its success thus far, KPS has an eye on the future to improve its momentum, in tandem with the gradual recovery of the world’s economies in the final quarter of 2021.
KPS investor relations and strategic communications director Zul Mawardi opined: “For the remainder of 2021, the outlook is becoming more optimistic. As most KPS subsidiaries are export-driven, the current economic development should bode well for KPS’ top-line, given our geographical and sectoral diversification.”
Moving into 2022, Fariz noted that the group’s current aspirations can be distilled into LEAP25, a five-year business strategy that is focused on enhancing KPS’ strategic position.
“We will be focusing on enhancing our return on equity and total shareholder return. To achieve this, we must ensure we keep improving efficiency and continue creating value in our subsidiaries,” he said.
Another critical element of LEAP25 is to outwardly communicate the achievements that KPS has attained.
He explained: “We expect a lot of engagements with the investment community, stakeholders and third parties. This is key, because we have been getting feedback that there are a lot of people who are not aware of our achievements.”
On top of its performance, KPS has a lot to be proud of. It has also been lauded for its sustainability and corporate social responsibility efforts, with its most recent accolades being the National Annual Corporate Report Awards 2020 and the Sustainability and CSR Malaysia Awards 2020.
In its strategy moving forward, KPS is reinforcing the foundations of its business by incorporating lessons learnt from steering the group through the pandemic.
In order to evolve with such strategic agility through crises such as the pandemic – which has called for an adaptation in the business process and to a big extent, a paradigm shift in consumer and business behaviour – the group has been focusing on several mitigating areas.
This includes improving efficiency; focusing on small wins such as incremental innovations; focusing on efforts for a more robust supply chain; finding emerging needs of its customers; streamlining product development; ensuring business viability and learning from its experiences, be it success or failure.
“What Covid-19 has done is to expose to vulnerabilities that we’re facing, be it the economy or the companies under KPS, so what we need to do is to have an in-depth understanding of the causes of these vulnerabilities.
“Once that is identified, we need to establish steps on how to be more resilient and agile, in anticipation of future challenges, so that we can absorb eventual shocks or embrace changes quickly,” he said, noting that such understanding and preparedness is necessary for future continuity and sustainability.
Lessons from the pandemic
To address and alleviate supply chain challenges, KPS has already conducted risk assessments on its supply chain management to overcome the ripple effects of disruption, as the supply of raw materials, logistics management and support services were either delayed or halted.
Among the biggest pitfalls Fariz foresees for KPS is understandably in supply chain disruptions, which will provide some headwind in its ability to generate sales.
He explained: “Disruptions in the supply chain will increase our input cost due to the scarcity of supply. Prices will increase depending on the raw materials.
“We currently face disruption in the supply chain push for raw materials, such as paper for our carton products and materials for mattress production.”
For instance, the cost can increase from a range of 10% to 70% for paper and 10% to 50% for resin.
“Learning from the experience and recognising the importance of building a resilient and flexible supply chain, we’re currently working very hard to diversify our supply sources by exploring alternative materials with the customers or working with another to procure raw materials.
“Another factor is logistics, where the lack of availability of ships could cause longer lead times in delivering raw materials or finished goods,” he shared.
While he acknowledged that other factors could affect operations, Fariz pointed to a proactive approach that KPS has taken via its supply risk management framework.
“We identify and assess the risks. This has allowed us to prepare, react and respond appropriately, as well as recover from all the potential adverse events that arrive in our way in the future.
“As a measure, we communicate with our customers to better understand their requirements under the current conditions and with our suppliers to ensure an alternative and more sustainable supply of raw materials,” he said.
In the meantime, KPS is also negotiating an increase in unit selling prices that it charges to customers on a case-to-case basis, in light of the steep increase in costs.
The move has had some success, Fariz said, noting that KPS’ subsidiary companies will continue to explore the possibilities of passing on the costs to clients if the situation is prolonged.
On the flip side, the adverse effect of Covid-19 on business sectors also saw the abilities and tenacity of the KPS management team and its workforce shining through in navigating the crisis, in order to ensure that the group remains on track with its business objectives.
“We need to show objectivity and transparency, so that everyone understands the situation at hand. With clarity, we can keep focused on executing our tasks, identify problems in our operations and find solutions to address them,” he added.
This operational structure ties in with KPS’ business strategy, with Zul stressing the importance of ensuring that the group moves in line with the overarching vision, missions and long-term corporate objectives, rather than being defined by temporary and, in most cases, fleeting challenges.
“Internally, we engage with our employees throughout the group regularly, providing awareness and understanding of the challenges that we are facing, emergent priorities and new expectations.
All business units and subsidiaries work in concert towards the common goal, which is to ensure the viability of the business and deliver sustainable results,” he said.
He added that on the external front, KPS engages with its different stakeholders such as customers and suppliers to reset priorities and communicate new plans to manage and mitigate risks.
What’s next for KPS
LEAP25 aims to lead KPS to a strategic position, fortify its fundamentals further and accelerate delivery of its subsidiary business, thus making further progress towards a more robust earnings prospect.
As KPS advances, investors can look forward to the performance guided by LEAP25 strategy.
The challenges that the group has faced are showing signs of easing up, as the overall economy and industries begin to pick up momentum. When it is time to sprint, Fariz is confident that KPS will be armed and ready to reach its growth potential.
“Given its strong fundamentals, we have full confidence that KPS’ performance will continue to ascend, guided by its sustainable growth and goals and most importantly, supported by the relentless commitment of our people and the support of our stakeholders,” he concluded.
