On behalf of the Board of Directors of Euro Holdings Berhad ("EURO"), I am pleased to present to you the Annual Report and Financial Statements of the Group and the Company for the financial year ended 31 December 2016 ("FY2016").
Economy and Industry Review
Encouraged by continued expansion in private sector expenditure, the Malaysian economy grew by 4.5% in the fourth quarter, bringing the full year's growth to 4.5% for 2016. Major economic sectors, namely services, manufacturing, mining and construction, expanded during the year.
According to the Malaysia External Trade Development Corporation (MATRADE), Malaysia's total trade for 2016 grew by 1.5% to reach RM1.485 trillion, compared to RM1.463 trillion in the previous year. Exports rose by 1.1% to RM785.93 billion despite uncertainties in the global economic environment, led by the manufactured and agricultural products sector. In 2016, Malaysia exported RM10.7 billion worth of furniture related products, a 2.8% increase from the year before. Our nation remains as the tenth largest exporter of furniture in the world, exporting 80% of our production.
On 25 May 2016, the approval granted by Bursa Securities vide its letter dated 26 May 2015 for Private Placement had lapsed and none of the Placement Shares were placed out. This marked the completion of the entire Multiple Proposal announced by EURO on 29 April 2015.
The profit after taxation ("PAT") of FY2016 registered at RM3.8 million, an increase of RM1.3 million from RM2.5 million in the previous year. The higher PAT was attributed to improved profit margin and lower taxation resulting from recognition of deferred tax assets.
Earnings per share of FY2016 was 1.40 sen as compared to 0.88 sen of the previous year attributed to the higher PAT. The shareholders' equity as at 31 December increased to RM74.0 million from RM70.6 million of the previous year.
EURO made its annual participation at the Malaysian International Furniture Fair (MIFF) 2016 at Putra World Trade Center in Kuala Lumpur in March, where we showcased a collection of EURO's best selling and award winning products from the past 40 years. EURO won the first prize in the Best Presentation Award of Bare Space Booth Category.
In March 2016, EURO has officially launched Damai Vista condominium, our maiden property development project located in Alam Damai, Cheras. The construction works of the project are progressing according to schedule.
In October 2016, EURO was featured at another world-stage exhibition in Cologne, Germany by participating in ORGATEC, an international trade fair that provided new perspectives, inspiring concepts and market leading solutions for working environment. More than 600 exhibitors from 40 countries participated in the event and attended by more than 50,000 visitors from 118 countries. We took the opportunity to display our range of products as well as highlighted our newly designed chair to be launched in 2017.
Participation in exhibitions and trade fairs is critical in our strategic marketing plan to meet potential buyers that ultimately translate to more sales. Generally, an average of 5% of our annual revenue is generated from such leads.
Outlook & Prospects
Going forward, the global economy is expected to remain on a moderate growth path. According to the International Monetary Fund's latest World Economic Outlook Update in January 2017, the world economic growth is expected to pick up to 3.4% in 2017 from 3.1% of the year before. The pickup in global growth, improvement in commodity prices and acceleration in infrastructure investment are expected to lift ASEAN-5's growth to 4.9% in 2017. India is expected to continue its economic recovery with a growth of 7.2% in 2017.
Back to our home front, Malaysia's real GDP growth is expected to grow at 4.5% in 2017, facilitated by sustained consumer spending, faster growth in public and private investments, and pick up in Government consumption expenditure.
The outlook augurs well with EURO's continued focus in these regions and with our dedicated team, we will remain resilient to make EURO better and stronger in the ever competitive market.
The Board of Directors ("the Board") does not recommend any payment of dividend for the year ended 31 December 2016 to conserve cash for working capital requirements and expansion plans of the Group.
On behalf of the Board, I wish to extend our heartfelt gratitude to our suppliers, contractors, bankers and valued shareholders for their invaluable support and also to the relevant government authorities for their continued guidance and assistance. Not forgetting also our sincere appreciation to our valued customers and clients who have placed their trust and confidence in EURO.
To the management and staff, I would like to acknowledge their dedicated service and hard work throughout the year. I am confident that they will continue to push forward to face the challenges ahead.
Finally, my gratitude to my fellow Board members for their commitment and invaluable contribution. May we continue to work hand in hand in driving the business forward and promote a sustainable growth for EURO.
Dato' Sri Mohd Haniff bin Abd Aziz
Chairman, Independent and Non-Executive Director