On behalf of the Board of Directors, I am pleased to present the Annual Report and Audited Financial Statements of Parkson Holdings Berhad for the financial year ended 30 June 2009.
Financial Performance
The current financial year has been a year of turbulence for the global financial markets and economies. The unprecedented global financial crisis which originated from the sub-prime lending in the developed economies has not only weakened the global capital markets and banking systems, but has also negatively affected the main street economies. Growth in developed markets has dried up as consumers face a collapse in real estate prices, job uncertainties and a dramatic drop in income and asset values. Against the backdrop of a severe drop in demand and cutbacks in discretionary spending, our Parkson stores were unable to sustain its high growth rate seen in the past few years. However, in spite of the adverse operating environment, I am delighted to report that the financial year ended 30 June 2009 was another relatively good year for the Group with the following improvements: Higher revenue of RM2.58 billion, an increase of about 15% as compared to RM2.24 billion in the previous year; Higher operating profit of RM721 million, an increase of about 28% as compared to RM561 million in the previous year; and Higher net earnings (excluding exceptional gains) of RM263 million, an increase of about 32% as compared to RM200 million in the previous year. During the year, the Group’s financial position was further strengthened through a share placement exercise of its listed subsidiary which resulted in the Group recording an exceptional gain of RM280 million (2008: RM248 million). The commendable results, which were mainly contributed by the Parkson stores in the People’s Republic of China ("PRC" or "China") were achieved through a combination of healthy same store sales (“SSS”) growth, improved productivity from the more efficient use of available floor space and the increase in sales and promotion activities. Throughout the financial year, the Group had also made necessary adjustments to its operating strategies to keep abreast with the challenging and fast changing operating environment.
Corporate Developments
During the financial year, the Group had undertaken the following significant corporate events:
(i)	In December 2008, the Group announced the proposed acquisition of a retail property located in Hai Phong, Vietnam for a cash consideration of US$24.15 million (RM84.04 million). The proposed acquisition is in line with the Group’s overall strategy of ownership of key operating outlets. It is also expected to provide the Group the opportunity to venture into the potentially lucrative commercial property market in Vietnam and generate a steady income stream for the Group;
(ii)	In January 2009, Parkson Retail Group Limited (“Parkson Retail”), a subsidiary of the Group listed on The Stock Exchange of Hong Kong Limited, announced its intention to acquire the land use right and the building ownership right of a shopping complex located in Chaoyang District, Beijing, the PRC, which was still under construction with the structural works duly completed, for a total purchase consideration of Rmb1.128 billion (RM580 million). The proposal will enable the Group to capitalise on the growth of the retail industry in Beijing through a new department store and benefit from any capital appreciation in the property; and
(iii)	In June 2009, the Group completed the placement of 55 million ordinary shares in Parkson Retail representing approximately 1.96% of the then issued and paid-up share capital of Parkson Retail.
Full details of the various other corporate proposals are contained in pages 121 and 122 of this Annual Report.
Dividend
The Board of Directors is pleased to recommend a first and final cash dividend of 5 sen per share, tax exempt, ("Cash Dividend") and the distribution of share dividend on the basis of 1 treasury share for every 100 ordinary shares of RM1.00 each held in the Company (“Share Dividend”), fractions of treasury shares to be disregarded, in respect of the financial year ended 30 June 2009, for the approval of the shareholders at the forthcoming Annual General Meeting. Net Cash Dividend payable will amount to approximately RM51 million. The dividends are proposed after taking into account a reasonable balance between rewarding shareholders and funds set aside for future investment and business growth.
Corporate Social Responsibility
We recognise the importance of Corporate Social Responsibility ("CSR") as an integral part of business and incorporating a CSR framework into our business plan to enhance stakeholder confidence, accountability and transparency. CSR is an important component of good business practice aimed at improving society and the environment.
Society
In carrying out its business activities, the Group is mindful of its responsibilities as a corporate citizen, in contributing to society while enhancing the bottom-line and shareholders’ value. The Group is focused on assisting the community through education and medical care via the two Foundations established by the Lion Group of Companies of which the Group is a member. The Lion-Parkson Foundation disburses funds for education and charitable needs; and every year, awards scholarships and interest-free education loans to undergraduates in the local universities. The Lion Group Medical Assistance Fund provides financial assistance to needy Malaysians who require medical treatment including surgery, purchase of equipment and medication. The Fund also sponsors community health programmes such as medical camps and the purchase of dialysis machines for Dialysis Centres providing subsidised treatment to the less fortunate. The Group also supports the community by contributing to fundraising and donation drives and responding to the plight of disaster victims locally and elsewhere.
Environment
Under its Parkson Cares My Park programme, the Group is continuing with its campaign to adopt various parks nationwide in every locality where a Parkson outlet is sited. The programme involves restoration, enhancement and upgrading facilities to improve the condition of the park and recreational amenities in promoting a green environment and healthier lifestyle. Todate, 8 parks have been adopted.
Prospects
Despite operating in very challenging and uncertain times, emerging markets still provide the best platform for growth in the retail industry, with China as one of the countries leading the way. The Group will continue to be vigilant in controlling costs and to augment initiatives to expand market share as well as seek new markets for our businesses. In China, the PRC government has announced several stimulus packages totalling Rmb4 trillion through a combination of monetary and fiscal policies to strengthen its economic fundamentals. These measures will help to mitigate some of the effects of the economic slowdown as well as to improve business confidence and consumer sentiments. We believe such measures to stimulate consumption and drive economic growth will bring business opportunities to the Group. On the local front, we expect the economic conditions to remain challenging due to the gloomy outlook for household income growth. We further recognise that our local maturing retail market will be highly competitive. However, we believe our strong domestic exposure, tactical promotional programmes, effective cost management exercises as well as the expected spill-over effects of the two (2) economic stimulus packages introduced by the Malaysian Government will support our earnings growth and enable the Division to stay ahead of its peers. Vietnam is still an attractive market. Although it has short-term challenges, our long-term outlook for the country remains positive. Its population is young and the country is continuing to urbanise with increasing brand awareness and demand for better quality products. Hence, we believe Parkson, being one of the first few foreign players here, would be able to garner a higher market share going forward. The Group is confident that the medium to long term prospect of our business remains bright. Our healthy balance sheet, solid cash generating business model and strong brand equity will not only enable the Group to ride through the current economic crisis comfortably, but will also allow the Group to consolidate its leadership position by fully capitalising on the current market conditions to further expand its business network and emerge stronger after the storm.
Board Of Directors
The Board would like to extend its warm welcome to Y. Bhg. Dato’ Mohamad Daud Bin Haji Dol Moin on his appointment as a Director of the Company subsequent to the financial year. I would also like to record a vote of thanks and appreciation from the Board to Mr Lim Poon Thoo who resigned from the Board during the financial year, for his contributions during his tenure as a Director of the Company.
Acknowledgement
On behalf of the Board, I wish to extend my sincere thanks to all our valued customers, financiers, business associates, Government authorities and shareholders for their continued support, cooperation and confidence in the Group. I would also like to convey my sincere appreciation and gratitude to my fellow Directors for their invaluable guidance and contributions throughout the year as well as to record my appreciation to our employees at all levels for their dedication, commitment and contributions to the Group.
TAN SRI WILLIAM H. J. CHENG Chairman