CONTENTS Key Financial Indicators

Transcription

1

2 CONTENTS Key Financial Indicators P02 Key Financial Highlights P03 Scomi Group Corporate Structure P04 Corporate Statement P08 Corporate Information P09 Profile of Directors P10 Management Team P16 Chairman s Statement P18 Management Review of Operations P26 Corporate Social Responsibility P36 Human Capital Development P39 Statement on Corporate Governance P43 Statement on Risk Management and Internal Control P54 Audit and Risk Management Committee Report P60 Additional Information P64 Statement of Directors Responsibility P67 Financial Statements P70 Analysis of Shareholdings P207 List of Properties P211 Corporate Directory P214 Notice of Annual General Meeting P217 Notice of Nomination P221 Form of Proxy P223 Scomi is all about realising potential. In this annual report, we seek to bring Scomi s promise to life by using paper art, where a simple sheet of paper is re-imagined into complex three dimensional forms. Much like how Scomi leverages upon the simplest opportunity to create value, this demonstrates how creativity and vision can transform something as basic as paper into an object of beauty.

3 P / 02 KEY FINANCIAL INDICATORS SCOMI GROUP BHD ANNUAL REPORT 2013 Key Financial Indicators 15 months 12 months 12 months 12 months 12 months RM 000 RM 000 RM 000 RM 000 RM 000 Continuing operations Turnover 1,922,368 1,402,566 1,931,036 2,419,781 2,573,198 EBITDA 255, (148,563) (192,953) 409,148 Depreciation 104, , , , ,943 Finance costs 129,678 48,856 98, , ,058 Share of profit in associated companies 133 (2,978) 6,157 43,577 49,543 Share of profit from joint-ventures 6,568 3, ,596 Profit/(loss) before tax 21,097 (167,707) (276,980) (951) 190,191 Taxation (27,557) (19,298) (27,081) (31,092) (13,221) Profit/(loss) from continuing operations (6,460) (187,005) (304,061) (32,043) 176,970 Loss from discontinued operations (62,989) (170,156) (3,269) Profit/(loss) for the year (69,449) (357,161) (307,330) (32,043) 176,970 Non-controlling interest 2, , ,424 21,179 (60,417) NOTES ** Based on (loss)/profit attributed to owner of the Company and the weighted average number of shares assumed to be in issue in the respective Based on (loss)/profit attributed to owner of the Company and the weighted average number of shares assumed to be in issue in the respective period/year after taking into consideration the dilutive effect of unexercised ESOS The financial highlights on pages 2 and 3 reflect the audited results of Scomi Group Bhd, with certain numbers restated to reflect retrospective effects as a result of adoption of new or revised Financial Reporting Standards in the respective years. (Loss)/profit attributed to owners of the Company (66,833) (223,705) (172,906) 9, ,553 Numbers of shares in issue ( 000) 1,564,540 1,187,688 1,182,658 1,086,801 1,021,839 Weighted average number of shares assumed in issue ( 000) 1,634,422 1,391,731 1,371,255 1,025,795 1,006,342 Weighted average number of shares used to compute diluted earnings per share ( 000) 1,638,693 1,394,528 1,387,259 1,053,648 1,016,009 Basic - Net EPS (sen)** (4.09) (16.07) (12.61) Fully diluted - Net EPS (sen)@ (4.08) (16.04) (12.46)

4 SCOMI GROUP BHD ANNUAL REPORT 2013 KEY FINANCIAL HIGHLIGHTS P / 03 Key Financial Highlights Turnover (RM Million) Total Assets (RM Million) As at 31 March 2013 RM1,647 As at 31 Dec 2011 : RM1,532 As at 31 Dec 2010 : RM2,466 As at 31 Dec 2009 : RM3, months ^2013 1, months ,402 Profit/(Loss) Before Tax (RM Million) 12 months , months , months ,573 Earning Per Share (Basic) 15 months/2013 (4.09)sen 2011 : (16.07) sen 2010 : (12.61) sen 2009 : 0.96 sen 15 months ^ months Net Tangible Assets (RM Million) As at 31 March 2013 RM441 As at 31 Dec 2011 : RM188 As at 31 Dec 2010 : RM346 As at 31 Dec 2009 : RM months 2011 (168) 12 months 2010 (277) (Loss)/Profit Attributed to Owners of the Company (RM Million) 12 months 2009 (951) Shareholders Fund (RM Million) As at 31 March 2013 RM599 As at 31 Dec 2011 : RM509 As at 31 Dec 2010 : RM726 As at 31 Dec 2009 : RM920 NOTE 15 months ^2013 (66) 12 months 2011 (224) 12 months 2010 (173) 12 months months Net Assests Per Share (Attributable to owners of the Company) As at 31 March sen As at 31 Dec 2011 : 37 sen As at 31 Dec 2010 : 61 sen As at 31 Dec 2009 : 85 sen ^ The 2013 financials are in respect of continuing operations only.

5 P / 04 SCOMI GROUP CORPORATE STRUCTURE AS AT 31 JULY 2013 SCOMI GROUP BHD ANNUAL REPORT 2013 Scomi Group Bhd 1 SINGAPORE Scomi International Private Limited Scomi Solutions BRITISH VIRGIN ISLANDS Scomi Ecosolve Limited 65.65% 2 Scomi Chemicals LABUAN Scomi Capital Limited BERMUDA Scomi Oiltools Bermuda Limited Scomi Energy Services Bhd 1* Scomi OBM Terminal Scomi Barite SCOTLAND Scomi Oiltools (Shetland) Limited MAURITIUS Scomi Oiltools Overseas (M) Limited Gemini 51% Emerald 49% Sprint Logistics Trans Advantage LABUAN Marineco Limited 51% 48% Scomi Oiltools Scomi Oiltools (Kemaman) 51% KMC All Star Chemical ALGERIA KMC Oiltools Algerie EURL EGYPT Scomi Oiltools Egypt SAE 3,4 BRITISH VIRGIN ISLANDS Scomi Oiltools South America Ltd TEXAS, USA Scomi Oiltools Inc MEXICO Scomi Oiltools de Mexico S de RL de CV 5 MEXICO Oilfield Services de Mexico S de RL de CV 5 SCOTLAND Scomi Oiltools (Europe) Ltd 19% SCOTLAND Augean North Sea Services Limited SINGAPORE Scomi Marine Services Pte Ltd SINGAPORE Goldship Pte Ltd 80.54% INDONESIA PT Rig Tenders Indonesia Tbk 6 49% BRITISH VIRGIN ISLANDS King Bridge Enterprises Limited VIETNAM 21.08% Scomi KMC 4% Southern Petroleum Transportation Joint Stock Company LABUAN 50% Transenergy Shipping Pte. Ltd. Scomi Sosma FRANCE Scomi Anticor S.A.S 7 BRUNEI 50% Scomi (B) INDONESIA 95% PT Scomi Oiltools TEXAS, USA Scomi Equipment Inc. SINGAPORE Scomi Oiltools (S) Pte Ltd INDIA KMC Oiltools India Pte Ltd 9 VENEZUELA Scomi Oiltools de Venezuela S.A. VENEZUELA Premium Industrial Machining S.A. INDONESIA 95% PT Inti Jatam Pura RUSSIA Scomi Oiltools (RUS) LLC INDONESIA 95% PT Multi Jaya Persada

6 SCOMI GROUP BHD ANNUAL REPORT 2013 SCOMI GROUP CORPORATE STRUCTURE AS AT 31 JULY 2013 P / 05 KEY Energy Services Division Global Learning and Development Scomi Energy Oilfield Services (Western) Division Transport Solutions Division BERMUDA Scomi Oilfield Limited AUSTRALIA Scomi Oiltools Pty Ltd THAILAND Scomi Oiltools (Thailand) Ltd 8 NETHERLANDS KMC Oiltools BV KMCOB Capital Berhad OMAN Scomi Oiltools Oman LLC 60% NIGERIA Wasco Oil Service Company Nigeria Limited 51% CAYMAN ISLANDS Scomi Oiltools (Africa) Limited Scomi Enviro CAYMAN ISLANDS Scomi Oiltools Ltd CAYMAN ISLANDS Scomi Oiltools (Cayman) Ltd ENGLAND & WALES Vibratherm Limited GABON 96% Oiltools Gabon SA 50% BRITISH VIRGIN ISLANDS Scomi OMS Oilfield Services Ltd Scomi Rail Bhd Scomi Transit Projects Brazil BRAZIL Urban Transit Servicos Do Brasil LTDA 10 Scomi Transportation Systems Scomi 72.33% Engineering Bhd 1 Scomi Coach Scomi Coach Marketing Scomi Transit Projects Scomi Transit Projects Brazil (Sao Paulo) INDIA Urban Transit Private Limited 11 Scomi Special Vehicles Scomi Trading * Formerly known as Scomi Marine Bhd. 1 Listed on the Bursa Malaysia Securities Berhad (Kuala Lumpur Stock Exchange). 2 Includes 0.01% held by Scomi Energy. 3 Scomi Oiltools Bermuda Limited holds on trust for Scomi Oilfield Limited persuant to a trust deed dated 8 March Includes 1 share each held by Scomi Oitools Ltd and Scomi Oiltools (Cayman) Ltd. 5 Includes 1 share held by an individual. 6 Listed on the Jakarta Stock Exchange. 7 Includes 1 preferential share each held by 2 different individuals. 8 Includes 1 Class A share each held by Scomi Oiltools Ltd and Scomi Oiltools (Cayman) Ltd. 9 Includes 1 share held by Scomi Oiltools Ltd. 10 Includes 1 share held by Scomi Rail Bhd. 11 Includes % held by Scomi Rail Bhd. NOTES This corporate structure does not include the subsidiaries/ associated companies of PT Rig Tenders Indonesia Tbk. Except as otherwise expressly stated, all companies in this corporate structure are incorporated in Malaysia. Except as otherwise expressly stated, all companies in this corporate structure are wholly owned by their respective holding companies.

7 Transforming a simple commodity into something of global value.

8 A GLOBE Using imagination, even a simple piece of paper has the potential to become an object of greater value. In paper art, Scomi sees its own credo to realise potential.

9 P / 08 CORPORATE STATEMENT SCOMI GROUP BHD ANNUAL REPORT 2013 With a presence in 53 locations across 26 countries, the Scomi group of companies is a global technology enterprise in the energy and logistics industries. We are a global technology enterprise. Our global reach, capabilities and talent provide us with the necessary resources to develop and own new technology in all areas of our business. We focus on Energy & Logistics. All our businesses are focused on the Energy and/or Logistics sectors with the ability to compete globally. All of us in the Scomi family should remember that any new initiatives we undertake will focus on these areas of business. We provide innovative solutions. We innovate to respond to an evolving environment. Our products and operations meet today s needs while anticipating tomorrow s. We are committed to developing competitive and innovative solutions to create efficiency, add value and grow with our customers to shape our future. We aim to realise potential for our stakeholders. Our customers: We will develop and offer customers innovative and competitive products and services that help them grow their business. Our shareholders: We are committed to providing long-term superior returns to our shareholders. Our people: We aim to provide our employees with developmental opportunities so they can succeed on personal and professional levels. Our suppliers: We will treat our suppliers as our partners in the mutual interest of business growth. Our society/ environment: As a good corporate citizen, we will give back to the communities we operate in worldwide.

10 SCOMI GROUP BHD ANNUAL REPORT 2013 CORPORATE INFORMATION P / 09 Corporate Information Board of Directors Tan Sri Asmat bin Kamaludin (Chairman) Tan Sri Nik Mohamed bin Nik Yaacob Tan Sri Mohamed Azman bin Yahya Datuk Haron bin Siraj Dato Mohammed Azlan bin Hashim Dato Sreesanthan a/l Eliathamby Dato Abdul Rahim bin Abu Bakar Dato Teh Kean Ming (Appointed on 22 October 2012) Foong Choong Hong Shah Shahzanim bin Zain Lee Chun Fai (Alternate Director to Dato Teh Kean Ming) (Appointed on 22 May 2013) Audit and Risk Management Committee Dato Abdul Rahim bin Abu Bakar (Chairman) Tan Sri Nik Mohamed bin Nik Yaacob Datuk Haron bin Siraj Dato Mohammed Azlan bin Hashim Nomination and Remuneration Committee Tan Sri Asmat bin Kamaludin (Chairman) Tan Sri Mohamed Azman bin Yahya Dato Mohammed Azlan bin Hashim Options Committee Tan Sri Asmat bin Kamaludin (Chairman) Datuk Haron bin Siraj Shah Shahzanim bin Zain Registered Office Level 17, 1 First Avenue Bandar Utama Petaling Jaya Selangor Darul Ehsan Malaysia Tel : Fax : Administrative and Correspondence Address Level 17, 1 First Avenue Bandar Utama Petaling Jaya Selangor Darul Ehsan Malaysia Tel : Fax : Website : info@scomigroup.com.my Registrar Symphony Share Registrars Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Darul Ehsan Malaysia Tel: Fax: /8152 Helpdesk: Advocates & Solicitors Albar & Partners Advocates & Solicitors 6th Floor, Faber Imperial Court Jalan Sultan Ismail Kuala Lumpur Malaysia Kadir Andri & Partners 8th Floor, Menara Safuan 80 Jalan Ampang Kuala Lumpur Malaysia Company Secretaries Ong Wei Leng (MAICSA ) Chong Mei Yan (MAICSA ) Auditors PricewaterhouseCoopers (AF 1146) Chartered Accountants Level 10, 1 Sentral Jalan Travers Kuala Lumpur Sentral PO Box Kuala Lumpur Malaysia Principal Bankers CIMB Bank Berhad 10th Floor, Bangunan CIMB Jalan Semantan, Damansara Heights Kuala Lumpur Malaysia OCBC Bank (Malaysia) Bhd 18th Floor, Menara OCBC 18 Jalan Tun Perak Kuala Lumpur Malaysia Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad Stock Name: Scomi Stock Code: 7158 Currency Ringgit Malaysia (RM)

11 From left Tan Sri Asmat Bin Kamaludin Chairman, Independent Non-Executive Director Tan Sri Nik Mohamed Bin Nik Yaacob Independent Non-Executive Director Tan Sri Mohamed Azman Bin Yahya Non-Independent Non-Executive Director Dato Mohammed Azlan Bin Hashim Independent Non-Executive Director Datuk Haron Bin Siraj Independent Non-Executive Director

12 From left Foong Choong Hong Non-Independent Non-Executive Director Dato Abdul Rahim Bin Abu Bakar Independent Non-Executive Director Shah Hakim Bin Zain Group Chief Executive Officer, Non-Independent Executive Director Dato Teh Kean Ming Non-Independent Non-Executive Director Dato Sreesanthan A/L Eliathamby Independent Non-Executive Director

13 P / 12 PROFILE OF DIRECTORS SCOMI GROUP BHD ANNUAL REPORT 2013 Tan Sri Asmat Bin Kamaludin Chairman, Independent Non-Executive Director Tan Sri Asmat, 69, a Malaysian, is an Independent Non- Executive Director and the Chairman of the Company. He was appointed to the Board on 3 March Tan Sri Asmat holds a Bachelor of Arts (Honours) degree in Economics from the University of Malaya, and he also holds a Diploma in European Economic Integration from the University of Amsterdam. Tan Sri Asmat has vast experience in various capacities in the public service and his last position was as the Secretary- General of the Ministry of International Trade and Industry, Malaysia (MITI), a position he held from 1992 to Between1973 and 1976, he has served as Senior Economic Counsellor for Malaysia in Brussels and has worked with several international bodies such as Association of South-East Asian Nations (ASEAN), World Trade Organisation (WTO) and the Asia-Pacific Economic Cooperation, representing Malaysia in relevant negotiations and agreements. Tan Sri Asmat has also been actively involved in several national organisations such as Johor Corporation, the Small and Medium Scale Industries Corporation (SMIDEC) and the Malaysia External Trade Development Corporation (MATRADE) while in the Malaysian Government service. In 2008, Tan Sri Asmat was appointed by MITI to represent Malaysia as Governor on the Governing Board of the Economic Research Institute for Asean and East Asia (ERIA). Other Malaysian public companies in which he is a Director are Permodalan Nasional Bhd, UMW Holdings Berhad, YTL Cement Berhad, Panasonic Manufacturing Malaysia Berhad, Compugates Holdings Berhad, The Royal Bank of Scotland Berhad, UMW Oil & Gas Corporation Berhad and AirAsia X Berhad. He also serves on the Board of JACTIM Foundation. Tan Sri Asmat is a member of, and chairs the Nomination and Remuneration Committee and the Options Committee of the Board. Tan Sri Asmat attended 10 out of the 11 Board Meetings held during the financial period ended 31 March Tan Sri Nik Mohamed Bin Nik Yaacob Independent Non-Executive Director Tan Sri Nik Mohamed, 64, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 13 July Tan Sri Nik Mohamed holds a Diploma in Mechanical Engineering, a Bachelor of Engineering (Hons) from Monash University, Australia and a Masters in Business Management from the Asian Institute of Management, Philippines. He also completed the Advanced Management Programme at Harvard University in the United States. He served as the Group Chief Executive of Sime Darby Berhad from 1993 until his retirement in June 2004 and during this period, he also served on the Boards of many of the Sime Darby group companies. He was Sime Darby Berhad s Director of Operations in Malaysia prior to his appointment as the Group Chief Executive in He was also the Chairman of the Advisory Council of National Science Centre and Chairman of the Board of Universiti Teknologi MARA (UITM) and served as a member of the INSEAD East Asian Council, National Council for Scientific Research and Development, Co-ordinating Council for the Public-Private Sectors in the Agricultural Sector, National Coordinating Committee on emerging Multilateral Trade Issues and the Industrial Coordinating Council. He was a representative for Malaysia in the APEC Business Advisory Council and the Asia-Europe Business Forum. Other Malaysian public companies in which he is a Director are GuocoLand (Malaysia) Berhad, Symphony Life Berhad (formerly known as Bolton Berhad), SapuraKencana Petroleum Berhad and Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd). Tan Sri Nik Mohamed is also the Executive Director of Yayasan Kepimpinan Perdana (Perdana Leadership Foundation). Tan Sri Nik Mohamed is a member of the Audit and Risk Management Committee of the Board. Tan Sri Nik Mohamed attended 9 out of the 11 Board Meetings held during the financial period ended 31 March 2013.

14 SCOMI GROUP BHD ANNUAL REPORT 2013 PROFILE OF DIRECTORS P / 13 Tan Sri Mohamed Azman Bin Yahya Non-Independent Non-Executive Director YBhg Tan Sri Mohamed Azman bin Yahya, a Malaysian, aged 49, is a Non-Independent Non-Executive Director of the Company and was appointed to the Board on 17 March Tan Sri Azman is the Group Chief Executive and Executive Director of Symphony House Berhad, a listed business process outsourcing group and the Executive Chairman of Symphony Life Berhad (formerly known as Bolton Berhad), a listed property group. He holds a first class honours degree in Economics from the London School of Economics and Political Science and is a member of the Institute of Chartered Accountants in England and Wales and the Malaysian Institute of Accountants and a fellow member of the Malaysian Institute of Banks. During the Asian Financial Crisis in 1998, Tan Sri Azman was appointed by the Malaysian Government to set-up and head Danaharta, the national asset management company and subsequently became its chairman until His previous career appointments include auditing with KPMG in London, finance with the Island & Peninsular Group and investment banking with Bumiputra Merchant Bankers and Amanah Merchant Bank, the latter as Chief Executive. Outside his professional engagements, Tan Sri Azman is active in public service and sits on the boards of Khazanah Nasional Berhad and Ekuiti Nasional Berhad (EKUINAS), the investment arm and the private equity arm of the Malaysian Government respectively. He also serves as a Director of PLUS Expressways International Berhad (formerly known as PLUS Expressways Berhad). Tan Sri Azman is a member of the Financial Reporting Foundation and is a Director of Sepang International Circuit and the Chairman of Motorsports Association of Malaysia. Tan Sri Azman is a member of the Nomination and Remuneration Committee of the Board. He attended all of the 11 Board Meetings held during the financial period ended 31 March Datuk Haron Bin Siraj Independent Non-Executive Director Datuk Haron, 68, a Malaysian, is an Independent Non- Executive Director of the Company and was appointed to the Board on 17 March Datuk Haron graduated from the University of Manchester, United Kingdom, with a Bachelor of Arts with Honours in Economics, and also holds a Masters Degree in Development Economics from Williams College, United States of America. Datuk Haron started his career as an Assistant Controller with the Ministry of Commerce and Industry. He subsequently served as the Principal Assistant Secretary, and later as the Under Secretary, in the Ministry of Primary Industries until From August 1980, he served as the Minister Counsellor (Economic Affairs) of the Permanent Mission of Malaysia in Geneva, Switzerland, and returned to Malaysia in 1985 to join the Ministry of International Trade and Industry, holding various directorship positions, and was later appointed as Deputy Secretary-General (Trade) in Datuk Haron was appointed as Ambassador, Permanent Representative of Malaysia to the United Nations and other International Organisations (including the GATT and the WTO) and Specialised Agencies in Geneva, Switzerland from September 1992 to December On his return, he became the Secretary-General of the Ministry of Primary Industries where he served until end of He was appointed Chief Executive Officer of the Malaysian Palm Oil Promotion Council from January 2001 until his retirement in January Other Malaysian public company in which he is a Director is Kulim (Malaysia) Berhad. Datuk Haron is a member of the Audit and Risk Management Committee and the Options Committee of the Board. He attended 10 out of the 11 Board Meetings held during the financial period ended 31 March 2013.

15 P / 14 PROFILE OF DIRECTORS SCOMI GROUP BHD ANNUAL REPORT 2013 Dato Mohammed Azlan Bin Hashim Independent Non-Executive Director Dato Azlan, aged 56, Malaysian, is an Independent Non- Executive Director of the Company and was appointed to the Board on 13 July Dato Azlan graduated with a Bachelor of Economics from Monash University and qualified as a Chartered Accountant in Australia. He is a fellow member of the Institute of Chartered Accountants, Australia, a member of the Malaysian Institute of Accountants, a fellow member of Malaysian Institute of Directors, a fellow member of Malaysia Institute of Chartered Secretaries and Administrators and a honorary member of the Institute of Internal Auditors, Malaysia. He has extensive experience in the corporate sector. Dato Azlan is the Chairman of D&O Green Technologies Berhad and SILK Holdings Berhad. He also serves as a Non-Executive Director of Khazanah Nasional Berhad, IHH Healthcare Berhad (formerly known as Integrated Healthcare Holdings Berhad), Labuan Financial Services Authority and is a member of the Investment Panel of the Employees Provident Fund and Retirement Fund Incorporated. During his career, he served in various capacities in the financial services industry and investment holding companies, including as Chief Executive of Bumiputra Merchant Bankers Berhad, Group Managing Director of Amanah Capital Malaysia Berhad and Executive Chairman of Bursa Malaysia Berhad Group. Dato Azlan is a member of the Audit and Risk Management Committee and the Nomination and Remuneration Committee of the Board. He attended 10 out of the 11 Board Meetings held during the financial period ended 31 March Dato Sreesanthan A/L Eliathamby Independent Non-Executive Director Dato Sreesanthan, aged 52, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 18 April Dato Sreesanthan, is an Advocate & Solicitor and a Partner with the legal firm of Messrs Kadir Andri & Partners. Dato Sreesanthan obtained his undergraduate law degree from the University of Malaya and his post graduate degree in law from the University of Oxford, United Kingdom. He was formerly a Legal Assistant and later a Partner with the legal firm of Messrs Zain & Co and Messrs Zul Rafique & Partners. Dato Sreesanthan is a member of the Disciplinary Committee Panel of the Advocates and Solicitors Disciplinary Board. Dato Sreesanthan attended 8 out of the 11 Board Meetings held during the financial period ended 31 March Dato Abdul Rahim Bin Abu Bakar Independent Non-Executive Director Dato Rahim, aged 67, a Malaysian, is an Independent Non-Executive Director of the Company and was appointed to the Board on 7 October Dato Rahim graduated from the Brighton College of Technology, United Kingdom with a Bachelor of Science (Hons) in Electrical Engineering in He is a member of the Institute of Engineers Malaysia (MIEM) and is a Professional Engineer, Malaysia (P.Eng). He also holds the Electrical Engineer Certificate of Competency Grade 1. Dato Rahim began his career in 1969 with the then National Electricity Board. He was attached to the organisation for 10 years in various technical and engineering positions before he moved on to the private sector. From 1979 to 1983, he served with Pernas Charter Management, a management company for the tin mining industry. Then, from late 1983 to 1991, he was attached to Malaysia Mining Corporation Berhad (MMC) in various senior positions. Later from 1991 to 1995, he moved on to MMC Engineering Services and subsequently to MMC Engineering Group Berhad as the Managing Director. In May 1995, he joined Petroliam Nasional Berhad (Petronas) to assume the position of Managing Director of Petronas Gas Berhad (PGB) and subsequently moved on to Petronas as its Vice President, in charge of the Petrochemical Business in He retired from Petronas on 31 August Dato Rahim s other directorships in public companies are Scomi Engineering Bhd, Telekom Malaysia Berhad, Global Maritime Ventures Berhad and Westports Holdings Berhad (formerly known as Westports Holdings ). Dato Rahim is the Chairman of the Audit and Risk Management Committee of the Board. He attended all of the 11 Board Meetings held during the financial period ended 31 March Dato Teh Kean Ming Non-Independent Non-Executive Director Dato Teh, aged 58, a Malaysian, is a Non-Independent Non-Executive Director of the Company. He was appointed to the Board on 22 October He graduated with a Bachelor of Engineering degree from University of New South Wales, Australia in He was a Resident Civil & Structural Engineer of Dayabumi Phase 3 Project ( ) and Menara Maybank ( ) and Area Engineer of Antah Biwater J.V. ( ) prior to joining IJM Construction as Project Manager ( ), Senior Manager (Project) ( ) and Project Director ( ). He was the Group General Manager of IJM Corporation Berhad ( IJM ) from 1 April 2001 to 31

16 SCOMI GROUP BHD ANNUAL REPORT 2013 PROFILE OF DIRECTORS P / 15 December He was also the Head of the Property Division of IJM from 2001 to 2008 and the Managing Director of IJM Properties from 1 January 2005 to 10 June He was the Deputy Chief Executive Officer & Deputy Managing Director of IJM from 1 July 2008 to 31 December 2010 prior to his present appointment as the Chief Executive Officer & Managing Director on 1 January His directorships in other public companies include IJM, IJM Land Berhad, IJM Plantations Berhad, ERMS Berhad and Road Builder (M) Holdings Bhd. He attended 4 Board Meetings held during the financial period ended 31 March 2013 since his appointment Lee Chun Fai Alternate Director to Dato Teh Kean Ming Mr Lee Chun Fai, a Malaysian, aged 42, was appointed as an Alternate Director to Dato Teh Kean Ming on 22 May He graduated with a Bachelor of Accountancy (Honours) degree from University Utara Malaysia in He obtained a Master of Business Administration from Northwestern University and The Hong Kong University of Science & Technology in He started his career with a public accounting firm. In October 1995, he joined Road Builder (M) Holdings Bhd ( RBH Group ) and was the Head of Corporate Services Division of RBH Group prior to the acquisition of RBH Group by IJM Corporation Berhad ( IJM ) in He was the Deputy Chief Financial Officer for the IJM Group before being appointed as the Head of Corporate Strategy & Investment on 1 July His directorships in other public companies include Road Builder (M) Holdings Bhd (Alternate Director), Scomi Engineering Bhd and Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd). East Asian markets and as an adviser for European and British pension funds and insurance companies on investments in South-East Asia and the Far East. Mr Foong returned to Malaysia to develop a joint venture company with Powers Supermarkets (UK), a then wholly-owned unit of Associated British Foods public listed company, to develop a Far Eastern sourcing and trading house based in Malaysia. Mr Foong is a Certified Financial Planner and also a Fellow of the Chartered Management Institute (UK). He also plays an advisory role in the Investment Committee of several multi-national companies for the identification of investments and development of business opportunities. He is currently the Managing Director of Asian Asset Group and a Director of Asian Asset Management. He attended all of the 11 Board Meetings held during the financial period ended 31 March Shah Shahzanim Bin Zain Chief Executive Officer/ Non-Independent Executive Director Encik Shah Hakim, 48, a Malaysian, is the Chief Executive Officer/ Non-Independent Executive Director of the Company and was appointed to the Board on 3 March Encik Shah Hakim started his career as an auditor with Ernst & Young and was subsequently promoted as Consulting Manager, responsible for servicing large corporations. He went on to be appointed as Executive Director of a regional packaging manufacturer in 1992, with direct operational responsibility. He currently sits on the Board of Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd), Scomi Engineering Bhd and KMCOB Capital Berhad. Encik Shah Hakim is a member of the Options Committee of the Board. He attended 10 out of the 11 Board Meetings held during the financial period ended 31 March Foong Choong Hong Non-Independent Non-Executive Director Mr Foong, 52, a Malaysian, is a Non-Independent Non- Executive Director of the Company and was appointed to the Board on 17 March Mr Foong holds a post-graduate degree in Management Studies majoring in Finance, from Middlesex University, United Kingdom. Mr Foong started his career with Robert Fleming Merchant Bank in the United Kingdom as an Economist responsible for South- NOTES None of the Directors have any family relationship with any other Director and/ or major shareholder of Scomi Group Bhd. With the exception of the disclosure on page 66, none of the Directors are involved in any conflict of interest, or any personal interest in any business arrangement, involving Scomi Group Bhd. None of the Directors have been convicted for offences within the past ten years (other than traffic offences, if any).

17 Loong Chun Nee Chief Investment & Performance Officer Shah Hakim Bin Zain Group Chief Executive Officer Rohaida Ali Badaruddin Chief of Staff

18 Dinesh Chelvathurai Chief Learning Officer Sharifah Norizan Shahabudin Chief Legal & Governance Officer Abu Zaharoff Abu Bakar Group Financial Controller

19 P / 18 CHAIRMAN S STATEMENT SCOMI GROUP BHD ANNUAL REPORT 2013 Dear Stakeholders, Your company celebrates ten years of realising potential for all its stakeholders. In the ten years since Scomi Group Bhd ( Scomi or SGB ) and its group of companies (the Group ) was listed on Bursa Malaysia, we have weathered demanding times, and in the most recent past an extremely challenging global economy. However, in doing so, we have strengthened our business tenacity and honed our operational flexibility. Thus we enter our second decade with greater energy and zest to explore and optimise business opportunities that are coming our way. Having recovered from the stressful business environment of the past years, it is with great pleasure that I present our performance for the financial period from 1 January 2012 to 31 March 2013 (the financial period ). This is a 15-month reporting period following a change in financial year end from 31 December to 31 March. The change was made to facilitate recent major corporate developments that included fundamental changes to our corporate structure, which is starting to show positive results for us. Overview The global economy remained pallid in 2012, although there were hints of recovery in various regions and sectors. Currency instability, regulatory disruption and civil unrest touched Scomi s businesses around the world. The relative weakness of the Indian Rupee and the Brazilian Real had the most impact on our business, especially Scomi Engineering Bhd that suffered unrealised foreign exchange losses through most of the financial period. Environmental constraints, security challenges and legislative requirements for land acquisitions also caused unforeseen delays to the progress of our Mumbai monorail project. Unsurprisingly, continuing civil unrest in the Middle East and North Africa affected our Oilfield Services ( OFS ), especially our operations in Egypt. Despite all these challenges, we achieved commendable results. Not only did we make remarkable advances in product development for the oil & gas industry, but both our Energy Services and Transport Solutions business segments won major contracts. Thus, with current order books of over RM5.1 billion and RM715 million respectively, the Group ended the financial period in firm footing. During the period under review, we did not lose sight of the people who are responsible for the sustained health of our business. Over the last 15 months, we have continued to sharpen the technical and service skills of our employees and deepen personal connections with our clients. Through the delivery of quality service and nurtured relationships of mutual trust and respect, we believe we have been able to create value in the future of our people and our clients for mutual benefit. Financial Performance For the 15 months ended 31 March 2013, the Group s consolidated revenue from continuing operations reached RM1.92 billion as compared to RM1.40 billion for the 12 months ended 31 December On an annualised basis, this equates to a revenue growth of approximately 10 percent. The increased revenue was mainly due to higher contributions from OFS and Transport Solutions businesses. However, this was offset by lower Marine Services contribution due to the expiry of a major coal contract in Indonesia in June 2012, which was then replaced with a time charter contract at lower rates. On the back of this revenue growth, the Group posted a Profit Before Tax ( PBT ) from continuing operations of RM21.1 million for the 15-month period as against a loss of RM167.7 million

20 Tan Sri Asmat Kamaludin Chairman

21 P / 20 CHAIRMAN S STATEMENT SCOMI GROUP BHD ANNUAL REPORT 2013 for the 12-months ended 31 December This turnaround result was achieved following the non-recurrence of vessel impairment charges and cost adjustments on our Mumbai monorail project, which were made in the financial year ended 31 December This encouraging financial performance was achieved despite the Group having to absorb a one-off charge of RM61.1 million to our accounts in line with our current accounting policies and in compliance with the Malaysian Financial Reporting Standards (MFRS), in particular MFRS 132 and MFRS 39. This one-off charge was due to the completion of the corporate exercise during the financial period that saw all the Eastern Hemisphere OFS and Marine Services businesses consolidated under Scomi Energy Services Bhd (formerly known as Scomi Marine Bhd) ( SESB ). Notwithstanding this adverse impact, several factors contributed toward the enhanced operating results including new contracts at better margins, a continuous cost reduction drive that lowered operating expenses and our optimal capital and corporate structure post completion of the corporate exercise. More importantly, a positive financial outcome for SGB from the corporate exercise is the substantial strengthening of its balance sheet by paring down debt. Total borrowings have dropped below RM1.0 billion as at 31 March 2013, most of which is made up of short term and operational funding for various subsidiaries. Dividend During the financial period, the Group was still in its transformation phase to consolidate its businesses in the energy and logistics industry segments. Through this period, the corporate exercise was also being driven through to completion. In view of this, the Board of Directors has decided not to declare a dividend for the financial period. Instead, the capital of the Group will be employed towards further strengthening its financial position as well as propelling its business growth so as to create greater future value for all its stakeholders, including you, our steadfast shareholder. Corporate Structure In line with our global strategy of focusing in the energy and transportation industries, during the financial period we continued to concentrate on two high growth areas, namely energy services in the oil and gas industry and transport solutions for urban cities. Oil and Gas On 12 March 2013, SGB completed a corporate exercise which saw nearly all of its operations in the oil and gas industry consolidated under one entity, Scomi Energy Services Bhd. The corporate exercise, which began in February 2012, involved the acquisition by SESB of the: entire issued and paid-up share capital of Scomi Oilfield Limited and Scomi Sosma and; 48% of the issued and paid-up share capital of Scomi KMC. This corporate exercise has streamlined and consolidated the Group s Eastern Hemisphere operations into an integrated upstream drilling and marine services business. This consolidation puts SESB on a stronger financial footing and thus provides for greater flexibility for future growth. This financial capability accords the entity greater operational strength to capitalise on business expansion opportunities both locally and abroad. With continuing and intensified upstream activities in the oil and gas industry for the next several years, vast business potential lies ahead which will benefit both SGB and SESB shareholders. As part of and to enhance the Group s Indonesian coal logistics business, PT Rig Tenders Tbk ( PTRT ), an 80%-owned subsidiary of SESB, acquired the entire equity interest in three firms owned by its parent company Scomi Marine Services Pte. Ltd. ( SMS ), in a deal worth USD57 million. The three companies were CH Logistics Private Limited, CH Ship Management Private Limited and Grundtvig Marine Private Limited. The consolidation of the three companies is expected to improve the management, operation and cost efficiency of the logistics business and, ultimately, PTRT s financial performance. The transaction was completed on 12 April SESB currently has an order book of over RM5.1 billion after winning major contracts in Qatar, Thailand, Indonesia, Turkmenistan and Malaysia. With a healthy pipeline of tenders submitted and upcoming tenders in the industry, SESB is geared for continued growth. Divestment of Machine Shop Business Previously Scomi, through its subsidiaries, had a strong presence in the machine shop business with a network of machine shops in Asia, Aberdeen and Nigeria. However, in line with its business strategy to be a global technology enterprise focused in the energy and logistics industries, Scomi embarked on a divestment strategy to dispose of its machine shop business and the gains from the sale will be used for investment in its core businesses. In the final step of its divestment strategy, Scomi entered into a Conditional Share Sale Agreement with AOS Orwell Limited on 16 May 2012 for the disposal of its 100% equity interest in Scomi Nigeria Pte Ltd ( SNPL ), and a 2% equity interest in Oiltools Africa Limited ( OAL ) for a total cash consideration of USD39.77 million (approximately RM million). Both SNPL and OAL are involved in the machine shop business in Nigeria. The exercise was completed in October 2012 and the proceeds from the disposal have been used to strengthen Scomi s financial structure. Meanwhile, we have also intensified our focus on higher margin, high value added activities in high growth markets where the Group holds leading market positions.

22 SCOMI GROUP BHD ANNUAL REPORT 2013 CHAIRMAN S STATEMENT P / 21 Transport Solutions Scomi Engineering Bhd ( SEB ), a listed subsidiary of SGB, is a leading provider of transport solutions that designs and manufactures monorail systems, coaches, buses, rail wagons and special purpose vehicles. The financial period, though challenging, saw the continued progress of its monorail projects in India and Brazil while its coach, bus and special purpose vehicles continued to pick up pace. For SEB, countries with fast developing economies and exponential urbanisation resulting in exigent needs for urban transit solutions are vital markets. Two such markets are Brazil and India, which are currently offering SEB plentiful business opportunities. The financial period saw major progress for its projects, with Phase 1 of the Mumbai Monorail on track for completion and the Brazil projects awarded in the latter half of the previous financial year 2011, seeing rapid project implementation in Manaus Metropolitan Region Monorail In January 2012, SEB, together with three consortium partners, entered into a contract with the Infrastructure Secretariat of the State of Amazonas in Brazil for the development of the detailed engineering design, construction, supply, and installation of a monorail system for the Manaus metropolitan region. The contract signing followed the successful award of the project to the consortium in August The consortium comprises SEB, CR Almeida S/A Engenharia De Obras, Mendes Junior Trading E Engenharia S/A, and Serveng-Civilsan S/A Empresas Associadas De Engenharia. Launch of a Brazilian Monorail Manufacturing Facility Subsequently, in August 2012, SEB s Brazilian partner Montagens e Projetos Especiais SA ( MPE ) also opened a manufacturing facility in Rio de Janeiro to manufacture the trains for the Line 17 Monorail in Sao Paulo. This new manufacturing facility is the first facility outside of Malaysia to manufacture the Scomi SUTRA (Scomi Urban Transit Rail Application) monorail and is part of the project development plans for local manufacture. Covering 41,100 sqm, the facility is fully equipped to assemble and test the monorails as well as store up to 15 completed monorail cars. This is a landmark initiative undertaken by the Group as a part of our growth and expansion strategy in the Latin American market. With this facility, we are reiterating our strategic commitment to providing innovative urban transport solutions for the Brazilian market. Scomi s largest shareholder once the bonds are fully converted into ordinary shares in SGB by IJM. In this mutually beneficial arrangement, IJM brings its vast experience in the construction industry which will complement Scomi s Transport Solutions division, whilst IJM gains the opportunity for entry into the lucrative oil and gas industry. Corporate Citizenship One of the important channels in ensuring sustainable growth of the Scomi group is by continually building both our internal and external communities. This translates to creating an environment that nurtures our employees to excel and to push their boundaries to fulfil their potential. Our employee value proposition quite simply states You provide the talent, we provide the career development. Hence each and every one of our employees is groomed towards evolving into confident, effective and efficient leaders who can grow our business as well as grow professionally themselves. The Group s footprint now spans 26 countries, and every region where we operate has unique needs. We therefore empower each and every Scomi business unit to play a part in its community through locally-driven activities. Yayasan Scomi is a foundation established by SGB. The Group s employees are encouraged to contribute towards Yayasan Scomi s activities. The foundation has steadily increased its efforts to provide both financial and practical assistance to the less fortunate and the underprivileged. We are also keenly aware of our duty to act as stewards of our planet by protecting the environment. Our research and development efforts are therefore focused on developing eco-friendly, energy efficient products that reduce environmental impact, especially noise pollution and waste generation. We strive to maintain excellent corporate governance throughout the Group. We exercise stringent risk management not solely at the enterprise level but also at the project level to ensure the most effective execution of our contracts. Our Delegated Authority Limits are subject to regular review. While we are mindful that our governance measures must ensure a sound, internal system of checks and balances, we recognise that, as a lean and agile organisation, we must also remain nimble in adapting to the ever-changing business terrain. Further information on our corporate citizenship is provided in the Corporate Social Responsibility section of this report (page 36 to page 38). Strategic Partnership At SGB s recent EGM on 31 January 2013, the shareholders voted in favour of the issuance of RM110 million worth of bonds to IJM Corporation Bhd ( IJM ), which will make the construction giant Board Of Directors During the financial period SGB has welcomed 2 new members to the Board of Directors, who represent IJM as our substantial shareholder. Dato Teh Kean Ming joins us as a

23 Anchor Handling Tug and Supply Vessel

24 SCOMI GROUP BHD ANNUAL REPORT 2013 CHAIRMAN S STATEMENT P / 23 Non-Independent Non-Executive Director whilst Mr Lee Chun Fai is an Alternate Director to Dato Teh. Both bring with them a wealth of experience and we look forward to their valuable contribution on all company matters. Prospects The ensuing financial year is expected to be a less volatile period for the global economy, and the newly reorganised Scomi is primed to advance across all our chosen sectors and markets. Although oil prices have softened, the demand for oil and gas, particularly in the developing nations, continues to increase, driving new exploration and drilling activity. The Energy Services order book is robust, and OFS has successfully clinched several sizable contracts recently in Malaysia, Indonesia and Turkmenistan. We anticipate several more jobs in the aforementioned countries and focus on contract execution and service quality. We remain optimistic of the offshore support segment as we evaluate strategic investment opportunities in specialised offshore vessels. Increasing offshore exploration and production in Southeast Asia also means a heightened demand for support vessels, and we expect resulting growth in our Marine Services business. In its newly consolidated form, the Energy Services division can better meet the specific needs of our target markets, and we are confident that our participation in the Eastern Hemisphere s thriving energy sector will continue its upward trend. Prospects are also bright for our Transport Solutions division, as an increasing number of urban areas consider eco-friendly monorails to alleviate traffic woes. In India alone, over 20 cities are now contemplating monorail systems. With the anticipated delivery of Phase 1 of the Mumbai project in the current calendar year and the improvements in the KL and Brazil projects, performance for is expected to be satisfactory. Whilst the division is currently focused on executing contracts in Malaysia, India and Brazil, it also has new proposals pending in India and Sri Lanka. Although the challenging foreign exchange climate is unlikely to abate in the coming year, the growth in monorail installations and manufacturing facilities is most encouraging, and our visibility is definitely on the rise. Acknowledgements On the heels of several challenging years, we at SGB are enormously gratified to have seen our efforts paying off handsomely during the financial period. The transitions of the past year could not have taken place without the steadfast support of all of our stakeholders, and on behalf of the Board of Directors, I would like to express our sincere gratitude. Our customers across the globe continually inspire us to develop new products and skills. Our shareholders have held firm throughout the restructuring exercise, and our business partners, suppliers, advisors and bankers have all contributed invaluably to this year s remarkable results. As ever, we also wish to thank the governments in the many countries in which we operate; their assistance and guidance remains indispensable. Over 3,000 individuals make up the Scomi team worldwide, and I thank each of you profoundly for your dedication and unique contributions to the Group s success. Finally, I would like to express my appreciation of my fellow Directors, whose vision and diligence continue to pilot the Scomi Group in its pursuit of excellence. Tan Sri Asmat bin Kamaludin Chairman

25 Transforming an everyday substance into continuous value.

26 A CHAIN Using imagination, even a simple piece of paper has the potential to become an object of greater value. In paper art, Scomi sees its own credo to realise potential.

27 P / 26 MANAGEMENT REVIEW OF OPERATIONS SCOMI GROUP BHD ANNUAL REPORT 2013 Dear Stakeholders, The past fifteen months have been a period of dramatic transformation for Scomi Group Bhd ( Scomi or SGB ) and its group of companies (the Group ). Our restructuring, completed in March 2013, is already delivering measurable benefits, with the Group emerging more efficient, more resilient, and well able to meet the challenges and grasp the opportunities in the still turbulent global marketplace. Overview Widespread financial recession, civil disturbance, political upheaval and volatile currency exchange have created treacherous ground for every highly internationalised business, and these factors have certainly menaced Scomi s operations. But by keeping our eyes steadily on our products and services, the best markets for us to be in, and how we can operate most costeffectively, we have been able to end the financial period on a buoyant note. Our research and development teams are continuously enhancing and developing new products and solutions to meet market needs. We have designed lightweight, efficient and durable drilling waste management equipment for all phases of oil and gas exploration and development, as well as drilling fluids for the most challenging environments. Scomi s specialised vessels offer various support services to offshore drilling installations, and for dense urban areas battling increasing traffic congestion, our monorails are providing a highly effective solution. And last but far from least, our human component, Scomi s technical and support staff have once again proved themselves to be key to our thriving relationships with our clients, and their continuous development remains one of our highest priorities. The new Energy Services division is focused on the Eastern Hemisphere and is most active in Malaysia, Thailand, Indonesia and the Gulf. Meanwhile, the large cities of Brazil and India are the primary customers for the Transport Solutions group. Although we have pegged these as our key regions, we regularly review the potential in other markets and we have the ability to change course promptly in response to shifts in market conditions. Group-wide cost reduction drives have also paid off, with operating expense margins being reduced during the financial period. Indeed, part of the rationale behind consolidating the Oilfield Services and Marine Services divisions was greater cost control and operating efficiency for the merged entity. Meanwhile, the Transport Solutions division is also maintaining a disciplined approach to cost management to ensure its projects are within budget.

28 Shah Hakim Zain Group Chief Executive Officer

29 Liquid Mud Plant at Kemaman Supply Base, Malaysia

30 SCOMI GROUP BHD ANNUAL REPORT 2013 MANAGEMENT REVIEW OF OPERATIONS P / 29 Financial Performance After a one-off fair value charge on a Put Option of RM61.06 million, Scomi Group Bhd recorded a revenue of RM1.92 billion and a Profit Before Tax ( PBT ) of RM21.1 million for the financial period ended 31 March Without the one-off charge, the Group would have achieved a PBT of RM82.2 million on the back of the same RM1.92 billion revenue. The Oilfield Services ( OFS ) division continued its positive momentum, posting a PBT of RM96.0 million. This sterling performance was spurred by a revenue of RM1.15 billion for the 15-month period, with Malaysia, Thailand, Russia and Indonesia being the biggest contributors. Meanwhile, the Marine Services Division reported a revenue of RM318.3 million and a PBT of RM38.7 million. The coal segment revenue was lower than the 2011 financial year however, reflecting a drop in tonnage carried, while the docking of two vessels and the refurbishment of an accommodation barge resulted in a lower offshore contribution. The bottom line was also hit by vessel impairments. The Transport Solutions Division generated a revenue of RM450.3 million for the 15-month period, driven by the delivery of rolling stocks to Mumbai and our ability to complete the electrical and mechanical milestones in the Kuala Lumpur Monorail Fleet Expansion Project. Although there was a pre-tax loss of RM21.1 million for the 15-month period, this was substantially lower than the pre-tax loss of RM60.6 million posted for the 12-month period ended 31 December The New Scomi With the completion of the corporate exercise involving the acquisition by Scomi Energy Services Bhd ( SESB ) of the Oilfield Services Eastern Hemisphere entities, the Group will deliver a host of benefits including streamlined marketing efforts, lower debt, enhanced cost management and greater growth potential. SESB comprises two divisions, OFS, providing integrated drilling fluids, drilling waste management solutions, production enhancement technologies and multiple drilling services; and Marine Services, offering marine transportation for the coal industry and provision of offshore support vessels to the oil and gas industry. The Group will continue to focus its attention to grow businesses in Africa, Russia, the Middle East, and Asia. Although the Group has reduced its market presence from 36 countries to 26, we are agile enough to penetrate other regions when the circumstances are right. Meanwhile, our other listed subsidiary, Scomi Engineering Bhd ( SEB ) continued to make strides in the provision of innovative public transport solutions. Energy Services The Energy Services division currently has an order book of over RM5.1 billion with significant bids still in the pipeline, and we foresee a continuing positive trend in the coming year. The Energy Services operating results improved throughout the financial period, underpinned by new contracts at better margins, a successful drive to reduce costs, and the optimisation of our capital and corporate structure following the merger exercise. Though oil prices dipped below USD100 per barrel in 2012, demand in developing nations, particularly India and China, has increased. A Spears & Associates Inc report is predicting international drilling activity in 2013 to grow by 12% in Mid East and 6% in Far East. In the latter half of the financial period, we were seeing a rise in exploration and rig counts in Malaysia, Indonesia and Thailand and as a consequence this translated to an increase in operational activity. We are also seeing steady growth in the Gulf and Turkmenistan while our West African operations have generated positive results with increasing rig activity. Australia and Russia, which are predominantly drilling waste management markets have fared better during the financial period due to increased usage of our proprietary drilling waste management products. We are capitalising on the activity sparked by the Malaysian government s Economic Transformation Programme ( ETP ), in which oil and gas has been defined as a National Key Economic Area. In 2012, the Malaysian Oilfield Services operations inked a five-year, RM2.1 billion contract with PETRONAS Carigali to provide drilling products and services. We are further encouraged by PETRONAS plan to develop marginal fields in Malaysia, which presents vast business potential and a new area of expertise for us to explore. The Indonesia Operations has also secured a contract for a three-year mega-project in Indonesia, having received a Letter of Award from Total E&P Indonesie. Work has commenced on this estimated RM380 million contract for the provision of drilling fluids and services. This is the largest single contract that Scomi has ever signed in Indonesia. During the course of the financial period, we also won a breakthrough contract with Qatar Petroleum in Qatar to provide drilling fluid services and along with another significant project in Turkmenistan. The hike in offshore exploration and production has benefitted the marine division as well, driving the demand for vessels. During the financial period, the division signed a two-year contract with PT Pertamina Hulu Energi Offshore North West Java in Indonesia, estimated at RM120 million, to provide three vessels for offshore support services. However, our coal transport segment saw a revenue drop, reflecting a general slowdown in the coal industry in Indonesia. This was further compounded by the expiry of a major coal logistics contract which was replaced with a time-charter contract at lower fixed rates. Our Production Enhancement Technologies ( PET ) business unit, albeit a smaller unit within the OFS division has consistently

31 P / 30 MANAGEMENT REVIEW OF OPERATIONS SCOMI GROUP BHD ANNUAL REPORT 2013 delivered on its product and services. Servicing clients in Asia from its Malaysia operations and the rest of the world from its France operations, PET continues to maintain its market share and is a consistent contributor to the financial performance of the division. While nurturing our relationships with current clients, we have continued to network and build our brand recognition by showcasing our products and services at numerous international energy sector conferences and exhibitions throughout the year. We were prominently seen at the prestigious 25th World Gas Conference in Malaysia where our brand presence was significantly enhanced as the single sponsor for the Interactive Expert Showcase. Meanwhile our products attracted scores of attention at the Neftegaz oil and gas exhibition in Russia, the 12th China International Petroleum & Petrochemical Technology & Equipment Exhibition and the Abu Dhabi International Petroleum Exhibition and Conference. Transport Solutions The Transport Solutions division has an order book which stands at over RM715 million with three major monorail bids in the pipeline in India, which if successful will add an anticipated RM1 billion to the order book value. As the world s cities grow in population density, they are simultaneously expanding in land area. Governments are increasingly exploring public transit systems that will reduce traffic and pollution while providing their citizens with a safe and efficient means of transport. This trend, especially in the large cities of the BRIC nations (Brazil, Russia, India and China), is providing SEB with a wealth of opportunities, primarily in the monorail market. We are also extremely excited about the growing interest and demand for monorail systems in India. India with its escalating population is fertile ground to expand our Transport Solutions business. Tier I and Tier II cities are seen as key contributors to the country s economy and hence the anticipated exponential growth in the requirement to move people between cities. We continue to keep our eye on the infrastructure developments in Chennai, Kerala, Delhi, Bangalore and Hyderabad. Having built the first monorail in India we are well positioned to take advantage of any opportunity that materialises. In Brazil, we are bidding against two competitors for several new monorail projects, including a second line in São Paulo. Phase 1 of the 18-kilometre Line 17 monorail project in São Paulo kicked off in September Piling work is progressing well, and the Integration Design for All Systems milestone was approved by the client in December When completed in early 2015, this line is expected to carry 252,000 passengers per day between 18 stations. During the financial period the Manaus monorail project, which we are undertaking with three consortium partners, made good progress. For our portion of the contract, we are responsible for the design and supply of rolling stock and depot equipment, track switches, maintenance vehicles, system integration and project management. The project is slated for completion in We have now established a joint venture company, Quark Fabricacao de Equipamentos Ferroviarios e Servicos de Engenharia Ltda with two Brazilian firms, Montagens e Projetos Especiais SA ( MPE ) and Brasell Gestao Empresarial, LTDA, to handle the manufacturing, assembly and marketing of monorail rolling stock and to provide rail-related engineering services. Guided by our technological expertise, our partner MPE, opened a manufacturing facility in March 2013 in Rio de Janeiro, that has 10,000 sqm dedicated for the production and testing of the monorails, with a balance 31,100 sqm for storage of up to 15 completed monorail cars, warehousing and office facilities. This facility has the capacity to produce up to six cars per month for our Brazil monorail projects. In India, work on the Mumbai monorail has faced several schedule delays due to factors beyond our control. Phase 1 covers 8.6km between Chembur and Wadala, and Phase 2 connects Jacob Circle and Wadala, a distance of 10.5km. Trial tests on Phase 1 have been ongoing since the early part of the year and we are gearing up to revenue operations by end Meanwhile, the client has resolved several challenges along the alignment for Phase 2 involving security issues, land acquisitions and resettlements and this phase is now proceeding as per expectations in tandem with the testing of Phase 1. Our monorail business continues to make inroads in India. We are currently one of two companies short-listed in the bidding for the Chennai monorail project, which, at RM4.65 billion, would be the biggest ever for Scomi. In total we have currently expressed interest for 3 monorail projects in India for which we anticipate decisions to be announced by the end of the calendar year. Prior to the financial period, we had signed a contract to expand the severely oversubscribed Kuala Lumpur monorail. The RM494 million project includes the delivery of 12 sets of new four-car trains, a new depot, and upgrades to stations. The civil works have been ongoing and we delivered the first set of trains in March These new trains, which have the capacity to increase passenger traffic to 64,000 passengers per hour per direction, are anticipated to be completed and delivered over the next financial period. The Coach and Special Purpose Vehicle units continued their stable performance. Although a relatively small contributor to the financial performance of the division, we continue to see opportunities to grow this business. Hence, we have enhanced our design and assembly capabilities as well as expanded into the maintenance, repair and overhaul segment and equipment leasing. Further expansion possibilities include the local manufacture of reputed international brands to make these products accessible and affordable for regional markets as well as the trading of parts and spares for specific industry equipment. Key Initiatives Research and Product Development To capitalise on the global trend toward zero-discharge policies for drilling operations, SESB is developing environmentally conscious and efficient technologies for the Drilling Waste Management

32 Global Research & Technology Centre, Malaysia

33 P / 32 MANAGEMENT REVIEW OF OPERATIONS SCOMI GROUP BHD ANNUAL REPORT 2013 market. One of our newest innovations is the use of microwave technology for drilling waste treatment. In the final stages of prototype testing, this new technology is generating great interest amongst both production companies and investment analysts in the oil and gas industry. Our system has numerous advantages over both existing microwave and thermomechanical cuttings cleaning methods, addressing a wider range of waste products, reducing power consumption, operating more reliably, and complying with EU standards. Its reduced footprint and weight will also make it an extremely suitable option for offshore rigs. We are confident of the marketability of this product and anticipate commercialisation during the current financial period. Pushing the boundaries of our current waste management solutions, we have developed a range of shale shakers with the 5 Panel Prima-G shaker the latest to join the portfolio. Operating more quietly and at high G-forces, this family of shakers have impressed everyone who worked with them at the early installations and have also drawn a great deal of attention at energy conferences. We had also introduced the Clean-in-Place automated tank cleaning system to this region in 2011 and it has proved its worth with active use in Malaysia and Thailand operations. This solution totally eliminates the need for human entry into any tank for cleaning purposes and has the ability to consistently clean tanks in less than half the time taken by conventional systems, with only 10% of the normal waste generated. Moreover, no human entry means greatly reduced health and safety risks. Our Drilling Fluid technologies and systems are constantly being enhanced and improved to cater for new challenges that surface during drilling operations. With the industry moving towards deepwater and ultra deepwater drilling, our systems have also been enhanced to support the requirement. Further the global focus is now on protecting the environment and the industry is shifting towards solutions that fulfil both the technical and environmental performance criteria. Hence our Oilfield Services research and development team has also worked with strategic partners to developed eco-friendly green fluids with the capability to deliver superior performance with environmental benefits through lower toxicity and biodegradability features. To ensure the performance of our drilling fluids is always at optimum level, we have also developed several proprietary engineering software programmes. These programmes equip our engineers with the capability to deliver technical assistance whether it is for comprehensive data management and accurate reporting by our onsite engineers or for drilling hydraulics simulations to ensure the formulations of our fluids. The Marine Services group is tailoring its fleet to focus less on the waning coal transport business and more on the offshore support services sector. In revitalising our fleet we have recently divested our older pairs of tugs and barges and are reviewing newer options for the offshore support services. As part of this process we have also refurbished our accommodation work barges. We are also well positioned to combine our expertise in oilfield services with our experience in offshore vessels to provide innovative solutions including floating warehousing facilities for offshore works. We had initially provided a similar concept for a floating liquid mud plant which was well received by our client. Hence we are confident of expanding our portfolio to include this innovative service. The Transport Solutions has quite literally continued to trim the shape and reduced the weight of its monorails through its

34 SCOMI GROUP BHD ANNUAL REPORT 2013 MANAGEMENT REVIEW OF OPERATIONS P / 33 continuous research and development efforts. This has translated to production optimisation, greater energy efficiencies and increased passenger capacity. Learning from its practical experiences in Mumbai, Brazil and Kuala Lumpur, the research and development team are in a continuous cycle to improve our monorails. Research and development to enhance our products is integral to the Group s strategy. Our centres in Malaysia at our Global Research and Technology Centre for drilling fluids and the Engineering, Technology and Innovation Centre north of Kuala Lumpur for rail solutions; and in Houston for our waste management continue to be the driving force in translating operations feedback to substantive results. People Power We know that our success depends on the skills, dedication and integrity of the more than 3,000 individuals who make up the Scomi Group. We are committed to attracting and retaining top-tier talent both by offering excellent career development and by helping each individual to realise his or her full potential. Our in-house training department, Group Learning and Development, organises trainings on diverse subjects in a range of languages and cultures, reflecting the regions in which we do business. To gain expertise in relevant technologies, Scomi professionals also attend courses offered by external companies. All our training initiatives, especially those targeted at the management level and above, ensure we have a competent and skilled workforce. Competency Mapping is our tool to guide every individual s development path. Initially focusing on the technical streams within the organisation, we are developing Competency Frameworks which clearly outline the experience, skills and training required from both a management and a technical perspective for an individual to progress. This mapping also gives the scope for an individual to decide whether to follow a technical progression path or to move into a management progression path. This gives employees greater clarity on their career pathways and empowers them to map out concrete steps to achieve their goals. Thus we are able to retain a secure and reliable talent pool. Our programme for Succession Planning identifies potential successors for various positions within the organisation and we work with these employees to develop their abilities so that they can step up to fulfill the organisational needs within the group. This process has considerably strengthened the leadership talent pipeline and in many of our global locations we are seeing young managers capably stepping up to leadership roles. Looking Ahead According to the World Bank and other global financial analysts, the next twelve months should be less turbulent for the world economy. Brent crude oil prices are expected to hover around the USD100 per barrel mark, a drop of about 10% from 2012, due to increasing crude oil production from non-opec countries. Japan s decision to shut down its nuclear power plants in the wake of the Fukushima earthquake is spurring liquid natural gas development in Southeast Asia and the Middle East, and at the same time global gas demand continues to sprint ahead, growing at five times the rate of global oil demand. As a result, analysts predict increasing activity in all aspects of energy exploration and production. In the Eastern Hemisphere, we certainly see encouraging signs for the coming year. Indonesia has promised to improve investment opportunities and cut bureaucracy in order to increase exploration and production. The EU recently lifted almost all sanctions against Myanmar, paving the way for significant new investment in all sectors of the economy. The Chinese government will subsidise the development of shale gas and allow tax-free imports of equipment for shale-gas exploration. Here in Malaysia, operators have discovered an estimated 1.4 billion BBOE ( barrels of oil equivalent ), representing about 72% of total discoveries in the region. All of this indicates a productive and successful year to come for SESB. For our Marine Services division, the coal market remains volatile. We will of course continue to serve our customers in this industry. However, as the oil and gas exploration and production numbers are all set to rise, the strategy is for us to shift the composition of the fleet to serve the offshore support services sector. The increasing level of activity is expected to absorb the flow of new vessels, which should result in steady to higher daily charter rates and high utilisation. We remain optimistic about this sector as we continue to evaluate strategic investment opportunities in specialised offshore vessels. Our Transport Solutions monorail teams will have a busy year as they fulfill our current contracts in Brazil, India and Malaysia. These projects have raised Scomi s visibility tremendously, and we are expecting to land more projects in both India and Brazil, as both countries governments are seeking better public transportation solutions for their congested urban areas. With our partner s new manufacturing plant in Rio de Janeiro, we are in a prime position to support the Brazilian requirements, whilst the strategies are in place to explore indigenous assembly should more projects in India materialise. This expansion strategy for the manufacture of our transport solutions will bring us closer to the relevant markets and hence make us more agile to answer the city s transport needs. As we have consolidated and streamlined our operations, our shareholders are now able to see a leaner and compact organisation emerging. This has also created greater operational nimbleness to respond to market needs while giving greater financial strength to raise capital for growth. In line with our corporate statement, we are clearly focused on energy and logistics with an expansive technology driven product portfolio and a global reach that allows us to provide innovative solutions and thus, quite simply, to realise potential for all our stakeholders and that includes our valuable employees and our steadfast shareholders. Shah Hakim Zain Group Chief Executive Officer

35 Transforming basic material into enduring worth.

36 A DIAMOND Using imagination, even a simple piece of paper has the potential to become an object of greater value. In paper art, Scomi sees its own credo to realise potential.

37 P / 36 SCOMI GROUP BHD ANNUAL REPORT 2013 CORPORATE SOCIAL RESPONSIBILITY Aristotle believed that the whole is greater than the sum of the parts. At Scomi Group Bhd ( Scomi or SGB ) and its group of companies (the Group ), we too believe in combining our processes, our people and our brand, to reach out to all our stakeholders and those that we come in contact with. Scomi is committed to making a positive and meaningful impact in the communities where we are present. We believe that the Group does not operate in isolation and as such, we are proactive and resolute in our stand that our business objectives and decisions take into account sustainability for continued growth in the environments that we are in. We continue to focus on our social, environmental and economic impacts in creating value for our business, our shareholders as well as our other stakeholders. On this premise, we have made corporate social responsibility ( CSR ) a cornerstone for our efforts. Our CSR activities have progressed more holistically, evolving from individual acts of philanthropy to becoming a mindset that influences decision-making and business strategy. The Marketplace We remain committed to operating responsibly and upholding best business practices while adhering to the highest ethical standards in our business approach and dealings with all our customers, vendors, the Government and other stakeholders in general. Communication is an integral element in ensuring timely information of the company reaches its key stakeholders. Hence throughout the financial period, Scomi played host to numerous media communicators, investment analysts and fund managers to provide them with the latest information of the Group. We also ensured timely announcements to Bursa Malaysia on material activities and events, distribution of quarterly Letter to Shareholders to the investment communities on the Group financial performance, and also media releases on key developments of our business. News on Scomi s business as well as our operations globally is disseminated through our newsletter, FOCUS, which is shared with customers, partners, suppliers, employees and other stakeholders. Meanwhile, comprehensive information on the Group is easily accessible via our website and this includes our Annual Reports, Circulars to Shareholders, media releases and media coverage. In creating value for our customers, we ensured that all our products adhere to regulatory requirements and quality standards. Further, to add value for our customers, we have also extended to our customers several technical training modules on Drilling Fluids Technologies, Drilling Waste Management and Drilling Operations. The modules cater not only for technical personnel but also non-technical personnel who come in contact with the services that we provide. Through this training we are able to enhance their knowledge of our products and services as well as building cognizance of the latest technology, products and services that we provide. To further enhance our presence and to create awareness of our brand and products, the Group as a whole participated in numerous energy and transportation exhibitions, conferences and forums worldwide. Throughout the financial period, our Transport Solutions team participated in conferences and summits in Brazil and India to showcase our expertise. The division also hosted several government and trade visits at our manufacturing facility in Malaysia as well as our ongoing project in India. Our Energy Services division participated in a number of global oil & gas exhibitions in Malaysia, China, the Gulf and Russia. Our senior management have been recognised as thought leaders and industry experts and were called upon as speakers at conferences and forums. Scomi s Group Chief Operating Officer

38 SCOMI GROUP BHD ANNUAL REPORT 2013 CORPORATE SOCIAL RESPONSIBILITY P / 37 was an invited speaker and panelist at the Perdana Leadership Forum in Malaysia and the FICCI India Urban Transport Summit in New Delhi, India; while our Chief of Staff, Chief Learning Officer as well as members of the Group Learning and Development department, were invited to speak at several HR and talent management conferences, in Malaysia and other countries. The Workplace We credit the success of our business to the contribution and steadfast commitment of our people, being our most valuable asset. As Scomi Group expanded, it has always nurtured a working environment which attracts, develops, motivates and retains the best talents. Employees were consistently being challenged to push their performance levels, be driven to deliver results and continue to outdo themselves. We are committed to creating a working culture that values and rewards performance while cultivating and reinforcing a sense of belonging to the Group. Based on performance delivery, employees were rewarded with bonus increments. To bring out the best in our employees, we introduced various initiatives such as projects involvement and stretch assignments of increasing responsibility and complexity. At the same time, we provide our employees with training and professional development opportunities to ensure they are equipped with the relevant knowledge and skills for career progression. We have made it a requirement for all executives to attend a minimum of 40 hours of training a year, while non-executives need to fulfill at least 20 training hours annually. To foster and enhance unity, the Group has also put in place a number of programmes that stamp Scomi s unique identity and draw participation of our employees. We seek to create a sense of belonging and ownership by interacting with our employees and maintaining effective and clear communication with them. Details of our Group Learning and Development and human capital development activities are set out in pages 39 to 41. The Environment In the current global economy, there is increased pressure for companies to operate in a manner which is sustainable while promoting environmental conservation. As an environmentally concerned global technology enterprise, we are committed to providing innovative solutions whether in the energy services or transport solutions industries, with the lowest environmental footprint. Scomi employees across the globe are committed to greening the earth and have organised a number of programmes and initiatives to minimise wastage of resources and mitigate negative environmental effects. We have also endeavoured to leverage on technology and intellectual capital to create clean and green solutions aimed at environmental sustainability while obtaining optimum customer satisfaction. Scomi s commitment towards the environment is reflected in its Oilfield Services product portfolio. Its Drilling Fluids are constantly engineered to provide optimised performance and enhanced recyclability properties. The systems are engineered to prevent loss of fluids and damage to the surfaces during drilling. They also ensure efficient waste carrying properties as well as adsorbtion properties that allow the drilling waste to be easily cleaned for disposal. The Drilling Waste Management solutions that handle drilling waste solids control, containment and handling, treatment and disposal ensure that all waste generated are effectively separated, contained and treated prior to disposal, for minimal impact to the environment. These are achieved through research and development for innovative products and also the creation of efficient solutions to meet individual waste management challenges. For our Transport Solutions business, we have improved on our world-class Scomi Urban Transit Rail Applications (SUTRA) to offer amongst others an improved direct-drive propulsion system and lower vehicle weight translating into an energy-efficient monorail system. Our monorail being a public transportation system, directly contributes towards the reduced usage of private vehicles. Taking these vehicles off the road translates into minimising carbon emission to the environment. The system itself is an environmentally friendly solution as it runs on electric motors that has no emissions as well as moves on rubber wheels on a concrete surface and hence vastly reducing noise pollution. Certification Scomi ensures where possible all its business units, subsidiaries and joint venture partners are certified to either ISO , ISO or depending on process requirements and or risk identification reviews. The Community As a caring corporate organisation, Scomi believes that it has a responsibility to give back and support communities across the 26 countries in which we operate. With the understanding that corporate responsibility is integral for success and essential for holistic growth, we strive to ensure our CSR programmes make a positive difference to the community. This has been our guiding principle since our establishment and signifies efforts to raise standards of living and enriching communities over the years. In Malaysia, Yayasan Scomi, a non-profit foundation dedicated to developing communities through education and living assistance has been established since Yayasan Scomi organises CSR activities with participation of Scomi employees, to support the underserved public irrespective of race, religion or creed. Over the years, it has provided educational assistance and scholarships for needy students along with rural school and motivational programmes as well as helped the less fortunate in terms of the provision of food and other basic living necessities. Yayasan Scomi organised several key community engagement

39 P / 38 SCOMI GROUP BHD ANNUAL REPORT 2013 CORPORATE SOCIAL RESPONSIBILITY and relief programmes including its annual blood donation drive which was co-organised with University Malaya Medical Centre at Scomi s global headquarters. It also continued its support for 10 under-priviledged families it has adopted in Malaysia, extending financial support to them to uplift their living conditions. Todate Yayasan Scomi has provided scholarships to over thirty students, special education needs continuous training and equipment to three schools and helped more than six hundred individuals through their underprivileged assistance initiatives. Yayasan Scomi also initiated a partnership with Mercy Malaysia, an internationally renowned Malaysian NGO for the deployment of Scomi s staff as Mercy Malaysia s volunteers in its community programmes. This partnership will enable Scomi staff to pledge their support and sign up as volunteers to participate in the various community programmes driven by Mercy Malaysia. Above and beyond the corporate driven activities, each business unit is empowered to organise its own CSR activities. This can be as simple as creating a moment of joy for the underprivileged by interacting with them or as altruistic as home or education improvement for a deserving family or community. We believe the quantum is not of import rather the quality of the helping hand is. Hence with all our global hands reaching out together the sum of the parts becomes greater once again.