Group CEO’s Report

Annual-Report-2015-15_02It is a pleasure to report on the progress Fijian Holdings Group has made during the financial year ending 30th June 2015. As ever, it has been a busy year as we strive to better serve our customers and partners across our many businesses and deliver value to our shareholders.

The year started with a hard look at our strategy, where we wanted to be as a Group by 2020 and how we could deliver the required growth. As we analysed our strengths and capabilities, we quickly came to recognise the importance of focusing on our core competencies in different sectors.

Review and refinement are key elements of growth, and during the past year, your company has done both, reviewed the areas in which we operate and refined our focus to those in which we can be the most effective, and do the best. In keeping this report concise and pertinent to the year under review, whilst being comprehensive and detailed, we have ensured the commentaries are of a helicopter view of the events and progress within the year.

Group Performance

Despite challenging industry landscapes in several of the Group’s key business lines, the diversity of its operations enabled the Group to demonstrate stability in its earnings profile.

The FHL Group turned in another year of strong financial performance with consolidated profit after tax before discontinued operations for the year surging 33% to reach $15.13 million. The Group’s consolidated revenue grew by 9.2% to record $ 276 million during the financial year. Growth was broad-based with all sectors recording top line growth. As per accounting standards, operations of PNG-based Media Niugini Ltd (MNL) was considered discontinued operations for the financial year ending 30th June 2015.

The key contributors to the Group’s revenue during the year were RB Patel Group Ltd (33.7%), Basic Industries Ltd (16.0%) and South Sea Cruises Ltd (14.2%). The Group’s revenue streams are well diversified with the contribution of an individual sector not exceeding 20% of consolidated revenue except for retail sector. Export-oriented business interests have also enabled the Group to be geographically diversified with revenue streams originating from multiple countries in the Pacific region.

Group operating profit before tax increased by 10.8% to $24.1 million during the financial year supported by revenue expansion, whereas growth in other income was marginal. While staff costs increased by $1.51 million, other operating expenses decreased by $2.1 million. Primary contributors to the Consolidated Profit were Merchant Finance Ltd with 23% followed by RB Patel Ltd and South Sea Cruises Ltd with 15% each.

During the financial year, FHL Group, excluding Merchant Finance Ltd, paid a total of $6.17 million as finance cost. In addition, an impairment loss on goodwill was recorded at $6.1 million arising out of South Sea Cruises acquisition. In addition, at holding Company level too, a provision to the value of $8.9 million was made in terms of diminution value of investments. Total group assets reached $459 million during the year, as the Group continued to strengthen its market positions and geographical reach through acquisitions and organic growth. Total group liabilities stands at $255 million, a 1.4% decrease compared to the previous year.

Performance of Group Companies

Each of these companies have strong macro drivers and are well positioned for growth going forward.

Fijian Holdings Ltd as a holding company recorded a 38% growth in revenue leading to a 32% increase in after tax profits for the financial year. FHL has achieved an average annual revenue growth of more than 15% for past 4 years. Total investment portfolio at holding company level grew by 9% to reach $231 million.

Merchant Finance Ltd (MFL) recorded a pre-tax profit of $10.0 million for the year based on a revenue of $19.7 million. MFL derived a total interest income of $18.9 million from a lending portfolio of $101 million while contributing the largest dividend payment to the holding company during the year. With a branch network of 7, the company has been in preparation mode for a public listing. With a solid business model which is largely based on asset financing, MFL would be an attractive proposition for investing in the coming years.

Notwithstanding challenging operating environment in the Licensed Finance Institution industry, Merchant Finance recorded a strong performance aided by growth across all businesses with both deposit and credit growth trending above industry average. The company is in the planning stages of new products in line with our innovative business strategies.

The turnaround of Basic Industries Ltd after several years of poor performance was a key achievement reflecting the spirit of the FHL Group. From a moderate 11% revenue contribution to the group in 2013 to 16% of contribution to increased group revenue in 2015 is a remarkable achievement. This is on the backdrop of improved demand for aggregates, concrete, cement blocks and other concrete products. A 27% growth in the annual revenue indicates the potential of the sector and will become a contender for the group’s highest revenue contributor in the years to come. The re-engineering process is not yet completed but will continue until such time, when we achieve optimum results. We will emerge stronger with a sharp focus on innovation to deliver higher value additions.

Pacific Cement Ltd (PCL) experienced the first full year under competition, which otherwise used to be a monopoly business in the country. While we welcome competition, we are contained with the level of customer service provided by the company in order to ensure PCL delivers a superior product with excellent customer service. A recent management change coupled with shareholder change has led to a new direction in terms of investment in modern machinery. The same will improve efficiency in production in the coming years.

While RB Patel continues to be the most consistent company in the group in terms of performance, any significant growth in the retail arena would require major investment outlay. We do recognise the fact that the only way to improve the revenue contribution from the retail chain would be to increase the number of stores. Potential acquisition of a chain with few stores or stand-alone stores are possible in the coming years.

Acquisition of South Sea Cruises Ltd now proves to be a success with a cumulative growth of 20% in revenue despite the impact of Tropical Cyclone Evan. SSC has recorded a pre-tax profit of $6.6 million on a revenue of $45 million. Refurbishment of Fiji Princess and acquisition of the new vessel, Couger II have paved the way to enhance the shareholder value in the coming year. SSC chartered one vessels owned by Blue Lagoon Cruises Ltd and will be planning a major refurbishment for Mystique Princess within the next 18 months.


Fiji Television Ltd (FTV) was the most challenging subsidiary during the year. Challenges are much more than finance and continue to involve international negotiations. Extensive discussion with World Rugby and Government of Fiji lead to sub-licensing of Rugby Sevens series while exit of senior management attracted unwarranted attention. This was followed by signing of a Sale and Purchase agreement with the proposed divestment of 100% stake in PNG-based Media Niugini Ltd (MNL). After seven months of hard work, the transaction failed to eventuate as at early September 2015. Management changes coupled with organisational restructuring has improved revenue base for the company while ensuring survival without dividends from MNL.

Problems continue with BIL PNG Ltd, the PNG-based wholly-owned subsidiary of FHL which operates a concrete batching plant. For the Financial Year 2015, BIL PNG made a loss of $2.3 million leading a 3-year cumulative loss of $5.3 million. During the year, BIL PNG relocated and commenced operations from a large area with brand new machinery and a fleet of new ready-mix trucks. Extensive search is on to find a strategic partner for BIL PNG.

Acquisitions and Divestment

Over the years, the Group has pursued diversification through focusing on Fiji’s key growth industries and has successfully built a resilient model for value creation cutting across manufacturing, agriculture and service sectors. Group strategy during the year was aligned to respond to the opportunities in the local market.

During the year, FHL invested in Pernix (Fiji) Ltd, a subsidiary of a US group specialising in secured construction and operators of large power plants. The investment will provide an enhanced opportunity for FHL to enter into a growth-potential renewable energy business in the future.

FHL also invested in a green field project of Life Cinema Ltd, a company that operates a 620 seat cinema complex in Nadi. Our investments in the cinema industry has shown promising growth with the company performing above expectations. As at this stage, we are planning to invest in least five more Cinemas around the country within the next 18 months. We will continue to make investments in the entertainment industry in the coming years in order to derive optimum value from the industry.

While there are several investment projects in the horizon, we are mindful of potential to grow at medium risk mode. Within this sphere, FHL may enter into at least two new industries in the coming year. Our long run focus continues to be controlled diversification. As such FHL reduces its exposure to a given sector not more than 20%. Currently our exposure to Financial Services and Tourism exceeds this benchmark.

People Capital

People are our business – the thousands of people who trust in us to deliver the best choices, the best solutions and the best partnerships that bring win-win results for everyone. Both locally and internationally, we believe we can offer new and exciting ways for people to keep enhancing their quality of life.

The success of our Group has been built around our loyal and committed employees and I wish to pay tribute to them for their contribution to what has been a successful year. Over the years, we have attracted the best and the brightest from the entire pool of available talent to build a strong workforce that reflects the diversity of the customers we serve. We continue to engage and encourage our employees to perform to the best of their talents through a performance-oriented culture founded on ethical and transparent behaviour which in turn promotes sustainable and profitable growth.

We rely on a team of over 2,000 employees for delivering our corporate goals. Empowerment of this team has been the key to unleashing their potential enabling a continuous improvement in our performance. Within the years, most of our senior members have successfully completed Fiji Directors Course while 7 senior managers have completed their MBA programme. Several of them have attended training programmes in USA, Malaysia and Singapore.

We have also launched key initiatives to enhance our leadership development programmes and have made innovation an important component of every thought process. FHL creates value for its employees primarily by providing a great place to work as part of highly-motivated teams alongside people who are inspired to excel. Governance structures, policy frameworks, systems and processes have been put in place to support employee productivity goals and how the Group creates value for employees.


Engaging with our key stakeholders on a consistent basis is an important aspect of our strategy formulation process, as it allows us to aptly recognise the requirements of different stakeholder categories.

We’re committed to sustainable business – operations that take into account the many factors that go towards a truly environmentally friendly and community-conscious business model. Shareholders, employees, business partners, Reserve Bank of Fiji, South Pacific Stock Exchange, Government and the public at large form our sphere of stakeholders.

FHL is committed to doing what is right in its business and places equal emphasis on the quality and the quantity of its profits.

Future Outlook

We are proud of our heritage and have built foundations to support our ambitious plans for growth in our diverse areas of expertise. We see our future growth trajectory clearly. Investments and acquisitions will strengthen and add value to our businesses, ensuring that your company continues to grow, delivering excellence, and setting the standard, in every sphere in which we operate.

From a portfolio diversification perspective, the investment in key growth industries are essential to reap benefits in the medium to long term. As such, we see the prospects for agriculture and diary, renewable energy, retail and entertainment in particular are promising given the significant under penetration of the same in comparison to other comparative markets. In reality, right strategic partner coupled with the right investment would be critical success factors in reaching our goals within a given industry.

We are confident that investments which we are making today in pursuing a sustainable long term future will result in improved returns on our capital employed in the medium to long term.

Reinforcing our position as a well-established regional holding company, we will continue to explore investment and partnership opportunities across the South Pacific, growing our presence, expanding our reach and delivering increasing value to every stakeholder we serve.


I salute my team including the management and all employees for a stellar performance and thank them for their hard work and dedication. Going forward, I count on your continued support as we look to raise the
bar we have set for ourselves. It will be challenging but I am pleased, I can count on you. Our strategic partners, customers and suppliers have been with us for many years and I thank them for the confidence placed in us to drive mutual growth.

I extend my sincere appreciation to the FHL and subsidiary company directors for their contribution enriching the rigour of reviews and deliberation of matters set before the Boards. My sincere appreciation also goes out the insightful support and direction of the Group Chairman and other independent directors.

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