CEO STATEMENT
KLCCP Group continued to build upon its sustainable business platform by registering another encouraging growth in revenue and operating profit for the year ended 31 March 2011. 
FINANCIAL PERFORMANCE
Statement of Comprehensive income
The Group’s turnover registered an increase of 5% to RM926.4 million from RM881 million in the previous year. The growth in revenue was primarily attributed to stronger performance in the hotel and retail segments and further complemented by steady improvement in the office rentals. Consistent with the valuation impact incorporated in last year’s financial statements resulting from the adoption of FRS 140, the Group has recognised a fair value adjustment in the period under review amounting to RM547 million. With the fair value adjustment and on-going cost optimisation efforts, the profit for the year after minority interests amounted to RM706 million, a 9% improvement from the preceding year.
Excluding the impact of the fair value adjustment, the profit for the year after minority interests would have reflected a 12% growth to RM261 million from RM233 million a year ago. As a result, the Group’s Earnings per Share (EPS), excluding the effects of fair value, has also improved to 27.93 sen from 24.99 sen last year.
Statement of Financial Position
Total assets increased from RM11.6 billion at the beginning of the year to RM12.6 billion. This represents an improvement of RM1.0 billion or 9% over the same period last year, boosted by the appreciation in fair value of the investment properties and progress in Lot C construction.
This has led to an improvement in net assets per share excluding RCULS to RM5.60 from RM4.95 in the preceding financial year, representing a growth of above 13% for the second consecutive year.
During the year, the Group adopted additional relevant FRS’ which became effective for annual periods beginning on or after 1 January 2010. The adoption of these FRS’ did not have any significant financial impact to the Group except for Amendment to FRS 140, the effect of which is as disclosed in Note 3 to the Financial Statements.
The Group will also be adopting a new financial year ending 31 December effective Financial Period starting 1 April 2011.
BUSINESS OVERVIEW
Commercial Properties
Our commercial properties grew by 1.2% despite the overall industry facing an over-supply situation which dampened the prospect of an upward push in rental rates. The quality, prestige and strategic location of our commercial properties rendered them as the most sought after address in Malaysia, and also amongst the most well known in the region and globally. Further, the existing business model of securing long term quality tenancies have also made it possible for this segment to continuously deliver sustainable performance amidst the soft market almost throughout the financial year.
Commercial properties contributed about 44% and 56% of the Group’s total revenue and operating profit respectively, a significant part of which is attributed to the PETRONAS Twin Towers (PTT). The PTT remains as the backbone of revenue stream for the Group, contributing 36.3% to the Group’s turnover, and providing a steady income flow out of the long term tenancy agreement with PETRONAS.
The growth prospect for commercial properties is further complemented by recent positive developments in Menara ExxonMobil and Kompleks Dayabumi. ExxonMobil Exploration and Production Malaysia Inc., being the sole tenant of Menara ExxonMobil, has agreed to exercise the five year extension option at a higher average rental compared to the current rate. This will bring their tenancy of the building to 2017. Kompleks Dayabumi, on the other hand, has managed to yield rental growth with higher rates during the year under review with the completion of the refurbishment to the lift lobbies. The better rates have resulted in revenue growing by 13% year on year.
Retail Property
Suria KLCC continued to live up to its reputation as the premier shopping destination in the country by chalking up yet another strong performance during the year, and sustaining its contribution to the overall Group revenue at 32.0%, second only to the twin towers. Revenue was up by 6% to RM295 million while operating profit improved by 8% from RM223 million in the preceding year, to RM240 million. This was made possible through the various events and promotions undertaken by Suria in establishing the centre as the preferred retail destination. This has resulted in customer footfalls for the year sustaining above 40 million and the achievement of RM2 billion sales turnover by its retailers.
To further strengthen its position as the preferred shopping destination, the six-level mall will see an addition of 140,000 sq ft of nett lettable area to the existing 1 million sq ft retail space with the coming on stream of Lot C retail. The new retail podium will offer over 35 specialty stores including world class flagship Cartier and Chanel stores, a new Giorgio Armani store and South East Asia’s first Armani Café. In addition, Isetan store’s massive refurbishment due to complete in September this year will add on new amenities which will include a world class food offer to be located on the concourse level with the convenience of new travelators directly linking the concourse level to levels one and two of the car park.
Suria KLCC’s appointment as the operator for the Alamanda Putrajaya, Mesra Mall in Kerteh and Lot C retail reaffirms its capabilities in attracting the right customer base and the right brands.
Hotel Property
Mandarin Oriental, Kuala Lumpur (MOKUL) benefitted from stronger overall demand resulting in occupancy increasing by 20% to 65.6% for the financial year ended 31 March 2011. The hotel remains the market leader in average daily room rate (ADR) at a significant premium over the competition.
MOKUL’s Revenue per Available Room (RevPAR) increased by 10.9% despite downward pressure on room rates in the five star luxury market. With the uncertainty of the pace of the economic recovery, the hotel continues to contain costs while improving operational efficiency.
Owing to its luxury offerings and unrivalled customer service, MOKUL continues to be recognised by travellers worldwide as reflected in the numerous accolades it received during the year. At this year’s Hospitality Asia Platinum Awards (HAPA) 2010/2011, MOKUL was awarded the HAPA Best Five Star Hotel; Best Restaurant - Mandarin Grill & MO Bar; Best Western Cuisine Restaurant – Mandarin Grill & MO Bar. MOKUL also received The Brand Laureate Awards Best Brands category for HOTEL Luxury 2010 / 2011 from the Asia Pacific Brands Foundation
Asset & Facilities Management
This segment continues to play an integral part in the Group’s operations in ensuring the long term sustainability of yield improvement for the respective assets. Whilst the core objective of this segment is to complement other assets within the Group, it also makes notable contribution to the overall Group performance by registering revenue of RM62.2 million, a growth of 4% from the previous year.
The growth was driven by the parking management services arising from higher traffic volume and also additional revenue from Prince Court Medical Centre (PCMC), the latest client of KLCC Urusharta Sdn Bhd (KLCCUH). The appointment of KLCCUH by PCMC is further testimony of the capability and expertise of KLCCUH in providing facilities management services.
OUTLOOK
PETRONAS’ tenancy of the PTT is due to expire in September 2012. Discussions are already underway for a new long term lease arrangement which is expected to be concluded before the end of financial period 2011. The signing of a new lease by PETRONAS would provide a huge boost in sustaining a strong performance over the long term.
In addition to the above, PETRONAS has signed a 15-year triple nett lease agreement for the entire Lot C office tower, which has been renamed PETRONAS Tower 3. The super structure construction of the office tower has been completed and was marked by the “topping-out” ceremony held on 13 June 2011. The fit-out and mechanical, electrical and plumbing (MEP) works are being completed progressively with a target handover to PETRONAS by early 2012. This would further enhance the contribution of the office segment to the overall result of the Group.
The performance of the hotel segment, and retail to a certain extent, would continue to be susceptible to the fluctuations in the market. In addition, further improvement in demand for the hotel is dependent on a sustained recovery of the global economy. MOKUL, however, remains committed to delivering superior service quality and products, and is well positioned to further strengthen its leading competitive position.
APPRECIATION
I would like to take this opportunity to extend my sincere and humble appreciation to the KLCCP Board members for their wise counsel and contribution. To all our shareholders and other stakeholders, a special thank you for your continued support as well as the trust you have placed in us.
On behalf of the management of KLCCP, I would like to put on record my utmost appreciation to Tunku Tan Sri Dato’ Seri Ahmad Bin Tunku Yahaya and Datuk Nasarudin Md Idris for their invaluable contributions to the KLCCP Group and the instrumental role they played in guiding the organisation to where it is today. On the same note, I would like to congratulate and welcome Mr Krishnan Menon as the new Chairman and given his vast knowledge and experience, I am confident he will continue to propel the organisation to new heights.
I would also like to express my deepest gratitude to all the KLCCP staff for their unrelenting effort, sacrifice and priceless contribution in achieving yet another laudable achievement for the year ended 31 March 2011, which have been fundamental to our success.
Hashim Bin Wahir
Chief Executive OfficertHe year in review