Managing Director's Review - Gab

ManagingDirector’sReviewThis is my fifth review as Managing Directorof Guinness Anchor Berhad (GAB), and itis with immense personal and professionalpride that I am able to discuss our 11 thconsecutive year of revenue, volume, marketshare and profit growth for the financial yearended 30 June 2012 (FY12).In FY12, our revenue grew by 9.1 per cent,profitability by 14 per cent and volumeexpanded by over nine per cent.We achieved this growth even withthe market softening in the second halfof the financial year and despite ourimplementation of a revised strategy tofocus on the domestic market. I believe ourtrack record of delivering such consistentperformance underlines GAB’s resilienceand the health of our business.Our share price grew 32 per centto RM13.36, increasing our marketcapitalisation by approximately1 billion Ringgit. We were able to giveour highest dividend payout to date- over RM370 million in total for FY12.At the core of our success is a tried andtested strategy, one that is focused oninvesting in our people, our portfolio ofbrands and systems performance. I believethis approach has put us in a strong positionto weather economic challenges; it has alsoenabled us to make significant strides towardsour vision of being ‘An Icon in Business’.We believe this strategy will keep us on thegrowth path in FY13 and beyond.28 GUINNESS ANCHOR BERHAD (5350-X)

Focusing on what we do wellIn FY12, our core Malt Liquor Market (MLM)business grew by nine per cent from a yearago. We were able to achieve significantgains in market share in the first half of theyear, and when the economy softened wemanaged to defend these gains with ourvarious brand campaigns.During FY11, we made the decision tofocus on the domestic market and as aresult our Malaysian Duty Not Paid (MDNP)business was cut by over 50 per cent.However, this reduction had only a limitedimpact on our bottom line. By revising ourstrategy to focus on the domestic market,we have been able to increase our effortson our duty paid products which havehistorically enjoyed healthier margins.Employees who want careers,not jobsGAB’s success is driven by our employees.As such, we believe that is it important forall employees to always have anunderstanding of the thinking behind GAB’sstrategy and goals to feel empowered.The Company puts great emphasis oncommunication to develop a culture oftrust and transparency. Apart from quarterlytownhalls, monthly MD and departmentupdates, we also have an “open doorpolicy”, where employees are encouragedto raise concerns and queries to theirline manager or to any member of theManagement Team.Another key consideration for us is to createa working environment that looks aftertotal employee welfare while maximisingemployees’ productivity as a team.Since the introduction of our HR 7 Pillarsfive years ago, significant efforts havebeen made to enhance our HR policies andinitiatives so that our employees will feelinspired and fulfilled with their careers.During the past six years, our total benefitsexpenditure per employee increased bymore than 55 per cent. GAB’s financialsuccess has also allowed us to increaseour budgets on training and development.Our FY12 budget for training anddevelopment is about 50 per cent morethan what it was in FY07. Over the pastfinancial year, much resource was alsoallocated to mapping out careers of ouremployees in the form of Career Days.Through this initiative, our employees geta chance to review where they are at andwhere they hope to be in GAB.As GAB grows, the depth and breadthof our business operations is growingin tandem. Over 130 new employeeswere recruited in FY12, while 70 existingemployees were promoted to meet theCompany’s evolving needs.We will continue to improve our HR policiesand initiatives to further enhance our appealas Malaysia’s employer of choice and toensure that we will always attract the bestfrom the talent pool.In FY12, our revenuegrew by 9.1 per cent,profitability by14 per cent andvolume expandedby over nine per cent.GAB Today Financial Highlights Performance Review Corporate Information Corporate Governance Financial Statements OthersGUINNESS ANCHOR BERHAD (5350-X) 29

MANAGING DIRECTOR’S REVIEWWe witnessedgrowth across ourtop five brands, withparticularly strongperformance from ourthree biggestbrands – Tiger, Guinnessand Heineken.Worthy of an Iconic PortfolioLast financial year also proved to beexceptional on the brand front.We witnessed growth across our top fivebrands, with particularly strong performancefrom our three biggest brands – Tiger,Guinness and Heineken. Leading thecharge was Guinness, with double-digitvolume growth, while Tiger and Heinekenenjoyed single-digit volume growth lastfinancial year.During the year, we also won big onthe consumer endorsement front.GAB walked away with four awards at thisyear’s annual Putra Brand Awards – Tigerand Heineken both won Gold, while Anchorreceived a Silver and Guinness a Bronze.These awards continue our winning streak,we have received a total of 10 Putra BrandAwards since the Award’s inception.The appeal of our iconic portfolio extendsbeyond our consumers to our trade partnerstoo. I am delighted to say that in thecourse of one year, we were able to signover 1,500 new outlets to be our primarytrade partners. This huge number is aclear sign that we are a preferential supplierto retailers in Malaysia.If we take an industry snapshot, basedon our internal analysis, nine out of every10 new outlets in Malaysia choose to beour trade partner today.GAB is able to make such a huge impact onour consumers and trade partners becauseof the consistent investment that we havemade in our iconic brands. Our brand eventssuch as Guinness Arthur’s Day, GuinnessSt. Patrick’s Day, Tiger Asian Music Festival,Tiger Street Football, Heineken Green Roomand Heineken Thirst are regionally andglobally recognised. This year’s GuinnessSt. Patrick’s Day celebration in ChangkatBukit Bintang attracted 15,000 and wasthe largest St. Patrick’s Day celebration inAsia. Last year’s Guinness Arthur’s Daycelebration was attended by 20,000 partyrevellers making it the largest ‘Live’Arthur’s Day celebration in the world.The Tiger Asian Music Festival in May 2012saw 40,000 rocking to the tunes of theirfavourite Asian Bands. For Heineken Thirst,last November at Sepang, close to 25,000enjoyed a show by world-renowned DJTiesto. In short, GAB’s dynamic marketingteam have committed themselvesto build the equities of our brands bycreating consumer events that are of epicproportions.Whilst it is important to maintain their iconicstatus, we believe the same dedication hasto go into the brew quality of our brands.The supply chain team takes great pains toensure that our quality is consistently goodfrom brewery to bar top. No other breweryin the world can claim winning the GuinnessLeague of Excellence award five times ina row. This accolade is testament that ourGuinness is indeed the best in the worldoutside of Ireland.30 GUINNESS ANCHOR BERHAD (5350-X)

GAB’s dedication to quality also goesbeyond the brew with much investmentbeing made to ensure the quality ismaintained at all our outlets. Since thelaunch of the GAB Academy (now known asGAB Professional Solutions), the Companyhas invested RM4.5 million on trainingemployees of partner outlets. To date,over 900 outlets have participated inthe programme.Updating and upgrading todeliverTo deliver results, sound investments mustalso be made to enhance our systemsand processes. In FY12, we embarked ona major IT infrastructure upgrade calledProject Quantum. The 18 months project,which will be completed in FY13, was anecessary update for our IT systems andarchitecture. With Project Quantum, wewill be simplifying and streamlining ourprocesses from four legacy systems to twonew ones. We are putting a commercialmanagement system in place calledC.A.S. to replace three legacy commercialmanagement systems. This is necessaryas the old systems were reaching the endof their shelf life and systems stability wasbeing impacted.As for our existing SAP, we have had it fornine years and as part of Project Quantum,we will be doing a complete re-installationwith the latest versions. With this newinstallation, we will be able to obtain morein-depth commercial data, making us ableto better fine-tune our commercial spend,thereby becoming more effective andefficient.Project Quantum will go ‘live’ in October2012, and be fully operational by January2013. From a financial perspective, the costof Project Quantum will only be felt fromfiscal 2013 onwards, and amortised overfour to seven years.Taking proactive steps toshape our futureIn FY12, we launched a 5 Star Serviceinitiative focused on strengthening ourrelationships with internal as well asexternal stakeholders. 5 Star Service isan extension of our existing values thatshape GAB’s distinct culture. In FY13,we will continue to build a 5 Star Servicemind-set in all of our actions and activities.By delivering above what is expected webelieve GAB can secure a future of growthand success.Our brands will continue to have greatmomentum in the new financial year,and we will keep investing in them toensure they grow. In terms of our systemsand processes, we will also continue to lookfor areas of improvement so that our peoplewill be able to continue to perform to thebest of their ability.Our continued success also depends onour ability to hire well, and to retain andcontinuously improve the skills and abilitiesof those who are already part of theGAB family. Hence, the HR departmentwill continue to benchmark our policiesand initiatives so that we can becomeMalaysia’s employer of choice.Whilst we remain cautious of the globaluncertainties, I do believe that if we docontinue to invest in our people, brandsand performance, GAB will be able toachieve another decade of growth.Working with only the bestDuring my time in GAB, one of the thingsI truly appreciate is the phenomenal teamthat I have been privileged to work with.One person stands out because of the rolehe played guiding me as GAB’s ManagingDirector. The person I am talking aboutis of course our Chairman, my boss,Tan Sri Saw Huat Lye. Tan Sri Saw hasdedicated 25 years to GAB and in that timehe has seen the Company through to thesuccess that it is today. Tan Sri Saw will beretiring at our Annual General Meetingthis year. He will be deeply missedfor his wisdom, knowledge and love forthe company. Please join me in wishingChairman a wonderful retirement.Charles IrelandManaging DirectorAugust 2012GAB Today Financial Highlights Performance Review Corporate Information Corporate Governance Financial Statements OthersGUINNESS ANCHOR BERHAD (5350-X) 31