Review of Operations By CEO

An Exciting Year

Financial Year ended 30 June 2012 was an exciting year for GDEX. Our group turnover surged passed the RM100 million mark to RM116.3 million from RM93.1 million, an increase of 25%. Profit before tax also surpassed the RM10 million mark to RM12.2 million from RM9.9 million, an increase of 23%. Profit after tax increased 24% to RM8.7 million from RM7.0 million. Amidst the general pessimistic world economy, the results demonstrated strong support from our customers and hard work by our dedicated staff.

Building Capacity

For the year under review, we spent more than RM9 million to upgrade our hub infrastructure, expand branch outlets and regional offices, purchase more vehicles, enhance our IT and communication systems and improve our operation equipment. We put in place the infrastructure for our logistics operations with the installations of warehouse racks and other supporting facilities along with the purchase of long haul trailers.

To ensure our service quality matches with our growth, we have beefed up our manpower to 1,826 from 1,700. Our fleet size increased to 335 from 331 while our carrying tonnage increased to 684 tons from 621 tons.

We have enhanced our network infrastructure. Our network size now stands at 101 stations, comprising 54 branches, 2 affiliates and 45 agents compared with 97 stations the year before.

We continue to invest significantly in enhancing the skills and knowledge of our staff. Our Multimedia Remote Learning (MMRL) Programme was launched during the year that stretched our training reach to remote locations beyond geographical and time constraints, enabling our staff to undergo 25,468 hours of training compared with 18,720 hours.

These investments are essential in enabling GDEX to improve its handling variety and capacity, which should contribute to the Group's growth going forward.

Corporate Social Responsibility

Our staff, neighbours and customers continued to support the GDEX Blood Donation Drive, now in its sixth year running. The blood donation drive netted a total of 206 pints of blood for the National Blood Bank.

We incorporated the 'GO GREEN' environmental protection messages onto our corporate calendars to raise awareness on the environment. A total of 50,000 pieces of calendars was printed as part of our marketing programme.

To bring greater awareness on the conservation of the environment to our staff, we embarked on ISO14001:2004 Environmental Management System.

Changing Business Environment

We have entered into an era of transition - from evolving regulatory policies to a more intense and competitive industrial environment as well as greater customers' requirements and expectations. More importantly, we are dealing with a new generation of workers requiring us to adjust to the new generational mind-set, as our business is basically a people-oriented business.

The Regulator – Evolving Policies

Our industry regulatory body, Malaysian Communications and Multimedia Commission in its effort to raise the service quality of express delivery has indicated that it will soon implement, among others, a new licensing scheme and setting a minimum service standard for the service providers.

While we do not envisage any problem meeting the criteria for the new licensing requirement, we have prepared ourselves for more stringent licensing criteria and higher service standards in the future. This means we have to establish new measurement yardsticks that can meaningfully reflect our service quality. In this regard, the Group has proceeded to upgrade its various processes. The current upgrade of the existing ISO9001 standard to Integrated ISO Certification that includes ISO14001 on environment protection is one such move. The adoption on PSD – Proof of Successful Delivery is another initiative to better measure delivery performance compared with current POD – Proof of Delivery measurement.

The Customers

The market place is evolving. With rapid changes in technology and the shift of purchasing power from the relatively older Baby Boomer Generation and Generation X to the relatively younger but maturing Generation Y, consumer patterns, product features and service expectations are rapidly evolving. And the logistics that support the deliveries of these new products and services have to be upgraded. New service features for our delivery works are to be expected. Expectation of what constitute service accomplishment is raised.

As service providers, we do not determine what constitute satisfactory service standards. The customers do. If we are unable to meet such expectations, we will soon drop out of the race. It is therefore important that we not only determine what the customers or the end-users of our services want now, but we must also anticipate what they expect. Hence, we need to re-align and restructure ourselves to stay relevant. We will continue to identify and upgrade.

The Competitors

In 2011, the Malaysian government liberalised the express delivery sector to allow 100% foreign ownership on companies providing courier service. New competitors who are leading players in their domicile countries have since entered the Malaysian express delivery market. Existing players in the industry have buckled up to face the intensified competition. For many, price undercutting seems to be the only way to survive in a crowded market.

We see some silver linings in this cloudy backdrop. First, competition actually forces service standards to be raised. Second, competition and collaboration co-exist. While some opted for market domination as an operational strategy, others chose to collaborate with existing local players. While intensity of competition will continue to rise, opportunities for cooperation will emerge at the same time.

The Workforce

Managing a new generation of employees is yet another key challenge. The new generation work force forms the biggest proportion of our human resource, yet it has a very different value system and mindset towards work. Integrating the more senior staff with these new generation staff is a major challenge. Another challenge is meeting the expectation of the new workers, who desire quick reward and fast promotion.

We are also confronted with the situation of a general shortage of workers. Despite the general weakness in the world economy, employment rate in the region remains robust, thanks to the various government initiatives to hold up the economy. We need to be more innovative in getting people to work and stay with us. Competition for man power is no less intense than competition for business.

Another problem facing the workforce is the ever rising cost of living which is driving workers to anticipate higher pay to meet the basic needs. To meet this growing expectation, we have to constantly adjust the incentives as well as pay of our people. This translates to higher business cost. We must therefore improve our productivity to mitigate it.

Up the Bar - Transformation is Needed

Providing reliable, relevant, and value-for-money service is never easy. We must learn to be more flexible and adaptable – just like the element of water whose fluidity enables it to take on whatever shape it is put into and yet not lose its water characteristics. Thus, we need to transform ourselves without compromising on our corporate culture and values. Our transformation programme shall focus on improving our service quality and operational efficiency.

New service standards are Essential Performance Indicators for key operational components and supporting functions. Essential performance indicators for the different operational components and supporting functions have to be defined to set performance targets.

Existing processes have to be reviewed and modified or even replaced by new processes to meet new customers' requirements and help to lower unit cost. Information and communication system have to be revamped in line with the new technology to enable effective communication within ourselves as well as reaching the customers effectively. We must also ensure our information system captures and retains knowledge.

We will further our MMRL to provide cost effective training. Our interactive phase 2 of the MMRL will be launched to cover more staff.

Meanwhile, we would continue to explore opportunities in the region.

Enhancing the GDEX Corporate Culture

Most importantly, we need to shape the GDEX culture that integrates people from the older generation and the new Gen-Y to work as a team. This is the most important element for us to forge ahead.

Acknowledgement

I would like to thank the Board of Directors for their guidance. My gratitude also goes to my fellow colleagues for their hard work and commitment. I also like to thank our customers, vendors, business service partners and government agencies for their support to help us grow.

I look forward to further progress and improvement in GDEX. I am confident that we will be closer to our goal of becoming the leading express carrier and a competent total logistics solution provider in Malaysia and the region.

Thank you.