2001 marked a year of transformational change for Keppel. Your Company also had a record year ...

184 Pages·2004·1.43 MB·English

2001 marked a year of transformational weakness, aggravated b
change for Keppel. Your Company also security upheaval affect
had a record year in its 32 years’ history. consumers alike. Despit
business environment,
• Attributable profit before exceptionals Keppel Group succeede
was $273 million, an increase of 15%. significant improvemen
• Earnings per share (before exceptionals) on proforma attributab
increased 16% from 31 cents to 36 cents. Financial Services’ cont
• Revenues, EBITDA, and Profit before tax exceptional items, attrib
registered a slight decline of between by 50%. These are solid
4-6% largely due to the sale of our for 2001 given last year
Financial Services division which had environment.
traditionally contributed about 50% of
our earnings. The past year saw mixe
• Return on Equity (before exceptionals) businesses. Offshore &
improved from 8.5% to reach 10.1%. double-digit growth in
• Free cash flow was a strong $1.1 billion. the rest of the portfolio
• In addition to the capital distribution of and Property showed a
Chairman Lim Chee Onn 50 cents per share paid in December from this pattern that a
2001, the Board declared a dividend per following their respectiv
share of 16 cents, inclusive of a special is for this reason that ou
dividend of 3 cents in relation to the sale to focus on three busine
of the Financial Services division. have core competencie
believe will help the Gro
2001 turned out to be an even more difficult earnings fluctuations. O
year than the previous one. The economic continue creating value
Chairman’s Statement 14
by improving the Group’s Return on Equity. KTT did not get the requisite approval from
We continue to expand our global reach in shareholders. While this is a disappointment,
all our businesses and each incremental it will not impede our efforts to grow
investment will continue to be EVA-driven. Network Engineering as a key business
within the Infrastructure business division.
Restructuring with speed Most importantly, Management will
continue undeterred to implement the
Apart from the challenging macro-economic strategy of focusing on three key businesses
environment, we were undergoing a period to deliver growth in shareholder value.
of unprecedented change within the Group.
“
In August 2001, we sold our Financial Growing global leaders
Services division to OCBC Bank. This division
had historically contributed about 50% of Our three core businesses were chosen
our annual profit. Using the proceeds, we because they leverage the core competencies
We continue
were able to complete the privatisation of that Keppel has developed over the years.
Keppel FELS Energy & Infrastructure (KFEI) We believe that the selected businesses have
our globa
within three months of selling Keppel Capital both the headstart and the potential to be
Holdings. Within a month of the KFEI global leaders in their respective fields. We in all our bu
privatisation, we announced the privatisations intend to grow these businesses aggressively,
of Keppel Hitachi Zosen (KHZ) and Keppel but with utmost capital discipline. New and e
Telecommunications & Transportation (KTT). investments will only be made if they
incremental
Through this privatisation effort, we unveiled contribute towards the growth of our core
the Group’s strategy of focusing on three businesses. In addition, these investments
will con
key businesses – Offshore & Marine, must be EVA-positive and expect to yield an
Infrastructure and Property Development. ROE of at least 12%. to be EVA
During our 2000 Results announcement, Our financial target for our earnings growth
I had identified Network Engineering and is 15-20% CAGR for the period of 2001
power generation as two of the embedded through 2003. By then, we expect the
growth options within the Keppel Group. Group’s ROE to exceed 12%. This target is
Within 10 months, we had put in place the considered quite challenging against a
different pieces to execute this strategy of backdrop of a sluggish global economy,
developing an Infrastructure business although there are some sporadic signs of
division within Keppel. an improving situation. Nonetheless we shall
endeavour to enhance shareholder value by
KHZ shareholders approved the privatisation leveraging assets that are not captured in
and it was completed in March 2002. The our balance sheet but which Keppel has
Offshore & Marine units are now working grown over the decades, namely, our brand
hard to integrate their businesses and name, our management, our networks and
capture the synergies from the combination our global presence.
of their resources. The scheme to privatise
15 Chairman’s Statement
Let me now share with you the issues that But globalisation is not
will preoccupy Management going forward. establishment of global
our customers. Nor is it
Building a global team of products and service
Looking solely at our accounting data, it is Globalisation is also abo
easy for someone to mistake Keppel for a world for the best peop
Singapore-centric company. Although much who will help Keppel ac
of our revenue is booked in Singapore, the set out to do. As an exa
sourcing of that revenue takes place all over Engineering business ha
“
the world, especially for the Offshore & drawn from the global
Marine, Utilities and Network Engineering managers and engineer
businesses. Our customer base clearly shows team telecom software
that Keppel is active globally. With the Luxembourg, as well as
Our three core businesses
exception of property-related businesses and Germany and Malaysia;
our mobile phone operations through engineers in the Philipp
were chosen
MobileOne, our performance tends to be to be the “global emplo
because they leverage much more correlated with the global fields we operate. We st
economy than with the Singapore economy. exciting career opportu
the core competencies talented managers to h
The Offshore & Marine business has already global champions in ou
that Keppel
established its presence in strategic offshore We shall continue to de
and marine hubs, namely Azerbaijan, Brazil, schemes that will enabl
has developed over
the Gulf of Mexico, Middle East, the motivate local resources
the years. Philippines and Norway. Our vision is to to wherever they are ne
service and support our customers where
they operate, and our “near market, near Using our financial str
” customer” strategy will see us expanding opportunities in the gl
our global footprint to new regions that
require our services. Keppel generated $1.1
flow in 2001. We recog
In the medium term, emerging economies of earnings quality and
in Asia such as China and Vietnam will grow Our centralised cash ma
in importance for our businesses. We have stewarded by the Centr
over the years established strong provides us with the low
relationships, good networks and business meet our business expa
know-how in these countries and should be
well-placed to grow in tandem with them. Our strong balance she
flexibility and capability
anticipated opportuniti
businesses without freq
Chairman’s Statement 16
This will allow us to respond more quickly to Keppel has always believed in having high
opportunities giving us an edge over our standards of corporate governance, and is
competitors. It might be pertinent to note committed to making sure that effective
here that the privatisation of KFEI and KHZ self-regulatory corporate practices are in
was funded from internally generated cash place to protect the interests of its
and divestments. shareholders and maximise long term
shareholder value. At a recent Board
We will continue to work with joint venture meeting, the KCL Board agreed to my
partners and form strategic alliances to recommendation that it would take on the
make even better use of our financial and task of monitoring the Board’s own
“
human resources. These approaches have effectiveness in terms of coverage and skill
enabled us to gather local knowledge more set in addition to monitoring senior
effectively for quick start-ups. management’s performance. At my
suggestion, the Board is also considering
Effective self
Continually improving transparency and how best to assess the Chairman’s
corporate governance effectiveness in leading the Board. While
corporate
performance monitoring has always been
Key corporate and business managers hold part of a Board’s responsibility, assessing the are in place
intensive Business Stewardship reviews to Chairman’s effectiveness appears to be a
steward the performance of our businesses fairly new one. the inte
on a quarterly basis. This process allows us
of our shar
to better gauge the future and key drivers The Board has set up various Board
ahead of events, so that we can make timely Committees including an Executive
and maximise
course corrections. Committee to help it carry out its duties
effectively. The KCL Audit, Nominating and sharehold
2002 marks the year that Keppel begins Remuneration Committees are entirely made
reporting our quarterly results to the up of independent directors. The Board is
investing community and the public. This is assisted by a number of management
part of Management’s efforts to improve committees covering different areas such as
transparency in Keppel. We believe that the investment/divestment, risk management &
increased frequency of reporting, in addition audit and management development. All
to more detailed discussion of business these efforts are meant to increase the
performance, will help the investing accountability of Management to the Board
community better understand Keppel’s and the Board to shareholders and the
businesses and the drivers of our Board will continue to refine its corporate
performance. As managers, we want to governance processes to improve such
communicate what we are doing to grow accountability.
shareholder value.
17 Chairman’s Statement
Strengthening organisation & In the past, manageme
management linked only to the Grou
Going forward, we will
This is the most crucial factor in the remuneration and perfo
restructuring of Keppel’s businesses. system to link rewards w
business objectives and
A key initiative that KCL will be embarking performance. With EVA
on in 2002 is succession planning. While our business decision-makin
current management is still fairly young, the will be incorporated int
KCL Board and Management recognise the system to achieve more
importance of developing a strong business performance t
management line-up. We must start early in
“
such initiatives to allow our future Embracing change
management sufficient time and
opportunities to learn and grow. The Organisations perish no
urgency increases as our businesses continue not change. They disap
A key initiative
to expand overseas. A global reach will tax not change as fast as w
management resources if we do not have environment demands
that KCL will be
adequate bench strengths. global economic prospe
embarking on in 2002 us to re-invent ourselve
Owing to keen business competition, KCL I believe that to-date ou
is succession planning. will have to be even more demanding than creditably.
ever in our expectations of our staff. We
cannot afford to tolerate recurring For a Group like Keppel
”
under-performance, and we must also be successfully over the de
prepared to reward good performers for the way we do business
their contributions. In 2001, all employees Taking the hard decisio
have been ranked according to performance Financial Services divisio
and this assessment will continue annually. contributed about 50%
The intention of ranking is to identify, 2000 bottomline marke
reward and groom the top performers as the Company’s transfor
well as to identify and eliminate the causes Financial Services divisio
of underperformance. we moved quickly to re
Company into what we
have in the process cha
The change has breathe
organisation. Instead of
we always done it”, we
we do it better”. Nonet
Chairman’s Statement 18
some way to go before we become a I am pleased to welcome Dr Lee Tsao Yuan
Company that truly sees change as a source and Mr Tony Chew Leong-Chee to the
of excitement and opportunity, rather than Keppel Board. They are not newcomers to
as a threat or a crisis. Ideally, we should the Group having served on the Boards of
thirst for change. our subsidiaries.
The global economy will continue to
become more challenging and
unpredictable and we are not in any
position to predict the exact course that the
business environment will take. However, we
believe that our healthy attitude towards
“
change will equip us to meet the challenges
of the future.
Ultimate goal is to increase
We will c
shareholder value
to deliver on
Year 2001 was the year of transformation for
to increas
Keppel. We now have a Company that is
able to embrace change more confidently.
for our shar
Barring the unexpected, I believe we will Lim Chee Onn
continue to deliver on our promise to Chairman
increase value for our shareholders.
18 April 2002
I wish to take this opportunity to thank all
our staff for the sterling service they have
put in during a challenging year. Without
their total commitment to the tasks at hand
we would not have come this far. To our
Board, I wish to thank our Directors for the
advice and guidance Management and
I received throughout the year. And to our
shareholders, investors, customers and
business associates, I want to convey my
deep appreciation for their patience and
encouragement to press on with the
re-invention of Keppel.
19 Chairman’s Statement
Corporate Governance
Corporate Governance Structure
Shareholders
Nominating Committee
KCL BOARD
Remuneration Committee
KCL EXCO
MDC: Strategic HR Issues KCL Management
Offshore & Marine Infrastructure Property
The Company believes in having high standards of corporate governanc
to making sure that effective self-regulatory corporate practices exist to
of its shareholders and maximise long term shareholder value. These in
Directors comprising high calibre members, Board Committees and a ri
internal audit department.
Board of Directors
The principal functions of the Board of Directors are:
• to decide on matters which in relation to the Group’s activities are of
including decisions on strategic directions and guidelines and the ap
plans and major investments and divestments;
• to oversee the business and affairs of the Company, establish, with m
strategies and financial objectives to be implemented by manageme
performance of management;
• to oversee processes for evaluating the adequacy of internal controls
financial reporting and compliance, and satisfy itself as to the adequ
processes;
• to assume responsibility for corporate governance.
Corporate Stewardship 20
The Company has adopted internal guidelines setting forth matters that require Board
approval. Under the guidelines, new investments or increase in investments in businesses,
subsidiaries, projects or fixed assets and any divestments or sales thereof exceeding $100
million by any Group company, and all commitments to term loans and lines of credit from
banks and financial institutions by the Company, require the approval of the Company’s
Board of Directors. Further, any investment of $100 million and below but which does not
have strategic fit with any of Keppel’s core businesses, is not Economic Value-Added (EVA)
positive, or does not generate Return on Equity (ROE) of at least 12% on a standalone basis,
would require specific board approval. Each Board member has equal responsibility to
oversee the business and affairs of the Company. The Executive Chairman and Executive
Directors are responsible for the day-to-day operation and administration of the Company.
Currently, the Board consists of eleven Directors of whom seven are considered
independent* by the Nominating Committee. Details of their academic and professional
qualifications and other appointments are set out on pages 30 to 33. The nature of the
Directors’ appointments on the Board and details of their membership on Board Committees
are set out below:
Director Board Membership Committee Membership
Audit Executive Nominating Remuneration
Lim Chee Onn Executive Chairman Chairman
Cham Tao Soon Independent Chairman Chairman
Bernard Tan Tiong Gie Independent Member Member
Lim Hock San Independent Member Member Chairman
Khoo Teng Chye Independent Member Member Member
Sven Bang Ullring Independent Member
Tony Chew Leong-Chee Independent Member
Lee Tsao Yuan Independent
Loh Wing Siew Non-executive
Choo Chiau Beng Executive Director Member
Teo Soon Hoe Executive Director Member
& Group Finance
Director
* The Code of Corporate Gov
21 March 2001 by the Corp
Committee set up by the M
“Code of Corporate Govern
“independent” director as o
with the company, its relate
that could interfere, or be re
interfere, with the exercise o
business judgement with a v
the company. A related com
company includes its subsid
parent company.
21 Corporate Stewardship
Corporate Governance
The Directors submit themselves for re-nomination and re-election at re
least once every three years. Pursuant to Article 81B of the Company’s A
one-third of the Directors retires from office at the Company’s Annual G
year of initial appointment and last re-election of the Directors are set o
Name Age Position Date of Initial
Appointment
Lim Chee Onn 57 Executive Chairman 6.10.1983 (Direct
1.1.2000
(Executive Chairm
Cham Tao Soon 62 Director 24.6.1982
Bernard Tan Tiong Gie 58 Director 24.6.1982
Lim Hock San 56 Director 1.11.1989
Khoo Teng Chye 49 Director 1.7.1999
Sven Bang Ullring 67 Director 1.7.2000
Tony Chew Leong-Chee 55 Director 16.4.2002
Lee Tsao Yuan 46 Director 16.4.2002
Loh Wing Siew 67 Director 30.1 1974
Choo Chiau Beng 54 Executive Director 18.3.1983
Teo Soon Hoe 53 Executive Director & 1.6.1985
Group Finance
Director
As a matter of policy, a Director would serve a maximum of two 3-year
appointment. However, the Board recognises the contribution of Direc
have developed deep insight into the Group’s businesses and operation
therefore able to provide invaluable contribution to the Board as a who
Board would exercise its discretion to extend the term and retain the se
rather than lose the benefit of his contribution.
The Board meets regularly on a quarterly basis and as warranted. Howe
scheduled Board Meetings may be convened to deliberate on urgent su
Telephonic attendance at Board meetings is allowed under Article 100 o
Articles of Association. During the financial year ended 31 December 2
Directors held 11 meetings. The Directors’ attendance at those meeting
below:
Director No. of Meetings Attended
Lim Chee Onn 11
Cham Tao Soon 8
Bernard Tan Tiong Gie 11
Lim Hock San 11
Khoo Teng Chye 10
Sven Bang Ullring 9
Loh Wing Siew 8
Choo Chiau Beng 11
Teo Soon Hoe 11
Corporate Stewardship 22
As a general rule, Board papers are sent to Directors at least 7 days before the Board meeting
so that the members may better understand the matter before the Board meeting and the
Board meeting time may be conserved and discussion time focused on questions that the
Board has about the Board papers. However, sensitive subject matters may be tabled at the
meeting itself or discussed without any papers being distributed. Managers who can provide
additional insight into the matters to be discussed would be present at the relevant time
during the Board meeting. The Directors are also provided with the names and contact
details of the Company’s senior management to facilitate direct access to senior
management.
The Company fully recognises that the continual flow of relevant information on an accurate
and timely basis is critical for the Board to be effective in the discharge of its duties.
Management is therefore expected to provide the Board with information concerning the
Company’s progress or shortcomings in meeting its strategic business objectives or financial
targets and other information relevant to the strategic issues facing the Company accurately
and in a timely manner. This will be one of the criteria which the Nominating Committee
would take into account in assessing the effectiveness of the board as a whole.
The Board takes independent professional advice as and when necessary to enable it or the
independent Directors to discharge their responsibilities effectively. Subject to the approval
of the Chairman, individual Directors may seek and obtain independent professional advice
to assist them in their duties.
Board Committees
Executive Committee
The Executive Committee comprises six members, of whom three are independent
Directors. The members are: Messrs Lim Chee Onn (Chairman of the Committee),
Lim Hock San, Khoo Teng Chye, Tony Chew Leong-Chee, Choo Chiau Beng and
Teo Soon Hoe.
The terms of reference of the Executive Committee are as follows:
(a) To review, with Management, and recommend to the Board the overall strategy of the
Keppel Group, and monitor its implementation.
(b) To consider and recommend to the Board the Keppel Group’s intermediate range plan
(3 years) and annual operating and capital budgets.
(c) To consider, evaluate, review and, if deemed fit, approve investments, acquisitions and
disposal of assets of the Company and its subsidiaries which are above $10 million or
10% of the net tangible assets (whichever is the lower) of the respective companies but
less than $100 million.
(d) To review and recommend to the Board proposed investments, acquisitions and
disposal of assets of the Company and its subsidiaries which are $100 million or above.
(e) To review and recommend to the Board proposed investments and acquisitions of the
Company and its subsidiaries which do not fall within the Company’s core businesses
but which are considered strategic investments for the long-term prospects of the
Company.
(f) To consider, evaluate, review and, if deemed fit, approve capital equipment purchases
and leases of the Company and its subsidiaries which are above $10 million but less
than $100 million.
23 Corporate Stewardship