Wah Seong Corporation Berhad Annual Report 2020

25 ANNUAL REPORT 2020 MANAGEMENT DISCUSSION AND ANALYSIS OVERVIEW OF THE GROUP’S BUSINESS AND OPERATIONS, ITS OBJECTIVES AND STRATEGIES Wah Seong Corporation Berhad (“WSC” or “the Company”) is an investment holding company with business interest in three distinct business segments, namely, oil and gas, renewable energy and industrial trading and services (collectively referred to as the “Group”). 2020 was an unprecedented year as the world economy experienced a sharp slowdown as a result of the prolonged COVID-19 outbreak. It was a bleak start to 2020 for the Group due to the pandemic and the collapse of oil prices during the first half of 2020. This has resulted in the deferment of many planned projects and reduction in capital spending by oil majors which adversely impacted our Group. Over the past twenty years, the Group has managed to safely ride through several economic downturns and financial turmoils. Guided by our past experience, management took the necessary actions to ensure the Group can navigate through the challenging 2020 landscape. This was carried out without compromising the quality products and services to our clients while maintaining the good safety record and keeping our people and operations safe. During the year, the Group continued working on improving efficiencies and implemented stringent cost mitigation initiatives to strengthen the Group’s financials. As part of our cost rationalisation, management took a voluntarily pay cut. The Group also took steps to demobilise sites where no immediate projects were anticipated. This has allowed the Group to preserve its cash flows and ensure its business resilience while becoming leaner, healthier and more competitive in the challenging economic environment. Discussion on Key Financial Performance In 2020, the Group achieved a revenue of RM1.4 billion, a decrease of RM1.1 billion or 44% compared with the previous year’s revenue, affected largely by the sudden suspension of operations in the middle of March 2020 to comply with lockdown measures imposed by respective governments in countries where the Group has a presence. The lower level of activity recorded in FY2020 was also partially due to the completion of a large oil and gas project in the previous year, which resulted in the substantial decline, year on year basis. The Group had an order backlog of RM1.2 billion at the end of 2020 compared with RM0.9 billion the previous year, contributed mainly by an order backlog of RM870.2 million from the oil and gas segment (“WASCO”), RM251.8 million from the renewable energy segment (“RE”) and RM28.8 million from industrial trading and services (“ITS”). In line with the disclosure of business segments in the financial statements and the discussion and analysis presented the previous years, factors affecting the Company’s performance and risk will be deliberated by segments.