| Dear Shareholders, On behalf on the Board of Directors, it is my pleasure to present to you the Annual Report of your company for the year ended 31st December 2010. | | |
The Economic Environment 2010 was a year of consolidation for the Company. The global financial environment staged a turn around and the markets witnessed a modest improvement in economic activity. Major industries across developed nations went in for reorganization of their operations to curtail costs and remain competitive despite the subdued demand for their products. The markets also witnessed mergers and consolidations to achieve economics of scale for sustenance. This, coupled with the sustained measures adopted by governments through infusion of funds into labour intensive industries, spending on infrastructure and regulation of interest rates aided in changing the market sentiment. These developments helped in providing opportunities for employment and improving the purchasing power of consumers triggering modest revival of demand. Overall growth rates were however restrained. The Oman economy was fairly resilient to the global economic slowdown. With oil prices remaining stable above the budgeted level, the government continued its spending on building projects and development of infrastructure - providing the much-needed impetus to maintain the pace of the economic activity despite the slowdown witnessed across global markets. This offered opportunities for growth in construction activity and allied business, provided avenues for employment and aided in better capacity utilization. These factors together with an improvement in market liquidity and softening of interest rates, encouraged the business segment to explore avenues for expansion of their operations by exploiting the emerging market environment. The year under review Against the backdrop of subdued demand and competitive market conditions, the company adopted a conscious approach to improve its assets quality through tighter credit norms and restrained disbursements. This resulted in a decline in the loan portfolio of the company to RO 72.3m as at 31 Dec 2010. Bankers continued their support through renewal / enhancement of credit limits extended to the company. The company’s concerted efforts on improving collection performance aided in bringing down the level of impaired loans by 26%. Despite the drop in loan portfolio, the company recorded a net profit of RO 1.09m through, reduction in interest cost, curtailing overheads and release of reserved interest. The cash flow of customers in the business segment has eased with improvement in the market conditions and better capacity utilization. This has aided in collection of overdues from this segment of customers, resulting in reduction of impaired loans. The company made additional provisions of RO 1.18m million during the year as against RO 2.56 million made in 2009. The company maintains adequate provisions considering the securities available. In addition, the company maintains a Special Reserve of RO 1.64m to guard against delinquencies from unforeseen quarters. The market outlook is encouraging and the management is confident of significant reduction in impaired loans and write-back of provisions. Dividend The Board of Directors recommends retaining the net earnings to strengthen the net worth and distributable surplus of the company. Looking Ahead The government is embarking on several mega infrastructure projects covering expansion / construction of airports and seaports and dualisation of arterial roads connecting the various regions. The implementation of these projects is expected to accelerate growth and provide a steady path for development and progress in the ensuing years. The increased spending envisaged by the government is expected provide opportunities to the business community for growth through expansion of their operations. These developments would open up employment prospects to the aspiring youth population. With oil prices remaining stable above the budgeted level, the economy is on a firm foundation and poised for steady growth. UFC plans to optimize the business opportunities as they unfold and grow its loan book albeit at a modest pace without compromising on asset quality. The company would pursue its objective of spreading risk by increasing its retail portfolio and consciously reducing credit concentration to achieve a balanced portfolio. The company would continue its concerted efforts to improve collection efficiency to enhance asset quality. The company would also focus on optimum utilization of resources to achieve operational efficiency to improve profitability. Omanisation UFC achieved an Omanisation percentage of 65% in 2010, which is in compliance with the level prescribed by regulators. The Company continued it pursuit to impart training to its Omani staff to equip them with the required skills and knowledge to take up higher responsibilities and assignments. Acknowledgement I am joined by my colleagues on the Board in expressing our gratitude to the Central Bank of Oman, Capital Market Authority, Ministry of Commerce and Industry, Ministry of Manpower, Royal Oman Police and other Regulatory Authorities and thank them for their support and guidance. We also take this opportunity to extend our sincere thanks to our bankers, shareholders and other stakeholders for their unstinted support. I would also like to thank my colleagues on the Board for their effective guidance and contributions in steering the Company. I would like to place on record my appreciation and thank the management and staff for their individual and collective efforts in improving the level of performance and competence and achieving better operational efficiency. The Board of Directors and Management extend their felicitations to His Majesty Sultan Qaboos bin Said on the occasion of 40th National Day and express their highest gratitude and respectfully acknowledge his dynamic leadership and utmost caring to nurture the local economy. May God bless all of us. Sulaiman Ahmed Al Hoqani Chairman
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