On behalf of the Board of Directors, it is my pleasure to present to you the audited financial results of your company for the year ended 31st December 2020.
“Every adversity, every failure, every heartache, carries with it the seed of a similar or greater benefit” – Napoleon Hill
2020 started off on a promising note with the government unveiling the State Budget with sizable outlay for developmental projects to foster economic activity. The government adopted a balanced approach of restraining spending in line with the projected revenue streams to curtail the budget deficit. However, the onset of Covid-19 pandemic forced the governments across the world to implement strict precautionary measures which included lockdowns and movement restrictions to curtail the spread of coronavirus. These developments hampered normal economic activity as business establishments had to shut down operations and triggered a slump in demand for oil, resulting in a fall in oil prices by the end of Q1 2020. The drop in oil revenue prompted the government to curtail spending and roll back budgeted outlay on developments projects resulting in subdued market conditions which impacted normal economic activity.
The Board of your company met and decided that we should use the year of the pandemic to reset our focus and priorities and build a digitally-led, revived and rejuvenated company going forward. A three-year strategic plan was drawn up and 2020 was the first step in our new path to become a company that is relevant to the youth of Oman.
The company was faced with severe lockdown of businesses, staff and customers were affected by the pandemic and the second quarter of the year was essentially written off.
However, with the support of the Central Bank and the guidance of the Supreme Committee, we have come out a better and stronger company and are ready to face the coming years with belief and confidence.
Taking into consideration the volatile market conditions and uncertainties that prevailed through 2020, Company adopted a restrained approach in booking fresh business in the first half of the year. As a result, the loan portfolio of the company as at 31 December 2020 registered as decline and stood at RO.85.32 Million as against RO.98.46 Million as at 31st December 2019. The company recorded a net profit of RO.776,041 for the year 2020 as against RO.672,704 for the previous year an increase of 15%. Company took rigorous efforts on the recovery front which helped in restraining NPAs at RO.27.31 Million as at 31st December 2020 as against RO.26.76 Million as at 31st December 2019.
The company holds cumulative provisions of RO 17.84 Million as at December 2020, including reserved interest and a Special Reserve of RO 2.37 Million to guard against delinquencies. The Management is pursuing stringent recovery measures to control and bring down the level of impaired loans in the coming year.
The company put in a lot of effort in the year to assess the possibility of a merger with another finance company. One of the Big 4 audit firms was appointed to do the initial valuation of both the companies. The final proposed valuation, after negotiation, could not be agreed by either companies and it was decided to drop the proposed merger. I would like to thank the Board members of both the companies for the time and effort that was put in to this exercise.
We have worked hard to reduce headcount where required without allowing the Omanisation requirement of 80% to be breached, and this has resulted in our staff costs going down substantially. This was one of the key strategic decisions taken by the Board and we are now a leaner and more efficient organization. We also encouraged the management to train Omanis for senior management positions and four Omanis were identified and underwent training at the College of Banking and Financial Studies. Our vision is to have 100% Omanis in our branches very soon.
“Accepted that we are Human Resources, but we are Human first and Resources later” - Rutvik Oza
In the middle of the pandemic crisis we had asked our staff to voluntarily take salary reductions and I am pleased to say that 88% of our staff chose to forego part of their salary to help the company reduce costs at a difficult time. I would like to thank them all for this gesture.
One of the Directors, Mr. Ranga Gorur had resigned and as a consequence Mr. Khalid Abdullah Salim Al Eisri has been elected to the Board. Mr. Khalid Al Eisri is a Senior Manager at the Oman Investment Authority (OIA). He joined OIA in 2009 and has 15 years of working experience in the investment sector. He is a Chartered Financial Analyst (CFA) and has a Bachelor degree from the College of Commerce at the Sultan Qaboos University. We welcome him to our Board.
The company adopts the best corporate governance practices and is compliant with the prescribed code. The corporate governance philosophy and practices pursued by the company are contained in the report on corporate governance accompanied by the report of Statutory Auditors.
“You’ve got to think about the Big Things while doing the Small Things, so that all the Small Things are going in the right direction”- Alvin Toffler
The National Program for Fiscal Balance and the State Budget for the year 2021 focus on measures to increase the efficiency of spending through various initiatives. The objective is to ensure sustainable growth over the long term. The budget also focusses on diversifying income sources to reduce dependency on the oil and gas sector. Introduction of VAT, expanding the Excise Tax base and the phased withdrawal of subsidies of water and electricity are some of the initiatives being taken by the government to improve alternate revenue sources to reduce debt. Various austerity measures are also likely to be implemented to curtail non-essential expenditure. The Development Plan aims to promote economic diversification in sector such as logistics, agriculture, fisheries, mining and manufacturing to achieve balanced growth and provide job opportunities to nationals. These initiatives are aimed at driving economic activity and aid in achieving fiscal stability and sustainable growth in the long run.
We at United Finance Company SAOG are committed to aligning our corporate philosophy and strategy for growth with the principles and goals enshrined in the 2040 Vision. We are determined to play our full part in realising all of those objectives. Taking a cue from the 2040 Vision and its precursor, the 2020 Vision, the company is proud to have already embraced many of these pillars, notably in support of youth entrepreneurship, SME development and local community advancement.
With the market environment gradually reviving from the impact of Covid-19 pandemic, UFC would cash in on the market opportunities as they unfold and grow its loan book, albeit with emphasis on asset quality.
The delays experienced by customers in realizing their contractual dues and its impact on the cash flow of borrowers is a major challenge we expect going forward. Over the years we have built an adequate cushion of provisions and are well positioned to safeguard the company’s shareholders.
Our total borrowings to debt are below 1x and while we expect liquidity to remain tight, we are receiving good support from our bankers for our growth plans.
2021 is expected to be a year of uncertainties due to the second phase of the pandemic which is spreading across many countries. We expect that oil prices may remain low due to the travel restrictions and lack of mobility which are likely to continue. However, we remain cautiously optimistic that we will be able to execute the goals the company has set for itself, despite all the challenges.
On the first anniversary of the passing away of our beloved Sultan Qaboos bin Said Al Said, we recall with profoundly grateful hearts his tremendous and longstanding leadership as the Architect of Oman’s Blessed Renaissance and in carefully shepherding the nation’s development over five decades. During his long reign, the late Sultan laid the foundations for the growth of a strong and prosperous country that today stands justifiably proud among the GCC and other developed countries. A champion of peace and goodwill, he will always be acclaimed internationally for his espousal of cooperation and reconciliation.
The Board of Directors and Management express their highest gratitude to His Majesty Sultan Haitham bin Tariq Al Said and respectfully acknowledge his able leadership to nurture and lead the country in the years to come.
On behalf of the Board, I wish to express our gratitude to the Central Bank of Oman, the Capital Market Authority, the Ministry of Commerce and Industry, the Ministry of Labour, the 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.
On behalf of the Board I would like to place on record my appreciation and thank the Management and staff for their individual and collective contribution to achieving operational efficiency and realizing the company’s goals.
May God bless all of us.