HIGHLIGHTS OF PERFORMANCE IN FY2020

It is important to make a distinction between our performance pre-COVID and once the pandemic reached our shores. Leaving aside the unfavourable weather conditions and the slowdown in public projects which dampened our performance during the first few months of 2020, UBP was well on its way to achieving its financial objectives. Between July and December 2019, the Group’s revenue increased by 6.1% to reach Rs 1.8 billion compared to Rs 1.7 billion during the same period in 2018. We take comfort in knowing that our performance was on an upward trend and revenue would have surpassed last year’s Rs 3.2 billion track record.

Over and above the effects of the pandemic, our core business segment was once again negatively impacted by the persistent underperformance of our foreign subsidiaries. To this end, the Board is seriously considering to withdraw from Sri Lanka after years of confronting challenges in an unpredictable business environment. Likewise, we are carefully reassessing our situation in Madagascar and aim to come to a conclusive decision about our future there during the coming year.

Locally, as anticipated, the Group experienced a significant drop in performance as a result of the impact of the lockdown and a significant increase in the cost of production of our core business during the third quarter of the financial year. Besides COVID-19, Espace Maison’s performance was also affected by the anticipated lower operating performance of its sixth shop, which opened in Beau Vallon in November 2019. Gros Cailloux, for its part, experienced another disappointing year, mainly due to low yields in our vegetable-growing activities and an adverse fair valuation of our consumable biological assets. All of these factors have contributed to the Group reporting unsatisfactory financial results, with our revenue decreasing by 11% to Rs 2.9 billion (compared to Rs 3.2 billion in previous year) and our net profit declining by 89.5% to reach Rs 21.9 million for the year under review.

“Considering our challenging operating environment, I believe this is a testament to our resilience and years of investment in the right strategies, people and processes.”

Despite this setback, our Group remains highly cash generative and in strong financial standing. This is precisely what enables us to meet our promise of delivering long-term returns to our shareholders. Even with our share price plummeting by 20% between March 20 and April 6, 2020, we managed to recover quickly to Rs 128.50 as at June 30, 2020. We ascended from 7th to 4th position on the SEM list of the ten best performing stocks (measured in terms of annualised total return since their listing on the stock exchange) and distributed a final dividend of Rs 1.90 per share (compared to Rs 3.80 per share in FY2019). Considering our challenging operating environment, I believe this is a testament to our resilience and years of investment in the right strategies, people and processes.

NAVIGATING COVID-19 AT UBP GROUP

Like all other businesses in the world, the pandemic subjected our Group to extraordinary stress and disruption in ways we could not have foreseen.

At Group level, our first order of action was to protect the health of our employees and maintain essential business operations wherever possible. A large portion of our staff transitioned to working from home, which was no easy task. They continued carrying out their duties, while also caring for their families. I stand in awe of the Group’s ability to absorb a shock of this magnitude and I would like to share my thoughts on the four main factors that drove our resilience over the last few months:

• First, our people were quick to respond to the challenge and demonstrated an unimaginable level of engagement and ingenuity. The management team tackled the challenge head-on, making quick decisions and developing solutions speedily to secure our sites and to ensure the safety of our people by providing protective equipment. We also promptly created a private Facebook page for our employees to keep the team spirit alive. It is in these difficult times that I am reminded of the strength of our culture and values, which have bound us together during this period. This deep sense of belonging and strong sense of purpose is an enormous source of pride for us all.
• Secondly, I also have full confidence that UBP’s financial strength, healthy balance sheet, access to necessary resources and strong capital position have not only enabled us to navigate the storm, but will also help us safeguard the interests of all our stakeholders over the long term.
• The third was the support we received from our stakeholders. As mentioned previously, the Government announced a series of measures intended to stimulate the construction sector, the Wage Assistance Scheme being one of them. Along with our people’s positive attitude, we also received a great deal of support from our loyal partners, who have shown flexibility with respect to repayment terms, reimbursement plans and our ability to fulfill contractual obligations. This goes to show that only by joining forces with our stakeholders can we alleviate economic damage to our Group and our country.
• Fourth, our investments in digital capabilities over the years were instrumental in helping us adapt quickly to this new working environment. We intend to accelerate the pace of our digital agenda as we strive for greater agility in every aspect of our business model.

Our battle with the virus is far from over and significant challenges lie ahead, but allow me to reassure you, dear shareholders, that we are using this time to reassess our strategy, our strengths and how they can be leveraged to pursue new opportunities.

A SUSTAINABLE AND INCLUSIVE RECOVERY

Combatting COVID-19 may be at the top of agendas for most organisations, particularly against a backdrop of an impending recession, but failure to urgently address environmental concerns could have dangerous consequences. At UBP Group, we consider this as an opportunity to make way for a recovery that is economically, environmentally and socially sustainable. As part of our carbon-offsetting programme, we are growing a number of endemic plants and establishing mangrove ecosystems near our operating sites. My ambition is for the Group to align itself with the highest global sustainability standards and achieve carbon neutrality.

Our commitment to our communities remains unwavering, more so because the pandemic has shed light on the prevailing inequalities in our societies. Now is the time to strengthen our social fabric. In addition to our Rs 3.0 million contribution to the COVID-19 National Solidarity Fund and the provision of materials, equipment and logistics following the MV Wakashio oil spill, we are engaging with our communities to implement the United Nations Sustainable Development Goals (SDGs).

My fellow Board members and I are also aware that our ability to fulfil our roles depends on the strength of our relationship with our stakeholders. We intend to take on a more enhanced role in addressing our stakeholders’ needs and expectations, and closely monitoring and protecting the trusting relationships we have built with them over the years. This is key to our long-term success.

EFFECTIVE RISK MANAGEMENT AND CORPORATE GOVERNANCE

COVID-19 has dramatically shifted the risk landscape, exposing businesses to new threats. Our Group has always relied on strong corporate governance and prudent risk management to ensure our long-term viability, but the need to anticipate challenges and strengthen our internal controls cannot be overstated. In light of the lessons learned from this pandemic, we have reassessed the new risks that threaten our organisation—whether related to a global pandemic, a climate event or any other hazard—our vulnerabilities, and relevant strategies to reduce their impact. Our enhanced risk management practices are laid out on page 91. In the event of a second wave of infections in Mauritius, we have developed a set of Back To Work guidelines which clearly outline the necessary measures and steps to take to protect our employees and ensure the continuity of our activities. More details can be found in the Group CEO’s message.

Likewise, the pandemic has highlighted the importance of good corporate governance. In this context, this translates into swift, transparent decision-making. With no off-the-shelf playbook to navigate this crisis, the Board has had to be proactive, flexible and pragmatic in playing its role. Our Corporate Governance framework (on page 73) was revised to ensure enhanced stakeholder engagement, business continuity and continuous risk management and mitigation, amongst others. These emerging challenges will also necessitate new skill sets, and we are looking to ensure that the Group’s various Boards and committees are equipped with the right capabilities to continue to discharge their duties as effectively as possible. Much more remains to be done, but as a result of these efforts, I believe we are better prepared to get ahead of any impending crisis.

LOOKING AHEAD TO 2021 AND BEYOND

Today, the macroeconomic context remains uncertain and recovery scenarios are difficult to confirm. Bearing in mind the lack of visibility, we are continuing to closely monitor developments in the economy and market trends so we can factor them into our course of action for FY2021 and beyond.