MUI sets two-year turnaround plan
Divisions given fresh KPIs to grow business
LESS than 24 hours after the announcement of his appointment as executive chairman of Malayan United Industries Bhd (MUI), 46-year-old Andrew Khoo met with the press to reveal his ambitious plans for the loss-making group.
The eldest son of Tan Sri Khoo Kay Peng says he wants to turn the company around in two years, and eventually give investors a dividend with a policy on such payment. Andrew has his work cut out for him. Once known as one of the top corporate powerhouses in Malaysia, the asset-rich MUI group has been languishing in the red since 2014.
For the financial year ended June 30, 2018, the group recorded a net loss of RM60.5mil, although the losses had narrowed significantly from RM130.3mil the previous year.
Andrew, on his first day as executive chairman, tells reporters that the heads of all the group’s various businesses have been given a directive, along with a fresh set of KPIs.
“The mandate I have given them is to grow the business. If it is loss making, turn it around. If it is profitable, make it more profitable.
“We have given them budgets and KPIs and we will support them and provide the necessary resources,” he says.
Andrew, who has been holding monthly performance meetings with all the heads of companies, says he hopes to see positive results in the next 12 months.
In fact, he says, there are already notable improvements, as seen in the narrowing of the group’s losses in FY18.
While he wants to grow all existing businesses, Andrew also says MUI’s days as a conglomerate are over and that the company wants to focus on a few core businesses.
“For now, we want to grow all our existing businesses. Logically, of course, to be more focused, we must divest some assets but this is a separate issue that will be decided later at the board level.
“Sometimes we need to package things nicely and improve them before letting it go,” he says.
Among the most prominent business tycoons in the Malaysian corporate scene in the 1980s and early 1990s, Andrew’s father nurtured and grew MUI from a small manufacturer of toothbrushes and carton boxes in 1960 into the sprawling multi-national and multi-industry empire it is today.
Khoo helmed the company for four decades before stepping down last week, making way for his son to take over.
MUI’s international operations stretch across the UK, Continental Europe, the US and Asia-Pacific, with its headquarters based in Malaysia.
MUI is the company behind big names including fashion brand Laura Ashley, retail player Metrojaya and the Corus hotel group.
Its other prominent retail brands include East India Company, Somerset Bay, Zona and Cape Cod.
At its height in the 1980s, the MUI group had seven companies listed on the local stock exchange and several others listed abroad.
Khoo had expanded his empire via a spate of aggressive acquisitions and reverse takeovers.
The group was also the darling of the stock market, with its market capitalisation rising to RM1bil by 1981 from only RM6.4mil in 1976.
The good times came to an abrupt end, however, following the 1997 Asian financial crisis.
Optimistic about its future prospects, Andrew says they have outlined three strategic thrusts for the group.
The first is corporate and capital restructuring, which is already underway with two more years to go.
“This is to ensure that we are more focused and efficient. We will see how many listed companies we want to keep and how many dormant companies we should wind up.”
Second is to rationalise the group’s assets and deleverage and third, he says, is business transformation.
“I want our businesses to be more lifestyle-driven.
“You can already see this happening in our existing businesses, and we will also be bringing in new lifestyle brands into Metrojaya and Corus hotels,” he says.
The group’s hotel and property businesses currently form over 55% of its revenue, while the retail segment contributes about 25%. The food business brings in about 18%.
“These are the main areas we want to focus on, moving forward,” he says.
A new era for MUI
Talking about his father, Andrew acknowledges that Khoo senior had a sense of attachment to some of the group’s prized assets.
MUI is known to be an asset-rich company – a lumbering giant – that needs to do much more to sweat its assets.
Its share price is down 36% since December last year, closing at 16 sen yesterday, indicating that investors are not very enthusiastic about the company at the moment.
“I come from a different generation. I don’t have the same kind of history my father did with these assets,” he says.
Andrew says his business approach would be more objective.
“I will look at what is best for the group – if it makes sense to sell, we will sell. If it makes more sense to grow the business, we will,” he says.
He adds that he is open to selling some of the group’s prized assets “if the right offer comes along”.
At this point, Andrew, who will also be maintaining his previous position as CEO, says MUI is at crossroads, transitioning into a new era and new way of doing business.
Apart from their business approach, there is another striking difference between the father and son.
Khoo is known to have always shied away from publicity, despite the company constantly being in the limelight in the 1980s and early 1990s when, under his leadership, MUI undertook a series of major acquisitions.
His son, on the other hand, says he wants to be more transparent and open about the company and the direction it is headed.
Andrew is also looking to change things up in the retail segment by embracing e-commerce.
Next year, he says, MUI will embark on developing an e-commerce platform, with discussions with potential partners already underway.
In Malaysia, the benchmark for companies was about 10% sales from the e-commerce platform, he says. “We are just starting this journey, so we are not even at 10% yet,” he says.
At the moment, the company uses third-party websites for the sales it do via e-commerce, mostly for Metrojaya.
In the UK, however, the online platform for Laura Ashley brings in 25% of sales at the stores.
The e-commerce platform for the brand was started up 15 years ago, interestingly, also by Andrew.
“Obviously we recognise the need to go into e-commerce but we want to do it the right way and with the right partners. If we don’t do it now, we will be behind the curve and it will be very hard to catch up,” he adds.
Asked about his outlook for the rest of the financial year, Andrew is optimistic. He is bullish about the performance of the property segment and the food business.
The hotel business, however, is facing stiff competition with new hotels entering the market.
Brexit, he says, could also pose some risks to the hotel business in the UK.
“Overall, I am quite optimistic for better results,” he says.
MUI, in the past, has attempted to turn the business around several times but has been unsuccessful thus far.
Currently, a slow property sector, intensifying competition in the hotels business and lacklustre retail scene in Malaysia, coupled with the potential impact of Brexit, means there could still be some bumps ahead.
Whether the new executive chairman will be able to pull off a turnaround this time with his new plans and different approach will be seen in the next two years.