A STRONG FOUNDATION

for the digital era

Annual Report

2017
A STRONG FOUNDATION
for the digital era
The theme for Pos Malaysia’s Annual Report 2017 centres on our transition
into the digital and e-Commerce era. To get our message across, we draw
inspiration from Pos Malaysia’s traditional and core role as the sole
provider of postal services to the nation. Hence, the iconic postbox is
featured on the cover. Given that our concept is also based on transitioning
into the digital era, the iconic postbox is portrayed as branching out
digitally. In doing so, it now resembles a tree that is expanding outwards
from a strong foundation and which is branching out into all areas of the
e-Commerce ecosystem. Similarly, as a transformed forward-thinking
organisation, Pos Malaysia is today steadfastly moving beyond the box,
expanding its capabilities and propelling towards a bright future.
POSTAL & BUSINESS SOLUTIONS
Mail (Standard & Non-Standard) • Postcard • Mel Rakyat • Pos Daftar
• Small Packet • Flexi-R • Direct Mail • Pos Solutions • Data Pos •
Periodicals • Bulk Mailing • Business Reply Service • Franking • Pos
Dokumen • Admail • Corporate Postal Solutions

COURIER, EXPRESS & PARCEL

Pos Laju Time Certain Service • Pos Laju Same Day Delivery • Pos Laju
Next Day Delivery • Pos Laju Putrajaya Express • Pos Laju Prepaid Boxes
& Envelopes • Pos Laju Prepaid Sticker • Pos Laju Motorcycle Delivery
• Pos Laju EziBox • Pos Laju Prepaid EziDrop • Pos Laju Kiosk • Pos
Laju EziDrive-Thru • Pos Laju Go2u • Pos Laju On Demand Pick-up •
Pos Laju Agents • Express Mail Service (EMS) • Flexipack Domestic &
International • Bagasi Haji • Pos Ekspres • Pos Parcel • AsiaXpress •
Paket Pos Terus

RETAIL
Stamps & Philately • Insurance & Takaful • Road Tax & Driving License
Renewals • Remittance • Will & Estate Administration Services • Shared
Banking • Assessment Tax & Quit Rent • Loan Repayment • Zakat &
Wakaf • ASNB • Bills & Utilities • Summons • Vehicle Shipping • Pos
Shop • Pos Automated Machine (PAM) • Pos-On-Wheels (POW) • Pos
ArRahnu

E-COMMERCE & DIGITAL SOLUTIONS

Pos Online • EZiPoz • Pos Digicert • e-Commerce Business Centre •
e-Commerce Solutions • Supply Chain Logistics

LOGISTICS
Sea & Air Freighting Services • Haulage Services • Warehousing &
Transportation (Non-Haulage) Services • Automotive Logistics • Project
Logistics • Aviation & Defense • FMCG • General Logistics

AVIATION
Air Logistics Operations • Ground Handling • Cargo Handling • Inflight
Catering • Aircraft Maintenance & Engineering • Facilities, Equipment &
Maintenance • Scheduled Charter Flight • Adhoc Full Charter / Partial
Charter & Diversion Flight
CONTENTS
04 Some Facts About Us
06 Our Vision, Mission & Brand Values
10 Group Financial Highlights
12 Business Highlights
13 Share Price Performance
14 Chairman’s Statement
20 Management Discussion & Analysis
32 Awards & Accolades
34 Corporate Events
38 News & Media
40 Corporate Information
42 Group Structure
46 Board of Directors
48 Directors’ Profile
55 Group CEO’s Profile
56 Our Chiefs
60 Corporate Responsibility
63 Corporate Governance Statement
80 Statement on Risk Management and Internal Control
85 Directors’ Responsibility Statement
86 Additional Compliance Information
92 Audit Committee Report
98 Financial Statements
217 Top 10 Properties
220 Analysis of Shareholdings
224 Notice of 25 th Annual General Meeting
231 Proxy Form
4 POS MALAYSIA ANNUAL REPORT 2017

SOME FACTS
ABOUT US

321 counters
Deliver to more than

8.5mil addresses

Deliver up to

3.1mil postal articles 86 Pos Laju Centres

on daily basis

More than

8,000 postmen 21 outlets

Community Postmen and at LRT stations & shopping malls
Community Postman Agents in
Sabah & Sarawak

A network of

25 mail processing centres

13,629 vehicles
333 delivery branches

More than
More than
95,849 PO Boxes 6,958 delivery routes
 ANNUAL REPORT 2017 POS MALAYSIA 5

265,500
1,162 touch points Flexipack International
items delivered worldwide annually

Process over

198 mil
transactions annually

10.7 mil kg
696 post offices of international mail and parcels
handled at the Pos Malaysia

227 pos mini outlets International Hub annually

30 Pos-on-Wheels (PoW)

27 4,700 tonnes
of e-Commerce items
Pos Automated Machines (PAM) handled and delivered

29 post offices
worldwide annually

providing extended services beyond 7pm

107 postal agents

232 countries & territories
Express Mail Service (EMS) delivery
destinations worldwide
1,146 stamp vendors
6 POS MALAYSIA ANNUAL REPORT 2017

OUR VISION
CONNECTING MALAYSIA AND BEYOND -
FOR TODAY AND TOMORROW

CONNECTING MALAYSIA
We connect all the people and businesses of Malaysia, at work
and at home, both online and offline

We are a part of the very fabric of Malaysian society, the glue

that binds it together yet opens up new opportunities for the
future

AND BEYOND
Malaysia is, and always will be, our home and our
principal place of business

However we also connect Malaysia, and all Malaysians, with

the world outside – as much as within

Our horizons are global, as are our opportunities, as we reach

for an ever more exciting future

FOR TODAY AND TOMORROW

We began life as a postal delivery service – connecting people
and enterprises

Postal services will always remain the keystone of our

business but we continue to evolve alongside our customers
and technology – innovating to stay relevant for the future,
delivering convenient new products and services
 ANNUAL REPORT 2017 POS MALAYSIA 7

MISSION
BUILD AND DELIVER THE
NETWORK OF CHOICE

BRAND
VALUES
EMPATHY
We need to understand our customers and do more than just hear
them. Our business then delivers what they need, and why they
need it

DECORUM
We treat all others the way we would want to be treated ourselves
– with decency, dignity and respect

INTEGRITY
We act in everything we do in an open and honest manner, beyond
reproach and with utmost sincerity

ACCOUNTABILITY
We hold ourselves, and expect to be held, accountable individually
and as a team, at all levels of the organisation, for our actions and
decisions

INNOVATION
We constantly search for new and better ways to satisfy our
customers, willing to question and unafraid to try
10 Group Financial Highlights
12 Business Highlights
13 Share Price Performance
14 Chairman’s Statement
20 Management Discussion & Analysis
32 Awards & Accolades
34 Corporate Events
38 News & Media
40 Corporate Information
42 Group Structure
10 POS MALAYSIA ANNUAL REPORT 2017

GROUP FINANCIAL
HIGHLIGHTS

Profitability 2017 2016 2015 2014 2013

Profit Before Tax (RM million) 131.4 92.5 181.3 223.4 191.9

Profit Before Tax Margin (%) 6.3 5.4 12.1 15.7 15.1

EBITDA Margin (%) 12.1 10.6 16.9 19.8 19.4

Return on Assets (%) 2.6 3.4 7.6 9.6 10.3

Return on Equity (%) 4.3 5.7 14.5 15.4 16.0

Balance Sheet

Total Assets (RM million) 3,264.5 1,868.7 1,680.6 1,654.2 1,615.3

Total Equity (RM million) 1,938.7 1,115.6 1,122.9 1,033.9 947.7

Current Ratio (times) 1.3 1.6 1.8 1.5 1.4

Staff Information

Number of Staff (No.) 23,336 18,340 18,377 17,507 16,245

Revenue per Employee (RM ‘000) 89.2 93.6 81.3 81.5 78.1
 ANNUAL REPORT 2017 POS MALAYSIA 11

Revenue Profit Before Tax EBITDA

(RM million) (RM million) (RM million)

283.2

2,082 252.5 251.3

223.4 246.1

1,717
191.9
181.3 181.4
1,494
1,427
1,270 131.4

92.5

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Profit After Tax Earnings Per Share NTA Per Share

(RM million) (Sen) (RM)

157.5 29.6
151.3
28.3

127.1
23.7
2.09 2.07
1.93 1.94
84.0 1.76

63.1

12.5
11.7

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
12 POS MALAYSIA ANNUAL REPORT 2017

BUSINESS
HIGHLIGHTS

RM RM RM RM
779.5mil 684.6mil 192.8mil 327.6mil
REVENUE REVENUE REVENUE REVENUE

37.4% 32.9% 9.3% 15.7%

REVENUE REVENUE REVENUE REVENUE
CONTRIBUTION CONTRIBUTION CONTRIBUTION CONTRIBUTION

POSTAL SERVICES COURIER INTERNATIONAL LOGISTICS AND

BUSINESS BUSINESS BUSINESS AVIATION BUSINESS
 ANNUAL REPORT 2017 POS MALAYSIA 13

SHARE PRICE
PERFORMANCE

Volume Share Price

(Million) (RM)
9 5.00

8 4.50

4.00
7

3.50
6
3.00
5
2.50
4
2.00

3
1.50

2
1.00

1 0.50

0 0.00
Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016 Sep 2016 Oct 2016 Nov 2016 Dec 2016 Jan 2017 Feb 2017 Mar 2017

2016 2017

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Total Monthly 18,059 8,967 13,363 20,867 63,303 36,926 42,964 31,493 21,614 12,861 19,951 39,606
Volume (’000)

Monthly High 2.90 2.92 2.94 2.92 3.47 4.01 4.17 4.17 3.99 4.10 4.51 4.78
(RM)

Monthly Low
2.61 2.45 2.45 2.60 2.80 3.18 3.66 3.76 3.78 3.83 3.94 4.25
(RM)

Month End
2.90 2.45 2.81 2.85 3.30 3.85 4.00 3.80 3.91 4.03 4.40 4.64
Closing (RM)
14 POS MALAYSIA ANNUAL REPORT 2017

I am pleased to say that the

Group maintained its growth
momentum to turn in a
commendable performance
on the financial front while
making solid headway on
the operational front.

Brigadier General (K) Tan Sri Dato’ Sri (Dr)

Haji Mohd Khamil bin Jamil
Chairman
 ANNUAL REPORT 2017 POS MALAYSIA 15

CHAIRMAN’S
STATEMENT
Dear Valued Shareholders,

On behalf of the Board of Directors, I am pleased to present to you the

Annual Report of Pos Malaysia Berhad (“Pos Malaysia” or “the Group”) for
the financial year ended 31 March 2017 (“FY2017”).

A YEAR OF GOOD PROGRESS

The year in review was one in which Pos Malaysia proved its mettle and accelerated closer towards fulfilling
its ambition of becoming the key end-to-end logistics player in the domestic marketplace. Despite a highly
challenging operating environment, I am pleased to say that the Group maintained its growth momentum to
turn in a commendable performance on the financial front while making solid headway on the operational front.

From a financial point of view, I am delighted to report that Pos Malaysia maintained consecutive year-on-
year growth to touch record revenue of RM2.1 billion in FY2017 – this being the first time that the Group has
surpassed the RM2.0 billion revenue mark. We also grew our profit after tax (“PAT”) by 33% to RM84.0 million
for FY2017 as compared to a contraction in PAT in the preceding financial year.

On the operational front, we made solid inroads by rolling out the transformation strategies under SCORE 2.0,
our five-year strategic blueprint, while steadfastly putting in place the building blocks necessary for the Group’s
sustainable growth. Given that we are just slightly more than a year into our five-year transformation plan, many
of our strategic initiatives are at various stages of implementation. However, exciting digitalisation initiatives like
our innovative Digital Mailbox service are nearing completion and will be launched nationwide in September
2017.

Tailor-made for the digital generation, the Digital Mailbox service will shift the Group’s mail services to the
digital space by leveraging on our unique position as the nation’s sole postal service provider. It will help
customers lower the cost of mailing documents electronically and will direct online traffic to Pos Malaysia
thereby according us the opportunity to introduce our new digital services to the public.

In mid-September 2016, we also legally completed the acquisition of the Pos Aviation Group (previously known
as the KL Airport Services or KLAS Group) thereby giving us a substantial presence in domestic ground handling
and multi-modal logistics services. Although the operational integration process is still ongoing (in terms of
human resource harmonisation, financial systems integration and other fundamental activities), we are pleased
to report that from a managerial perspective, the new logistics business has been fully integrated into the Pos
Malaysia Group.
16 POS MALAYSIA ANNUAL REPORT 2017
Seeing that the retail e-Commerce market could potentially be worth
some RM3.0 billion to RM4.0 billion over the next four or so years,
our transformation into a fully-integrated e-Commerce fulfilment
and logistics solutions provider gives us a competitive edge. We are
now able to provide end-to-end fulfilment and logistics services (i.e.
from the first mile to the last mile) to our customers in Malaysia and
eventually the region.
Moreover, several recent developments bode well for us. These include
the launch of the Digital Free Trade Zone (“DFTZ”), the first-of-its-kind
e-hub jointly established by the Alibaba Group and Malaysia Digital
Economy Corporation (“MDEC”) that combines both physical and virtual
zones; plus the RM60.0 million e-Commerce Regional Distribution
Centre (“RDC”) venture between Pos Malaysia and Lazada (M) Sdn Bhd
at the former low-cost carrier terminal in Sepang. As we leverage on
SCORE 2.0, the abovementioned developments and other initiatives,
these are expected to unlock the Group’s potential and fast-track our
businesses forward. It is with quiet confidence that I can say that Pos
Malaysia is on the right track to deliver sustainable performance.
A CHALLENGING ECONOMIC LANDSCAPE
In 2016, the global economy registered lacklustre growth of 3.2% as
compared to 3.1% growth in 2015. The year 2016 was characterised
by low commodity prices, a long drawn out downturn in the oil and gas
industry, slowing growth in China and a subdued US economy. This was
further compounded by major political developments such as Brexit
and the US presidential elections that cast a cloud of uncertainty upon
the global economic landscape.
Despite considerable external and domestic headwinds, Malaysia’s
GDP grew in 2016 but at a slower pace, dropping to 4.2% against 5%
GDP growth in 2015. Domestic demand continued to anchor growth,
supported mainly by private sector spending. Private consumption
growth, in particular, was sustained at 6.1% (2015: 6.0%), buoyed by
continued employment and wage growth following the increase in
minimum wage and civil servant salaries.
Inflationary pressures in the economy remained low over the course of
the year with headline inflation averaging 2.1% in 2016, in line with the
preceding year’s 2.1% headline rate. Despite a much weaker Ringgit,
domestic fuel prices and input costs remained low due to relatively low
global energy and commodity prices. This certainly helped mitigate the
impact of adjustments to administered prices and higher food prices
caused by the El Niño phenomenon.
COMMENDABLE FINANCIAL PERFORMANCE
Despite the moderating economic backdrop, I am pleased to report
that Pos Malaysia’s revenue grew by about 21% to hit a record RM2.1
billion in FY2017 from RM1.7 billion previously. This commendable
growth was primarily attributable to higher contributions from our
courier business as well as the inclusion of six months revenue from
Revenue of
RM2.1 billion
in FY2017
our newly absorbed logistics and aviation services businesses. The
growth of our courier business stems directly from the rapid rise in
e-Commerce transactions and is in line with Pos Malaysia’s ambition to
be a dominant player in the e-Commerce space.
We also turned in a higher PAT of RM84.0 million for FY2017, a
healthy 33% hike over PAT of RM63.1 million in FY2016. The increase
in profitability mainly came on the back of higher revenue from the
courier business and more disciplined cost management.
The details of our financial performance are spelt out in the
Management Discussion and Analysis section of this Annual Report.
GOOD SHAREHOLDER VALUE CREATION
In line with the Group’s policy of delivering sustainable returns to our
shareholders, your Board of Directors’ is recommending a first and final
single tier dividend of 10.7 sen per ordinary share with respect to the
financial year ended 31 March 2017 (FY2016: 11.7 sen). This is subject
to shareholders’ approval at the forthcoming Annual General Meeting.
The first and single tier dividend of 10.7 sen per ordinary share
amounts to a total dividend pay-out of RM83.76 million, representing
approximately 100% of Pos Malaysia’s consolidated PAT for FY2017,
similar to a payout ratio of 100% for FY2016 (or a payout of RM63.0
million for FY2016).
REMAINING RELEVANT IN A FAST CHANGING WORLD
The perennial challenge for postal businesses the world over is the
structural decline in traditional mail volume arising from the fast
growing adoption of digital and mobile communication platforms. The
proliferation of smart phones and social networks has rendered the use
of letters less and less relevant as digital communication platforms
now provide customers with near instantaneous and interactive
communication. Business mail, which accounts for the vast majority of
letters (in the form of bills and statements), is also declining in volume
as businesses look for alternative channels to lower their operating
costs.
To ensure we remain relevant in the digital era and in line with our
aspiration to be a full-fledged integrated logistics solutions provider, we
continue to look to our SCORE 2.0 blueprint to transform ourselves. To
recap, SCORE 2.0 has three key strategic thrusts.
 ANNUAL REPORT 2017 POS MALAYSIA 17

The first key thrust calls for us to enhance the productivity and
efficiency of our existing postal infrastructure via the use of technology
and automation.
In line with this, as well as efforts to transform the local courier
business and take the customer experience up several notches, we are
offering customers secure automated lockers, self-service machines
and kiosks at strategic locations. This enables them the convenience
of dropping off and self-collecting items as and when they want. To
date, our touch points include 60 Pos Laju Ezibox Parcel Lockers, 40 Pos
Laju Ezidrop Self-Service Machines and 21 Pos Laju Kiosks. The Pos Laju
Kiosks which are strategically located at MRT stations have proven to
be quite popular and we shall increase their numbers in stages.
With regard to our logistics business, the key challenge is to improve
our logistics assets in light of excess capacity in the logistics industry,
particularly in the business-to-business or B2B segment. To this end, we
have obtained a freight-forwarding license to channel more business
for our haulage assets. Previously, we were dependent on third-party
freight forwarders to give us business but we now have more flexibility
in channelling more business to our fleet of prime movers.
As a result of these initiatives, our customers can now readily tap
into our products and services in a convenient and seamless manner.
Ultimately, our aim is to help our customers connect with others to
accomplish more in a world that is more networked than ever before. In
doing so, we are ensuring we remain top of mind and relevant to them.

As part of our efforts to enhance operational efficiency and shorten
delivery time, we have begun work on the expansion of our parcel
sorting facilities to ensure fast and accurate sorting of courier items. In
addition, we have invested in technological platforms to enable more
efficient routing of delivery beats as well as to provide value added
services such as bill payments via mobile gadgets. The Group is also
embarking on data analytics for more informed decision-making within
Pos Malaysia.
Our second strategic thrust calls for us to diversify our revenue streams
into businesses that can leverage on Pos Malaysia’s existing assets,
namely Pos Malaysia’s postal network of about 696 post offices
nationwide.
UPHOLDING RESPONSIBLE CORPORATE PRACTICES
For over 200 years, Pos Malaysia has been serving the nation in a
responsible manner and we remain committed to doing so today
with the highest levels of transparency, integrity and accountability.
Your Board of Directors is deeply dedicated to upholding and
implementing strong standards of corporate governance as well as
robust risk management and internal control measures as fundamental
components of our business. These elements are not only ensuring the
sustainable, long-term growth of our business, they are helping boost
investor’s confidence, protecting our corporate reputation and ensuring
continued shareholder value creation.

Pos Malaysia has a responsibility to maintain its nationwide network

of post offices, including those in the rural areas, meaning our ability
to right-size our network in response to the structural decline in
mail volume is constrained. As such, we continue to look for ways to
optimise the yields of our nationwide postal network. We will enhance
our efforts in expanding our insurance sales and ArRahnu businesses
by leveraging on the reach of our postal network to improve the yields
of these post offices.

To partly counter the decline in productivity arising from the decline

in mail volume, we are today utilising our postmen to deliver courier
items, in addition to mail items, to addresses that are on their respective
beats. In doing so, we are better able to optimise the productivity of our
workforce.

Our third strategic thrust mandates us to expand our presence along

the e-Commerce value chain, either organically or through acquisitions,
specifically in the fulfilment segment of the value chain.

The acquisition of the Pos Aviation Group has been a step in the right
direction. It has also enabled us to have a larger presence in the
e-Commerce fulfilment space through the provision of a wider range
of e-Commerce related services, including warehousing, fulfilment and
integrated logistics.
18 POS MALAYSIA ANNUAL REPORT 2017
As part of our efforts to uphold the highest corporate governance
standards, the Group continues to subscribe to the principles, guidelines
and recommendations as set out in the Second Edition of the Corporate
Governance Guide issued by Bursa Malaysia Berhad and the Malaysian
Code on Corporate Governance 2012.
With regards to the Group’s risk management practices, we continue to
implement the necessary measures to strengthen our risk management
practices. Following the acquisition of the Pos Aviation Group, the Group
established a dedicated Risk Management Committee at Pos Aviation
and its subsidiary, Pos Logistics, respectively to provide oversight on
risk management matters pertaining to these companies. These
committees are tasked with elevating updates to the Risk Management
and Compliance Committee (“RMCC”) of the Pos Malaysia Group on a
quarterly basis.
Meanwhile at the Group level, disclosure and coverage of the key risks
for the Group now encapsulates the details of each significant risk that
may happen at any of the Pos Malaysia Group’s four major entities,
namely Pos Malaysia (the Company), Pos Aviation, Pos Logistics, and
Pos ACE. The RMCC is responsible for providing a consolidated risk
management report to the Board Risk Management and Compliance
Committee or BRMCC as well as to the Board of Directors on a quarterly
basis.
Amidst the evolution of postal services and the transformation that
is taking place within Pos Malaysia, the business of delivering mail
and connecting people remains an integral part of what we do. Being
“postmen”, we are accountable to our customers to deliver every one
of their items safely, come rain or shine, to their respective addresses,
be this in an urban centre or rural area. As we evolve, our commitment
to the business of delivering mail remains intact as does our promise
of keeping the public connected through new and improved products
and services that will serve all levels of society as well as help foster
personal and commercial ties.
RECOGNISED FOR OUR COMMITMENT TO EXCELLENCE
Pos Malaysia continues to garner a host of awards and accolades on the
domestic and international fronts for its commitment to excellence.
We emerged triumphant from the 2017 Frost & Sullivan Excellence
Awards event with a string of awards for the ninth consecutive year.
These included the Malaysia Excellence Awards for Domestic Express
Service Provider of the Year 2017; Malaysia e-Commerce Logistics
Service Provider of the Year 2017; and a new category, Malaysia Project
Logistics Service Provider of the Year 2017. These awards underscore
the strength of Pos Laju’s diversified service offering to its customers.
Pos Laju was also accorded the titles “Superbrands’ Brand of the Year
2016” and “Top courier partner for SMEs”. It was also awarded the
“Reader’s Digest’s Trusted Brands Gold Award” in the Airfreight/Courier
Services category 2017. These accolades bear testament to the strong
brand presence and good reputation that Pos Laju has steadfastly built
up over the years.
At the Universal Postal Union (“UPU”) Congress 2016 in Istanbul, we
attained a Level A-Star for Quality Management Certification and the
Gold Award for our International Express Mail Service.
At the Malaysian Communications and Multimedia Commission
E-Commerce Delivery Awards event, Pos Malaysia was recognised for
achieving the following: Most Outstanding Achievement Award (based
on our attaining the Level A-Star for Quality Management Certification
at the 26th UPU Congress 2016); Best Rider and Driver; Best Courier
Company; and Best Corporate Social Responsibility via the Posmen
Komuniti Programme.
Our branches too emerged winners at the PNB Starz Awards Nite
2016, an event by Permodalan Nasional Berhad (“PNB”) recognising
achievements by PNB agents. Our Kuching branch was ranked No. 1 for
the “Highest Number of New Accounts for All Amanah Saham Nasional
Berhad (“ASNB”) Products” and the “Highest Number of Transactions”,
while our Kota Murudu and Kota Kinabalu branches were ranked No. 2
and No. 3 respectively for the “Highest Number of New Accounts for All
ASNB Products”.
MOVING FORWARD
While the business landscape offers opportunities for the Pos Malaysia
Group, there are also marketplace challenges that we have to face in
our aspiration to become the premier fully integrated e-Commerce
fulfilment and logistics services provider in Malaysia. The execution of
the strategic initiatives under our SCORE 2.0 programme will be the key
to achieving our aspiration. The disciplined execution of these strategic
thrusts will put Pos Malaysia in a strong position to reap the benefits of
the rapid rise in e-Commerce, domestically and eventually, regionally.
Notwithstanding the headwinds buffeting Pos Malaysia’s traditional
mail business, the Group’s prospect remains positive for the near to
medium-term. I am confident that Pos Malaysia has the means and
 ANNUAL REPORT 2017 POS MALAYSIA 19

A big thank you also to my colleagues on the Board, for their astute
insights and for helping guide Pos Malaysia through both challenging
and opportunistic times. I would like to take this opportunity to
welcome En Ahmad Suhaimi bin Endut, an alternate director to Dato’
Sri Dr Mohmad Isa bin Hussain, a non-independent non-executive
director and an appointed director and representative of the Minister
of Finance (Incorporated) on our Board. En Ahmad Suhaimi assumed
his role on 7 December 2016 and we look forward to this contributions.

As the team at Pos Malaysia continues to work hard to deliver sustainable

value and excellence throughout every level of our organisation, I call
upon all our stakeholders to lend us their firm support. Thank you.

Brigadier General (K) Tan Sri Dato’ Sri (Dr)

the will to achieve the objectives of our strategic blueprint, which will Haji Mohd Khamil bin Jamil
undoubtedly improve the sustainability of our business and ensure the
Chairman
continued delivery of good shareholder value for the long-run. Moving
forward, Pos Malaysia will continue to carry out its obligations as the
national universal postal service provider, while innovating products
and services to serve the evolving marketplace, particularly the
booming e-Commerce arena.

ACKNOWLEDGEMENTS

As Pos Malaysia continues on its journey to success, we want to

acknowledge the many parties who have supported us along the way.
On behalf of the Board, I would like to extend my sincere gratitude to
Pos Malaysia’s valued shareholders, customers and supporters for their
unwavering support and confidence in Pos Malaysia. My utmost thanks
also goes to the rakyat for their unstinting support and belief in Pos
Malaysia as well as our innovative product and service offerings.

I also wish to express my deep gratitude to the Ministry of

Communications and Multimedia for its worthy support of our vision
and mission. My sincere thanks to the Malaysian Communications
and Multimedia Commission for its counsel, guidance and support.
My heartfelt appreciation to Bank Negara Malaysia and all the other
relevant regulatory agencies and bodies for their prudent oversight over
the diverse aspects of the Group’s business.

To Pos Malaysia’s Management and staff under the leadership of our

Group Chief Executive Officer, Dato’ Mohd Shukrie Mohd Salleh, I wish
to convey my heartfelt gratitude for your diligence, dedication and
resilience that has brought us thus far. I especially want to acknowledge
and thank the various worker unions in Pos Malaysia, with their about
23,000 members of which 18,000 are the postal and courier workers
that make up our “Warga Pos Malaysia” family. Thank you for doing
such a marvellous job and I look forward to your worthy contributions
as we work together to take Pos Malaysia beyond its traditional postal
service provider role.
20 POS MALAYSIA ANNUAL REPORT 2017

Dato’ Mohd Shukrie bin Mohd Salleh

Group Chief Executive Officer
 ANNUAL REPORT 2017 POS MALAYSIA 21

MANAGEMENT DISCUSSION
AND ANALYSIS

Dear Shareholders,

Pos Malaysia not only remained resilient for the financial year
under review but turned in a steadfast performance on the
financial and operational fronts amidst challenging market
conditions. Looking beyond the perennial issue of declining mail
volumes and the high cost of maintaining a nationwide network of
post offices, especially in the sub-urban and rural areas, we took
the opportunity to capitalise on several positive developments,
particularly in relation to e-Commerce fulfilment and logistics
activities.

This certainly helped reinforce our position as the key end-to-end e-Commerce fulfilment and
logistics services provider while enabling us to remain relevant to our target audiences. I am
pleased to present the Management Discussion and Analysis section that outlines the details of
Pos Malaysia’s business as well as our financial and operational performance for the financial year
ended 31 March 2017 (“FY2017”).
22 POS MALAYSIA ANNUAL REPORT 2017

OUR BUSINESS TODAY

To meet the needs of a digitally enabled marketplace, Pos Malaysia has been steadily transforming its businesses and moving beyond the boundaries
of the traditional postal business. Today, Pos Malaysia’s key businesses are structured as follows:

POSTAL COURIER INTERNATIONAL LOGISTICS AND OTHERS

SERVICES AVIATION

There were several functional changes in FY2017, one of which was the consolidation of our Pos Mel and Retail businesses to form our Postal Services
segment as these businesses leverage on our nationwide postal network of about 696 post offices. Another was the introduction of the Logistics and
Aviation business segment subsequent to the acquisition of the Pos Aviation Group.

In mid-September 2016, we completed the acquisition of the Pos
Aviation Group (formerly the KL Airport Services Sdn Bhd Group), thereby
cementing our transformation into a fully-integrated e-Commerce
fulfilment and logistics solutions provider. The Pos Aviation Group has
within its stable, Pos Logistics (one of the nation’s largest logistics
solutions providers) and Pos Asia Cargo Express (better known as Pos
ACE), thereby according us the ability to provide our customers total
supply chain management solutions throughout Malaysia. Today,
through our newly formed Logistics and Aviation segment, Pos Malaysia
has a significant competitive edge over other logistics players in that we
are now able to provide our domestic customers end-to-end fulfilment
and logistics services – from the first mile to the last mile. In time to
come, we will expand our range of services to the region.
OUR STRATEGIC PRIORITIES
the productivity of existing postal assets. It addresses the future of
the Group in a holistic manner through its laser-focused approach
on these aspects of our business: Solutions Driven by Technology;
Customer Centricity; Operational Efficiency; Revenue and Geographic
Diversification; and Enabler Capabilities.
SCORE 2.0 has these three key strategic thrusts:
1. To maximise the productivity and efficiency of our existing assets by
leveraging on the use of technology and automation;
2. To diversify our income streams into services that can leverage on
existing assets, namely Pos Malaysia’s postal network; and
3. To build up our e-Commerce fulfilment and logistics capabilities,
either organically or through acquisitions.

As we venture forth as a fully-integrated e-Commerce fulfilment
and logistics solutions provider, we continue to look to our five-year
strategic blueprint, SCORE 2.0 with its 19 Strategic Initiatives, to guide
us. Introduced on 1 April 2016, SCORE 2.0 aims primarily to expand Pos
Malaysia’s presence in the e-Commerce value chain and to improve
Our blueprint initially called for the implementation of 13 strategic
initiatives within the e-Commerce, Logistics, Postal and Courier as
well as Corporate components on four Core Offerings of our business.
Following the acquisition of the Pos Aviation Group, we added another
six strategic initiatives to give us 19 strategic initiatives in total under
SCORE 2.0.
 ANNUAL REPORT 2017 POS MALAYSIA 23

THE 19 STRATEGIC INITIATIVES UNDER SCORE 2.0

No. Strategic Initiative Objectives

01.
• Shift Pos Malaysia to digital services riding on its unique position as the sole postal
Digital Mailbox service provider.
• Generate new digital service revenue streams.

02.
• Create Pos Malaysia’s e-Commerce platform with new revenue streams from
e-Commerce
e-Fulfilment.

03.
Trade • Offer a simplified export service for micro, small and medium enterprises that is easily
Facilitation accessible via Pos Malaysia’s postal infrastructure.

04.
Supply • Develop total supply chain and fulfilment solutions to support e-Commerce businesses.
Chain and
Fulfilment • Expand market share in the B2B market.

05.
Smart • Leverage on digital platforms to enhance the range of services offered by our delivery
Postman staff at the customers’ doorsteps.

06.

Pos Ads • Monetise real estate assets via advertising revenue.

07.
Space
• Enhance the per-square-foot productivity of the post offices while simultaneously
Utilisation
providing value to consumers.
Programme

08.
Digital
• Develop post offices as one-stop centres for e-Commerce customers to conduct
Business
e-Commerce activities.
Centre

09.
Delivery • Centralise and optimise operations for more efficient delivery and to improve delivery
Optimisation staff productivity.
24 POS MALAYSIA ANNUAL REPORT 2017

10.
Integrated
• Consolidate Pos Mel and Pos Laju common processes and processing centres within the
Processing
same geographical area to optimise manpower and machine utilisation.
Hub

11.
Digital
• Position Pos Malaysia as the “largest doorstep remittance, insurance and bill payment
Money
service provider”.
Services

12.
EVOKE
“Enhanced
• Establish a comprehensive roadmap for managing all Pos Malaysia’s properties.
Value of Key
Estates”

13.
Big Data
• Unlock the commercial value of data and information captured by Pos Malaysia.
Analytics

14.
LCCT
Redevelopment • Create flexible terminal design to improve future market adaptability.
Project

15.
Pos ACE • Provide niche solutions for time sensitive, perishables, skidded and dangerous goods
Expansion cargo.

16.
Last Mile
Delivery • Enhance Pos Malaysia’s commercial approach, operations efficiencies and IT structure.
Enhancement

17.
Cross Border
• Collaborate and create strategic alliances to tap the cross-border e-Fulfilment business.
e-Fulfilment

18.
International
• Collaborate and create strategic alliances to establish an international postal hub.
Postal Hub

19.
Project
• Provide special logistics services for infrastructure projects.
Logistics
 ANNUAL REPORT 2017 POS MALAYSIA 25

Going forward, Pos Malaysia’s strategic direction will be guided by

the aforementioned three strategic thrusts and 19 strategic initiatives
over the next four years. We will of course remain nimble and adapt
our strategies in response to market forces and operating conditions
should the need arise.

OUR FINANCIAL PERFORMANCE

Profit after tax
For the year ended 31 March 2017, Pos Malaysia registered a
commendable 21.2% or RM364.8 million hike in revenue to touch
(“PAT”) rose
RM2.1 billion, our highest annual revenue to date. This came on the 33.1% to
back of higher contributions from our Courier business as well as the
inclusion of six months revenue amounting to RM327.6 million from
RM84.0 million
our newly absorbed Logistics and Aviation services businesses under in FY2017
the Pos Aviation Group.

Despite the intense competition in the courier market, our Courier

business, Pos Laju, grew its revenue by 22.5%. The surge in revenue
was generated from the On Demand and Contract Customer segments
were higher by RM4.8 million due to financing interest charges at Pos
that increased by 27.1% (RM40.5 million) and 46.2% (RM81.4 million)
Logistics Berhad and Pos Ar-Rahnu Sdn Bhd. The effective tax rate for
respectively as a result of higher demand from online businesses and
FY2017 was higher due to certain expenses (mainly depreciation and
encouraging sales from promotional campaigns.
amortisation) not allowed for tax deduction. However, we have initiated
However, the Group’s performance was offset by lower contributions a number of measures to be more tax-efficient that should result in
from our Postal Services and International businesses. Within our better PAT margins going forward.
Postal Services, the Retail business saw its revenue decrease as a result
To mitigate further increases in operating expenses, we will continue
of lower transactions volume across the Group’s post offices.
with our disciplined approach towards managing our workforce size
For the year in review, the Group registered a healthy 33.1% hike in going forward. We will also leverage on our expanded handling capacity
profit after tax (“PAT”) to RM84.0 million against PAT of RM63.1 million to make the most of new growth opportunities.
in FY2016. The higher profitability mainly came on the back of higher
To contain margin compression, we will continue to focus our efforts
profit contributions from the Courier business along with our more
on strengthening the efficiency of our existing postal infrastructure. To
disciplined cost management initiatives.
date measures such as optimising the last mile delivery infrastructure
The Group chalked up higher cost of sales against the previous year for both mail and small courier items, as well as setting up regional
due to higher staff costs, vehicle rental and communications charges processing centres including some in East Malaysia to shorten delivery
plus higher costs related to the acquisition of the Pos Aviation Group. time, have proven fruitful. We will step up our efforts in these areas as
The higher staff costs came on the back of additional manpower well as tap technological platforms in a more innovative manner to
requirements in the Courier business to cater for higher volume growth; meet the evolving demands of a digitally-savvy marketplace.
the higher vehicle rental costs were due to several van leases; while the
As we maintain a laser-focused approach on these cost management
higher communication charges were primarily due to higher wide area
measures and other initiatives, we are confident of securing the Group’s
network charges. The inclusion of the Logistics and Aviation businesses
long-term commercial viability and sustainability.
into our stable of businesses in the second half of the year and the
corresponding costs, resulted in higher overall expenditure for the The Group’s liquidity position remained positive as the Group’s cash
Group. and cash equivalents (exclusive of collections on behalf of agency
payables, money order and postal order payables) increased to
Administrative expenses rose, in particular due to the increase in other
RM742.4 million as at 31 March 2017 from RM576.7 million as at 31
operating expenses including approved donations for corporate social
March 2016. The Group’s gearing ratio (defined as total debt over total
responsibility programmes. The SCORE 2.0 Transformation Plan that
shareholders’ equity less goodwill) stood at 0.16 time as at 31 March
was launched during the financial year also contributed to the increase
2017 as compared to 0.09 time as at the previous financial year-end
in manpower and computer equipment costs. In addition, we also
pursuant to the inclusion of Pos Aviation Group’s debt liabilities. The
incurred additional costs of RM3.0 million arising from the acquisition
Group had no contingent liabilities as at 31 March 2017.
of the Pos Aviation Group.

Other income was higher against the previous year by RM24.9 million
mainly due to the gain on fair value adjustment of RM3.8 million,
gain of disposal of property, plant and equipment of RM7.4 million
and reversal of litigation expenses of RM4.0 million. Our finance costs
26 POS MALAYSIA ANNUAL REPORT 2017
The Group’s objectives in managing capital is to maintain a strong
capital base and safeguard the Group’s ability to continue as a going
concern, so as to maintain investor, creditor and market confidence and
to sustain future development of the business. The Directors monitor
and are determined to maintain an optimal debt-to-equity ratio that
complies with regulatory requirements.
The Group’s total capital commitments authorised for property, plant
and equipment amounted to RM343.3 million as at 31 March 2017, of
which RM324.3 million of capital expenditure had been contracted for,
but not incurred. The remaining capital expenditure of RM19.0 million
has not been contracted for. The approved and contracted amount
for capital commitments mainly relates to PNSL (a subsidiary of Pos
Logisitcs), on the acquisition of vessels amounting to RM164.0 million
in relation to the bulk coal transportation project with TNB Fuel Sdn
Bhd. The remaining balance relates to commitments for structure and
renovation, plant and machinery, computer peripherals, purchase of
motor vehicles, warehouse rectification, etc.
BUSINESS SEGMENT AND OPERATIONS REVIEW
POSTAL SERVICES
The Group’s Postal Services today encompass our Mail business under
Pos Mel and our Retail business under Pos Niaga. Pos Mel’s product
and service offering covers mail services and customised solutions
such as mailroom management and direct mail for commercial
customers, while Pos Niaga enables customers to perform traditional
postal service transactions as well as offers the broadest range of over-
the-counter transactional services in Malaysia. For FY2017. Our Postal
Services business posted revenues of RM779.5 million but registered
an operating loss of RM146.5 million due to lower revenues, arising
from lower mail and counter transaction volumes, coupled with higher
costs of maintaining the nationwide postal network.
Mail Business
Pos Mel’s network today includes the mail business hub at the
national automated mail sorting facility in Shah Alam that branches
out to 25 other mail processing centres, 332 delivery branches and an
international gateway at the Kuala Lumpur International Airport. This
delivery network also incorporates more than 8,000 postmen who
deliver mail to some 8.5 million addresses daily throughout Malaysia’s
urban, sub-urban and rural areas.
In FY2017, Pos Mel’s revenue dropped by about 3.0% to RM619.7
million from RM639.1 million in the preceding financial year. While
the Mail business has been a substantial revenue contributor over
the last few years, the decline in mail volume has affected Pos Mel’s
contributions. As a result, Pos Mel’s contribution to total Group revenue
dropped to 29.8% for FY2017 from 37.2% for FY2016.
In line with the efforts to alleviate declining mail volumes, Pos Mel
continues to leverage on the strength of its physical delivery network
to provide innovative services and customised solutions that meet
customers’ diverse needs.
The year in review saw Pos Mel successfully launch FlexiPrepaid, an
economical and affordable product targeting e-Commerce merchants
who sell low value items. Taking the form of a prepaid self-service
sticker label that is applied to light weight items, FlexiPrepaid provides
customers the flexibility to use their own packaging and to send items
at a cost as low as RM3.60 to any destination in Malaysia. Together with
its track and trace as well as proof of delivery features, this innovative
product effectively addresses the needs of customers who are looking
at reliability and cost efficiency for their delivery needs.
Pos Mel has also taken measures to diversify its MyDistribution or MyD
offering which is now available in Basic, Premium and Premium Plus
packages. This service involves the collection and distribution of bulky
items (with a minimum weight of 30 kg) to multiple delivery points.
Tapping the hub-to-hub or point-to-point delivery and pick-up concept,
the service is available on an inter-state or intra-state basis.
In FY2017, Pos Mel collaborated with Legoland Malaysia Resort for the
Legoland Stamp Booklet Campaign. With every purchase of the booklet
sold at RM4.80 per piece, customers enjoyed a RM50 discount off the
entrance fee to Legoland. Another achievement was the successful
conclusion of the Zoo Negara Stamp Booklet campaign whereby the
stamp booklet incorporated a RM5 discount off the entrance fee to the
zoo. The campaign which ran from 30 October 2015 to 31 December
2016, saw some 80.2% of the booklets sold.
Moving forward, our Mail business is continuing with its efforts to
mitigate the decline in traditional mail volume through developing
innovative offerings that add value to commercial customers and
individuals. To this end, Pos Mel has been exploring the option of
combining the elements of technology and physical mail for advertising
and greeting cards. Today, the Mail business is offering its Direct
Mail customers a host of creative Augmented Reality (“AR”) features
embedded in mail or physical samples to promote customers’ products
and services in a more attractive manner.
May 2017 saw the introduction of the first AR postcards to the public.
Taking the form of Hari Raya greeting cards, the postcards incorporated
simple messages from recipients amidst the exciting and nostalgic
embedded AR content. Recipients were able to view the AR content
within the postcards by downloading the “AR Postcard” app from
Google Play or the App Store.
For some time now, Pos Mel has been offering the Corporate Postal
Service (“CPS”) better known as its Mail Management Service. With
clients looking for more economical mail management solutions, Pos
Mel will look to introduce a variation of this service, namely the CPS
 ANNUAL REPORT 2017 POS MALAYSIA 27

Hub and Spoke offering. As e-Commerce continues to grow by leaps

and bounds, we are also looking at ways and means to further leverage
on the FlexiPrepaid offering to better cater to online merchants’ needs.

Retail Business

Today, our retail arm continues to leverage on the nationwide postal

network to accord our customers convenient platforms to perform their
daily transactions. These comprise regular postal transactions, driving
license and road tax renewals, purchase of motor vehicle, personal and
life insurance, shared banking services and national unit trust product
transactions, bill payments and international remittances.

For FY2017, our Retail business posted lower revenues of RM159.8

million, 9.7% lower than FY2016’s revenues of RM177.0 million.
This was mainly due to lower transaction volume at our post offices
partly due to increased online payments directly to billers. The lower
commissions from Amanah Saham Nasional Berhad transactions also
contributed to Retail Business’ lower revenue for FY2017.
Currently, there are 696 post offices nationwide and we are in the
midst of installing some 90 Pos Automated Machines (“PAM”) in the
following financial year.
COURIER
The Group’s courier arm, Pos Laju, continues to power the Group’s
growth on the back of a robust e-Commerce landscape that relies
on courier, express and parcel solutions for the delivery of goods and
merchandise sold online. In FY2017, in tandem with increased demand
for e-Commerce last mile delivery services, our Courier business grew
its revenue by some 22.5% to RM684.6 million from RM558.7 million
previously.
Today, Pos Laju continues to tap its extensive courier network
infrastructure to meet the delivery demands of its customers. Its
market strength currently stands at 69 standalone Pos Laju Centres,
the Pos Laju counters at 696 post offices as well as 165 authorised
agents nationwide.
and automation. The new touchpoints have been very well received
as reflected by the volume that each channel is handling. More
importantly, these touchpoints are helping transform the domestic
courier market even as they take the customer experience up several
notches.
Moving forward, Pos Laju is preparing to bring several new initiatives
to the table. In the offing are plans to enhance Pos Laju’s drop-off and
collection channels as well as its points of purchase by introducing new
and innovative means to provide greater customer convenience. Our
collaboration with our e-Commerce partners for cash on delivery and
credit card services will be enhanced while several novel marketing
campaigns will be rolled out over the course of FY2018. We are
confident that as these new initiatives play out, they will steadfastly
reinforce Pos Laju’s dominant role in the domestic courier market.
As we venture forth, continued revenue growth for the Courier business
is expected to come from sustained demand in the e-Commerce
segment for prepaid boxes and envelopes as well as from the On
Demand and Contract Customer segments. Moving forward, Pos Laju
will place an emphasis on operational excellence to enhance its service
delivery efforts.

In FY2017, the courier business bolstered its touchpoint network by INTERNATIONAL

strengthening existing channels and rolling out numerous new ones.
Our International business segment continues to connect Malaysia to
Currently, Pos Laju has in operation 10 Pos Laju EziDrive-Thrus, 60 Pos
the world by providing a suite of international solutions comprising
Laju EziBox, 40 Pos Laju Prepaid Ezidrop and 21 Pos Laju Kiosks. Located
e-Commerce transhipment services and direct entry services.
at strategic and high-traffic areas, these facilities enable customers to
collect or post their parcels in a convenient manner. Online merchants in In FY2017, Pos Malaysia International posted lower revenue of RM192.8
particular have benefitted from the convenience of being able to deliver million, a 26.1% drop from revenue of RM260.9 million previously. The
their products to their customers beyond the conventional operating lower revenue was attributable to lower transhipment volume arising
hours of our post offices and Pos Laju centres. This has certainly done from keen competition by emerging postal players in the region trying
much to boost the sales volume and revenue of online merchants. to break into the transhipment business.
All these developments underscore Pos Malaysia’s commitment
towards providing our customers a better experience via innovation
28 POS MALAYSIA ANNUAL REPORT 2017

In line with the Group’s vision of becoming a complete end-to-end

e-Fulfilment and logistics service provider, we are proactively forging
strategic alliances with international players to develop regional/
international e-Commerce and postal processing hubs in Malaysia. In
April 2017, we signed a collaboration agreement with global logistics
and transportation company, Tigers Global Logistics (M) Sdn Bhd
(“Tigers”), which will enable us to offer Malaysia’s first cross-border
e-Fulfilment business solutions capability within the Asia Pacific region.

This development opens up the way for Pos Malaysia to manage the
entire supply chain process, including customs clearance, product
handling, pick and pack as well as last-mile delivery. Meanwhile,
Tigers will support our operations through continuous investments in
technology. The collaboration will also result in the establishment of a
regional e-Fulfilment hub at the Low-Cost Carrier Terminal (“LCCT”) in
Sepang that will cater to local and international e-Commerce players
and customers in 30 countries throughout the region. Through the
provision of reliable parcel delivery services at competitive prices
together with high-level support for warehouse management, packet
and parcel preparation, Pos Malaysia expects to generate a sustainable
new revenue stream.
Moving forward, Pos Malaysia International will also look to tap into the
outbound (out of Malaysia) e-Commerce segment with its offer of more
economical postal solutions.
LOGISTICS
The Group completed the acquisition of the Pos Aviation Group in mid-
September 2016, thereby bolstering our newfound position as a fully
integrated e-Commerce fulfilment and logistics solutions provider.
The Pos Aviation Group brings to the table three key businesses – air
cargo and ground handling services under Pos Aviation Sdn Bhd (Pos
Aviation); air freight services under Pos Air Cargo Express Sdn Bhd (Pos
ACE); and haulage and general logistics services under Pos Logistics
Berhad (Pos Logisitcs).
For FY2017, the newly absorbed businesses of the Pos Aviation Group
contributed six months of revenue amounting to RM327.6 million to
Pos Malaysia.
Today, Pos Aviation’s air cargo and ground handling activities are part
of a concession business that leverages on operational efficiency as
its key strategy for profitability. Pos Aviation has also been tasked with
spearheading the Group’s efforts in relation to the redevelopment of
the old LCCT to cater for future growth.
Pos ACE’s primary business is the delivery of postal and courier items
from Peninsular Malaysia to Sabah and Sarawak on a daily basis.
This business’ key strategy is to increase asset utilisation (essentially
two leased aircrafts) by securing additional clients domestically and
regionally.
The haulage industry is currently experiencing excess capacity due to
the large number of competitors. As such, Pos Logistics’ key strategy
is to develop the e-Commerce logistics segment together with the
relevant businesses within the Pos Malaysia Group, particularly in
the area of warehousing and fulfilment facilities. Pos Logistics is also
setting its sights on further developing its project logistics business.
Currently Pos Logistics has contracts with TNB Fuels Sdn Bhd and Rapid
Pengerang for its project logistics business. The infrastructure building
initiatives by the Government are expected to open up new avenues of
opportunity that will help drive the project logistics business forward.
OTHERS
ArRahnu
Pos ArRahnu Sdn Bhd has over the year successfully transformed itself
from a group of Syariah-compliant pawnshops to a network of one-
stop gold centres. Today, customers are able to pawn, buy, sell and
keep their gold safe at any of our Pos ArRahnu outlets. As these outlets
co-exist with our post offices, their cost structures and overheads are
kept low. The outlets continue to successfully leverage on cross-selling
activities to grow their revenues. These include the sale of the Pos Gold
Limited Edition series, the sale of investment precious metals, namely
gold bars and the Dinar, plus the purchase of gold from customers. To
date, our Pos ArRahnu outlets have sold a total of 10,000 gold wafers
and continue to make strong strides forward.
In FY2017, the Pos ArRahnu business continued to grow steadily
registering revenue growth of 43.3% to RM35.3 million from RM24.7
million previously and remained profitable. In line with the growth
registered for FY2017, we reopened five outlets and added one new
outlet, bringing the total number of outlets to date to 71 outlets.
Moving forward, Pos ArRahnu intends to open five new outlets in
FY2018 as part of our expansion plan, especially into East Malaysia.

Pos Digicert
Pos Digicert continued to strengthen its core digital certificate business
and support major clients such as the Inland Revenue Board of Malaysia
or Lembaga Hasil Dalam Negeri (“LHDN”), the Immigration Department
of Malaysia, Bank Negara Malaysia and other financial institutions. By
virtue of the LHDN e-filing project alone, Pos Digicert has more than
3.03 million active subscribers. Pos Digicert also provides public-key
infrastructure services to the Immigration Department of Malaysia to
facilitate border security. In line with this, Pos Digicert is continuously
building the necessary infrastructure and knowledge-base to support
the smooth running of the Immigration Department’s e-Passport
functionality.
For FY2017, Pos Digicert’s revenue grew by 9.2% to RM28.4 million. The
improved performance came on the back of a 14.5% volume growth in
digital certificates to 9,258,893 certificates from 8,084,912 certificates
previously. Pos Digicert also chalked up a 99.8% rate for resolving
problems within eight hours (FY2016: 98.0% within eight hours).
In FY2017, the company successfully obtained the WebTrust Seal
of Assurance for CA from the American Institute of Certified Public
Accountants and the Canadian Institute of Chartered Accountants. It
also successfully renewed its ISO27001:2013 certification (relating to
Information System Management Services) as well as its ISO9001:2015
certification (relating to the Quality Management System) from SIRIM,
both with zero non-conformance.
Moving forward, Pos Digicert will be offering the market a host of
innovative solutions. These will include the new value-added Date Time
Stamping service in collaboration with national timekeeper SIRIM, as
well as an Online Certificate Status Protocol service which will highlight
the real-time status of digital certificates that are revoked.
DataPos
The Group’s DataPos business provides total mailing solutions,
ranging from data processing (formatting and sorting) to bulk printing,
envelope inserting, e-Presentment, record storage and mailing services.
Its hybrid mail business strategically complements the assortment of
services offered by Pos Malaysia.
For FY2017, DataPos recorded revenue of RM30.8 million, an increase
of 12.8% from the previous financial year. This growth was attributable
to the increase in the number of new customers, as well as higher
e-Presentment volumes (the process of electronically transmitting
traditionally paper-based documents).
Moving forward, DataPos will focus its efforts on enhancing its internal
processes to bring about higher operational efficiency. At the same
time, it will increase its productivity and operational capacity through
continuous investment in the latest technology and solutions.
ANNUAL REPORT 2017 POS MALAYSIA 29
SUSTAINING A HIGH PERFORMANCE CULTURE
The various efforts undertaken in previous years to establish Pos
Malaysia as a High Performance Organisation appear to be bearing fruit.
This is evident today in our highly engaged workforce whose concerted
efforts line up very well with the Group’s business goals. In FY2017, our
people development efforts focused on ensuring our workforce made
the paradigm shift towards embracing a more dynamic, technology-
savvy and customer-oriented Pos Malaysia that is in tune with the
digital era. As the Group prepares to leverage on a host of initiatives
including new technological platforms to improve efficiency, introduce
new services and enable superior customer experiences, the existence
of a high performance culture will be the key component that will
determine the outcome of these initiatives.
To this end, the Human Resources Division has been implementing
various initiatives with the aim of sustaining a high performance culture.
One of these initiatives, the organisational restructuring that took place
in FY2017, aimed to enhance operational efficiency throughout the
organisation by reinstating the State Manager positions. I am pleased
to report that this did much to strengthen the spirit of teamwork and
unity throughout our organisation. On top of this, we implemented
awareness programmes on the importance of ensuring good customer
experiences for our frontliners while extending this to our Posmen
Komuniti. This certainly went down well with our community postmen
who tirelessly serve rural communities in Sabah and Sarawak to ensure
the rakyat get to enjoy basic postal facilities.
The year also saw us rolling out numerous talent management
and leadership development activities aimed at strengthening our
leadership team whom play a major role in driving the transformation
of the Company. Several internal processes and measures too
underwent re-engineering. This included the re-engineering of the
internal recruitment process which led to enhanced cost-efficiencies
through reduced dependency on external recruitment sources. The
addition of new subsidiaries to the Pos Malaysia Group helped facilitate
the manpower rationalisation process which further contributed to the
efficiency of the internal recruitment process. In the area of employee
engagement, we continued to roll out townhall sessions, conventions
and regular staff briefings and updates to maintain the esprit de corps
and unity among Pos Malaysia’s employees.
Today, our Human Resources division continues to work together with
our postmen to equip them with new competencies that include data
collection and the ability to offer mobile digital services. In this new
financial year, customer-centricity and operational efficiency will
continue to be the central focus of Human Resource activities and will
be driven through a culture change programme.
30 POS MALAYSIA ANNUAL REPORT 2017
BUSINESS RISKS
As the Group moves forward into new areas of opportunity in a highly
competitive marketplace, we recognise that we may be exposed to
certain anticipated or known risks that may have a material effect on
our operations, performance, financial condition and liquidity. In line
with Bursa Malaysia’s new disclosure requirements, we provide an
overview of these risks and our strategies to mitigate such risks.
In terms of Market/Business Risk, we face heightened competition in
the courier, logistics and aviation business streams. To mitigate this,
we are building close partnerships and collaborations with strategic
partners such as Lazada, Tigers and AirAsia as well as improving our
service performance to create brand loyalty.
With regards to Strategic Risk, we face the possibility that the execution
of our Strategic Initiatives may prove ineffective. To mitigate this, we
have established the SCORE 2.0 Steering Committee to closely track
and monitor the execution of each Strategic Initiative. The Committee
is also tasked with making periodical updates to the Board on the
progress of SCORE 2.0.
Our Operational Risk includes the challenge we face in ensuring the
availability and readiness of resources to support business growth as
a result of the booming e-Commerce sector. To mitigate this, we are
expanding the Integrated Parcel Centre (“IPC”) at Pusat Mel Nasional
and developing a new IPC at KLIA. We are also embarking on a service
quality improvement programme to improve end-to-end service
performance within our Postal Services and Courier operations.
Our Financial Risk includes the possibility of higher operating costs
and lower profit margins in our Postal Services and Courier operations.
Our mitigation measures here include the integration of manpower
between the Postal Services and Courier operations as well as the
proactive rollout of cost-saving measures.
In the area of Organisational Risk, there is the possibility that the
successors for critical positions within Pos Malaysia may not be in place
as and when required. To mitigate this, we have begun the development
of a tailored succession programme for identified successors within the
Group.
In terms of Information/System Risk, we face the threat of potential
cyber-attacks on Pos Malaysia’s IT system. To counter this, we are
undertaking continuous security posture assessments as well as
assessing, redesigning, enhancing and reconfiguring our security
infrastructure to safeguard our IT system against cyber threats. At the
same time, we are creating new capabilities for detecting, monitoring
and managing cyber threats.
Where Compliance Risk is concerned, there is the possibility of non-
compliance with laws and regulations. Our mitigation measures here
include the development of a robust Risk-Based Approach compliance
system and policy as well as continuous on-site and off-site monitoring
measures.
In FY2017, we successfully achieved these key risk management goals:
• The rejuvenation of mitigation measures/action plans and
monitoring of these activities until their completion to address key
risks;
• The streamlining, identification, assessment, and reporting of risks
for the enlarged Pos Malaysia Group; and
• The establishment of business continuity plans to support Pos
Malaysia’s nationwide operations.
Moving forward, these key risk management initiatives will be
implemented in FY2018:
• The review and rejuvenation of the key risks register for the Pos
Aviation Group including the establishment of the Group’s risk
appetite and the introduction of new measures to further mitigate
risks;
• The updating of the key risks register for the business and support
functions within Pos Malaysia (the Company); and
• The review, updating and testing of the established business
continuity plans.

More details of our risk management and internal control measures are
spelt out in the Statement on Risk Management and Internal Control
found on pages 80 to 84 of this Annual Report.
OUTLOOK AND PROSPECTS
For 2017, global economic activity is expected to touch 3.4% growth in
comparison to 2016’s lacklustre 3.2% growth. The advanced economies
are projected to make small steps up, while activities in emerging
markets and developing economies will continue to drive global
growth. However, at the same time global risks remain significant and
difficult to predict.
In Malaysia, domestic demand is expected to remain the anchor of
economic growth in 2017. While ongoing investments into sizeable
long-term infrastructure projects in both the public and private sectors
are expected to provide a certain degree of resiliency, private investment
growth will likely be limited by the lack of investment in the oil and gas
industry, the relative slowdown in the property market, rising business
costs and Ringgit volatility. On the whole, economic growth is projected
to rise between 4.3% and 4.8% in 2017 (2016: 4.2%) on the back of
improvements in global growth, a recovery in global commodity prices
as well as the continued growth of resilient domestic demand.
The strong growth in e-Commerce in Malaysia and improving economic
fundamentals bode well for the Pos Malaysia Group. Favourable
demographics, competitive pricing and increased reliability of the
fulfilment functions by marketplace platforms are expected to spur the
increase in online purchases, especially of consumer goods in Malaysia
and the region. In tandem with this, fulfilment and last mile delivery
services providers such as Pos Malaysia will benefit from the growth of
e-Commerce. In addition, initiatives such as the establishment of the
Digital Free Trade Zone and a host of Regional Distribution Centres will
serve as catalysts for e-Commerce growth in Malaysia.
The Malaysian Government’s continued emphasis on new investments
in transportation infrastructure is broadly supportive of the Group’s
haulage/logistics agenda. In addition, the Group’s concession-based
businesses will continue to provide stable revenue streams going
forward, primarily driven by sustained but moderate growth in air
passenger and cargo traffic. Based on the foregoing, we believe that
notwithstanding the headwinds buffeting Pos Malaysia’s traditional
mail business, the Group’s prospects remains positive for the near to
medium-term.
As Pos Malaysia steps into its new role as fully integrated e-Commerce
fulfilment and logistics services provider, we will continue to strengthen
our capabilities and reach to remain relevant to our target audiences in
the digital era. I am confident that as we successfully execute the 19
strategic imperatives under SCORE 2.0, we will take a significiant step
towards long term sustainability.
ANNUAL REPORT 2017 POS MALAYSIA 31
As we focus our efforts becoming the premiere fully integrated
e-Commerce fulfilment and logistics services provider in Malaysia,
we will continue to diversify and strengthen our product and service
offering to meet the demands of the fast-evolving consumer and
business landscape. We will also work hard to ensure we meet customer
expectations for improved service quality and convenience. We will
continue to leverage on technology and automation to maximise the
returns on the Group’s assets and operations, as well as maintain a
disciplined approach towards managing operating expenses.
IN APPRECIATION
In closing, I wish to express my deep gratitude to our Board of Directors
and our regulators for their wise counsel and guidance. My heartfelt
thanks to our shareholders for your invaluable support and to the rest
of the Pos Malaysia community for their unwavering cooperation and
trust in us. To the customers that we serve and who are the reason why
we exist – our utmost appreciation for their continuing patronage and
confidence in Pos Malaysia.
Our good progress to date would not have been possible without the
hard work of our dedicated workforce of about 23,000 employees.
I applaud the diligence and commitment to excellence that our
dedicated postmen continue to display as they journey far and wide
on their daily assignments. I also applaud the thoroughness of our
customer-facing staff who facilitate more than 100 million over-the-
counter transactions throughout our nationwide network of 696 post
offices and various other touchpoints. As we embrace a new financial
year, I call upon our people to continue stepping up to the plate in
their respective roles to strengthen Pos Malaysia’s new role as a fully
integrated e-Commerce fulfilment and logistics services provider.
As we move closer towards achieving our vision of connecting Malaysia
and beyond, today and tomorrow, we call upon all our stakeholders
to continue supporting us in our mandate. On Pos Malaysia’s part,
rest assured that we remain committed to delivering value to our
shareholders by becoming the best at what we do through leveraging
on operational excellence, superior customer service and continuous
innovation. Thank you.
Dato’ Mohd Shukrie bin Mohd Salleh
Group Chief Executive Officer
32 POS MALAYSIA ANNUAL REPORT 2017

AWARDS &
ACCOLADES

SUPERBRANDS MALAYSIA
BRAND OF THE YEAR
2016 POS LAJU

READER’S DIGEST TRUSTED BRAND

2017 GOLD POS LAJU
Category Airfreight / Courier Service

FROST & SULLIVAN 2017

MALAYSIA E-COMMERCE
LOGISTICS SERVICE PROVIDER OF
THE YEAR POS LAJU
 ANNUAL REPORT 2017 POS MALAYSIA 33

PNB STARZ AWARDS 2016

HIGHEST NO. OF NEW ACCOUNTS
ALL ASNB PRODUCTS
1st PRIZE
(Kuching, Sarawak)

PNB STARZ AWARDS 2016

HIGHEST NO. OF TRANSACTIONS
( POS MALAYSIA BERHAD )

PNB STARZ AWARDS 2016

HIGHEST NO. OF NEW ACCOUNTS
ALL ASNB PRODUCTS
2nd PRIZE
(Kota Marudu, Sabah)
34 POS MALAYSIA ANNUAL REPORT 2017

CORPORATE
EVENTS
20 – 28 APRIL 2016

MINGGU SAHAM AMANAH MALAYSIA 2016

Pos Malaysia participated in the annual Minggu Saham Amanah
Malaysia or MSAM Exhibition, organised by Permodalan Nasional
Berhad in Tapah Perak. Pos Malaysia showcased its postal and
courier products and services at the exhibition.

26 APRIL 2016

LAUNCH OF THE SASTERAWAN NEGARA STAMP

Pos Malaysia, in collaboration with Dewan Bahasa dan Pustaka,
launched the Finest National Laureates or Sasterawan Negara
stamps on 26 April 2016 at the Malaysia Agro Exposition Park
Serdang (MAEPS).

16 – 21 MAY 2016

ASIAN PACIFIC POSTAL UNION EXECUTIVE COUNCIL

(APPU-EC) MEETING
Pos Malaysia collaborated with the Ministry of Communications
and Multimedia Malaysia and the Malaysian Communications
and Multimedia Commission to organise the Asian Pacific Postal
Union Executive Council (APPU-EC) Meeting 2016 at the Hotel
Berjaya Langkawi Resort.

6 JUNE 2016

FREE SHIPPING COLLABORATION WITH SHOPEE

Pos Laju and Shopee started a smart collaboration to tap
further into new business opportunities especially in the
e-Commerce business sector.
 ANNUAL REPORT 2017 POS MALAYSIA 35

24 JUNE 2016

LAUNCH OF PUSAT POS LAJU BANGI

Pusat Pos Laju Bangi was launched together with the introduction
of the Pos Laju EziBox and the Pos Laju Prepaid DropBox, a 24/7
value added services to cater for our customers’ needs.

4 AUGUST 2016

PRIZE GIVING CEREMONY OF “POS LAJU HANTAR

& MENANG CAMPAIGN” 2016
The “Pos Laju Hantar & Menang Campaign” kicked off on 1 March
till 31 May 2016. At the prize giving ceremony held on 4 August
2016, Cik Farah Nabilah Abdullah from Pahang walked away with
the Xtravaganza Grand Prize consisting of the 50 grams Gold Bar
999.9, a one (1) gram Pos Malaysia ArRahnu Gold Wafer 999.9
and one (1) year Pos Insurance 1 Malaysia coverage.

9 AUGUST 2016

LAUNCH OF POS LAJU EZIDRIVE-THRU

Pos Laju unveiled its Pos Laju EziDrive-Thru service at the Pusat
Pos Laju Bangi.

18 AUGUST 2016

ANNUAL GENERAL MEETING

The 24th Annual General Meeting of Pos Malaysia was held at
the Holiday Inn Kuala Lumpur Glenmarie.
36 POS MALAYSIA ANNUAL REPORT 2017

20 SEPTEMBER 2016

VISIT BY YB DATUK AHMAD MASLAN TO

NATIONAL MAIL CENTRE, SHAH ALAM
The Deputy Minister of International Trade and Industry paid a
visit to the National Mail Centre (NMC) in Shah Alam to delve
further into the postal and courier segment.

18 OCTOBER 2016

POS MALAYSIA LAUNCHED NEWLY

REFURBISHED ASAHAN POST OFFICE
The Chief Minister of Melaka, YAB. Datuk Seri Utama Ir. Hj. Idris
Haron, launched the newly refurbished and historic Asahan Post
Office, Melaka.

6 NOVEMBER 2016

LAUNCH OF THE ‘SMART POSTMAN’ MOBILE

APPLICATION
The Malaysian Communications and Multimedia Commission
(MCMC) and Pos Malaysia unveiled the ‘Smart Postman’ mobile
application during the launch of the Postal Transformation Plan
for Rural Areas in Lundu, Sarawak.

20 DECEMBER 2016

GOLDEN MOMENTS IN PARALYMPICS RIO 2016 STAMPS

Pos Malaysia issued a special stamp series depicting the
three Paralympians who contributed to Malaysia’s first gold
medals at the prestigious sporting event.
 ANNUAL REPORT 2017 POS MALAYSIA 37

18 JANUARY 2017

LAUNCH OF FLEXIPREPAID
Pos Malaysia launched its FlexiPrepaid sticker, a product catered
for individual customers or business clients that have an
online business platform. It allows customers, especially online
merchants to send goods up to 2kg per delivery within Malaysia.

7 FEBRUARY 2017

LAUNCH OF POS DIGICERT OFFICE

Pos Digicert’s new office was launched on 7 February 2017. Pos
Digicert was established to be the premier licensed Certification
Authority (CA) in Malaysia.

20 MARCH 2017

EXPLORASI ALAM CUTI SEKOLAH 2017

Pos Malaysia organised an environmental camp called the
Explorasi Alam Cuti Sekolah 2017 at the Forest Research Institute
Malaysia (FRIM).
38 POS MALAYSIA ANNUAL REPORT 2017

NEWS &
MEDIA
ANNUAL REPORT 2017 POS MALAYSIA 39