KUALA LUMPUR: The worst is over for Lembaga Tabung Haji (TH) as the turnaround plan to stabilise the pilgrimige fund has started to bear fruit. Outgoing TH managing director (MD) and chief executive officer (CEO) Datuk Seri Zukri Samat said the new management had been able to reduce the risk of a run on the fund and to restore its balance sheet. He noted that a systemic risk would had happened if the turnaround plan had not taken place. “The worst is over. Tabung Haji is now moving forward. We have subtracted the bad assets and so on. I told the Prime Minister’s Office it is time for me to go. TH’s excess over liability stood at more than RM1 billion. “I have created a reserve account.
During good days, you do not distribute all your profits. You keep some in the reserve. TH has no reserve before but now it has about RM400 million,” he told Bernama in an interview recently. Zukri, who was appointed to steer the TH turnaround in July last year, will make an early exit from TH due to health reasons. He will be succeeded by Nik Mohd Hasyudeen Yusoff on Sept 1, 2019. TH is the biggest shareholder of BIMB Holdings Bhd with a 53.47 percent stake.
TH recorded a stronger financial performance in the first half of 2019, underpinned by a sustainable investment strategy and prudent cost management measures. The pilgrimage fund recorded RM1.3 billion in revenue. “I did not expect the situation was that bad. When I moved in, we looked at the so called issue and the whole situation is much worse than we thought. People talked about bad investments in TH Engineering and such. These are the information that the public know.
“But in reality, there is much more to that. What is more shocking is basically the revelation by the PwC report commissioned by TH when the new leadership came on board,” he said. Zukri was referring to a PricewaterhouseCoopers’ (PwC) report which revealed that TH had failed to recognise a total of RM549 million in impairment losses on investments in several associate companies and subsidiaries.
The report came after the 2017 Auditor-General’s Report disclosed that the pilgrim fund board had failed to report an asset impairment totalling RM227.81 million from its investment in three subsidiaries and three associates, including a RM164.58 million investment in TH Heavy Engineering Bhd. “When we see all the reports coming from PwC, the board feels that we got to check on this.
When we came in, even though the account for 2017 has been done, it was not yet to be signed off. “The board feels that we cannot signed off the account with emphasis of matter being mentioned by the Auditor-General. For that reason, we appointed PwC to relook at the whole thing again,” said Zukri. The financial distress of TH was further aggravated by the weakening of the stock market in 2018, leading to a bigger deficit of RM10 billion as at Dec 31, 2018 from RM4.1 billion a year as well as the adoption of a new accounting policy in the same year.
“Based on that accounting policy, certain provision has to be made in some of the investments. Because of that we are short by RM10 billion,” said Zukri. In December last year, the fund said that the Finance Ministry via special purpose vehicle (SPV) Urusharta Jamaah Sdn Bhd acquired its underperforming properties and equities in exchange for RM10 billion in sukuk and RM9.9 billion in Islamic redeemable convertible preference shares.
TH transferred RM19.9 billion worth of underperforming assets at the end of last year to the SPV as part of its restructuring plan. The fund has also reduced its exposure in equities by shifting its focus on fixed income to minimise risks. Under Zukri’s leadership, TH managed to clean up the fund’s balance sheet following years of accumulated deficit which have led to illegal dividend payments to its depositors since 2014.
“Our biggest task at the moment is how do we to make sure that we restore the balance sheet of Tabung Haji so that we are in the position to pay, not only for 2018 but also in the future,” he said. TH announced a hibah of 1.25 percent to its depositors for the 2018 financial year, amounted to a total payout of RM913mil for TH’s 9.3 million depositors.– Bernama
