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Scicom CEO: Tax incentive expiry not expected to severely impact group earnings, dividends (The Edge 2017)

13 Nov 2017 (Mon)

 

KUALA LUMPUR (Nov 13): The expiry of a 5-year tax incentive granted to Scicom (MSC) Bhd on its statutory business process outsourcing (BPO) income derived in Malaysia is not expected to significantly impact the group’s bottom line or its dividend payout ratio, said its chief executive officer Datuk Seri Leo Suresh Ariyanayakam.

Speaking to reporters on the sidelines of the group’s annual general meeting today, Leo said the group’s business model has been one that has been resilient and recession proof.

“The trick is to get one new big business every year, and that’s how you sort of maintain your growth momentum.

“So its just timing, I wouldn’t necessarily agree there would be an impact [to earnings]. I think we have lots and lots of business in the pipeline, its just a  matter of time to conversion,” he said.

He also dismissed the notion that higher tax expenses for the group would translate into lower dividend payouts to its shareholders.

“I don’t see why we cant do that; on average, we have been doing 70% over the last few years, so don’t see that as a problem,” Leo said.

Although there is no formal dividend policy in place, Scicom has over the last 5 years, declared an average pay-out of approximately 71% of its profits to shareholders in declared dividends.

The group was granted customised incentive of 100% income tax exemption on statutory income derived from outsourcing income for 5 years commencing Nov 7, 2012 to Nov 6, 2017.

The recognition of the tax incentive is conditional to fulfilment of certain Key Performance Indicators (KPIs) that is assessed annually by the administrator of the Customised Incentive.

In August 2016, the administrator revised the KPIs and the tax incentive was reduced from 100% to 70%, which was applicable for the incentive period from Nov 7, 2015 to Nov 6, 2017.

Scicom shares were up 1 sen or 0.54% to RM1.87 at noon market close today.

By Supriya Surendran / theedgemarkets.com  | November 13, 2017 : 13:37HRS MYT