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DRB-HICOM Annual Report BERHAD 2018 Services Sector Under DRB-HICOM’s Services Sector, we offer postal and logistics services, as well as vehicle inspection, waste management, environmental services and banking. Our education arm, meanwhile, comprises DRB-HICOM University of Automotive Malaysia, the only tertiary institution in the region that is built by the industry, for the industry with a focus towards automotive engineering. POSTAL AND LOGISTICS POS MALAYSIA BERHAD (POS MALAYSIA) Pos Malaysia is the national postal organisation which, agents, 95 Pos Laju outlets and 35 Pos Laju kiosks today, is transforming into an end-to-end logistics services nationwide. A total of 14 new Pos Laju outlets and kiosks provider. With a history of more than 200 years, it has were opened while 120 new self-service terminals (EziBox over 3,700 touchpoints nationwide, and Pos Malaysia’s parcel locker stations and EziDrop terminals) were installed reach extends from major cities to the most remote rural at high footfall areas for added customer convenience. This areas. Its complete distribution network supports a suite brought the total number of self-service terminals to 210. of e-Commerce solutions, from last mile delivery to warehousing, logistics up to fulfilment operations. Included in the vast network are 691 post offices and 95 Pos Laju outlets as well as the first and last mile capabilities of its subsidiaries - Pos Aviation Sdn. Bhd. ("Pos Aviation"), Pos Air Cargo Express Sdn. Bhd. ("Pos ACE") and Pos Logistics Berhad ("Pos Logistics"). Its services are categorised broadly into Courier, Express and Parcel ("CEP"), Postal Services, International Business, Aviation, Logistics and Others. In FY2017/18, Pos Malaysia’s revenue increased by 18.7% to RM2.5 billion, driven mainly by CEP business growth and the inclusion of full-year revenues from Pos Aviation and Pos Logistics (as compared to six months’ revenue in FY2016/17). Although higher operating costs resulted in a 8.7% decline in PBT to RM117.3 million, the Group’s profit after tax increased by 14.1% to RM93.3 million as a result of a tax incentive for the Pos Aviation Group. The CEP business – under the Pos Laju brand – dominates about 40% of the domestic market with the widest network coverage and largest courier fleet. During the financial year, Pos Malaysia delivered 30% more courier items than the previous year through its 691 post offices, 162 appointed 104
DRB-HICOM Annual Report BERHAD 2018 In view of growing e-Commerce, Pos Malaysia is upgrading Revenue from postal services continued to decline as a the automated processing capacity of its Integrated Parcel result of decreasing mail volume and lower commissions Centre ("IPC") in Shah Alam from 112,000 items per day from the retail business. In mitigation, Pos Malaysia plans to to 300,000 items per day. The upgrade is expected to be expand its e-presentment solutions offered by subsidiary, completed by August 2018. Meanwhile a second IPC is DataPos, to customers migrating from physical statements being developed in the Kuala Lumpur International Airport to digital ones. It will also promote registered mail and (KLIA) area; and once fully operational, will double Pos Flexi-Pack products for lower value e-Commerce items that Malaysia’s processing capacity. do not need express last-mile delivery. In addition, it plans to relocate as many Pos Malaysia outlets as possible into Further enhancing its CEP services, Pos Malaysia launched shopping malls to increase the retail element of its postal a number of new products. These included EziFulfilment – services such as bill payments, road tax and driving license providing end-to-end e-Commerce services to SMEs; Cash- renewals. on-Delivery ("COD") and Credit Card-on-Delivery ("CCOD") – allowing customers to order items online and pay on The International Business consists mainly of the delivery; and Xpres Drop, an enhanced and rebranded Pos transhipment of e-Commerce items, mainly originating Express Service offering affordable courier service to micro from China, through the postal network. To enhance this entrepreneurs. Additionally, customers can now purchase business, Pos Malaysia is placing greater efforts to widen Pos Laju Shield insurance, provided in collaboration with its customer base, with a focus on offering more options to Zurich Takaful, to cover valuable items delivered using Pos meet the e-Commerce needs of those dealing with higher Laju. value e-Commerce items. Two key businesses under Pos Malaysia’s Other Services are the one-stop Pos Ar-Rahnu Sdn. Bhd. ("Pos Ar-Rahnu") gold centres and digital certification provided by Pos Digicert Sdn. Bhd. ("Pos Digicert"). Pos Ar-Rahnu currently operates 78 outlets and plans to add another seven in the current financial year, while Pos Digicert is developing new products and services to add to its stable of offerings. Pos Aviation Sdn. Bhd. ("Pos Aviation"), a wholly-owned subsidiary of Pos Malaysia, is a licensed independent ground handler offering a comprehensive range of services including inflight catering, aircraft maintenance and engineering, ground handling and air-cargo handling. Its revenue increased from RM135.19 million (for six months in FY2016/17) to RM275.2 million for the full FY2017/18. On a prorated basis, the aviation business registered a modest 1.9% decline in revenue. Although the air cargo handling business more than doubled due to higher volume, this was offset by lower revenue from inflight catering and ground handling as competitors gained market share. To improve its value proposition, Pos Aviation is enhancing its customer relationship management through Key Account Management. It is also implementing various IT 105
DRB-HICOM Annual Report BERHAD 2018 platforms for integrated resource management and cargo handling. In addition, Pos Aviation is looking to outsource the management of aircraft handling equipment and to introduce mobile apps for passenger-based services such as flight check-in and mishandled baggage. Pos Logistics, also a wholly-owned subsidiary, offers general logistics, automotive logistics, project logistics, freight management, e-Commerce logistics, marine logistics and supply chain solutions. It’s revenue increased from RM188.7 million (for six months in FY2016/17) to RM424.7 million for the full financial year under review. Strong revenue growth was seen in the second half of FY2017/18 mainly due to the project logistics business serving the Refinery and Petroleum Integrated Development ("RAPID") project in Johor and coal transportation services for TNB incinerator, MRF and transfer station, Cleansing Services, Fuel Sdn. Bhd. Green and Energy Sustainability Consultancy Services, Waste Water Treatment Services, Recycling and Collection Going forward, Pos Logistics will focus on rationalisation of Industrial Scrap Services through its wholly-owned and optimisation of warehouse space, entering the bulk subsidiary, DRB-HICOM Environmental Services Sdn. Bhd. commodity (raw sugar, etc.) transport sector, and the ("DHES"). expansion of e-commerce logistics services to enhance the sustainability of the Group’s logistics business. Along with continuous expansion in services offered and conscientious efforts to operate efficiently at optimum cost, CONCESSIONAIRES Alam Flora has seen both its revenue and profit increase steadily over the years. In FY2017/18, revenue grew by ALAM FLORA SDN. BHD. ("ALAM FLORA") 9.0% to RM812.96 million, helping to boost PBZT by 5.6% to RM99.66 million. Operational and cost efficiencies have Alam Flora provides solid waste and public cleansing been enhanced through the mechanisation and automation services in Kuala Lumpur, Putrajaya and Pahang under a of a growing number of functions via strategic investments 22-year concession agreement with the Government of in the best technologies and innovation. Malaysia until 31 August 2033. Outside of this concession, it extends Integrated Facilities and Assets Management Driven by an overriding motive to always offer value-added Services, Waste Facility Management such as landfill, services, this year the company adopted an integrated monitoring system – MFlora – that combines the Supervisor Monitoring System with the Vehicle Monitoring System and 106
DRB-HICOM Annual Report BERHAD 2018 Customer Relations Management. With MFlora, Alam Flora is able to schedule collection services, plan effective routes, ensure the availability of suitable vehicles, equipment and manpower as well as organise collection methods – all under one platform. Meanwhile, DHES has its own strategic roadmap to keep enhancing its services and grow its business. Targets set for the current financial year include: • Diversification into waste processes & solutions • Expansion of integrated facilities management • Diversification and expansion into downstream waste management • Technology innovation & value-added services • Expansion of business via acquisitions & joint ventures PUSPAKOM SDN. BHD. ("PUSPAKOM") PUSPAKOM has for the last two decades been undertaking online appointment and payment system that guarantees all mandatory inspections of commercial and public service time within 60 minutes; and a Queue Management vehicles in Malaysia to ensure they are roadworthy and System ("QMS") to shorten the waiting time of walk-in safe. In addition, it provides inspection services for hire- customers. purchase financing, ownership transfer and the registration of imported vehicles under its suite of offerings for private In terms of service quality, PUSPAKOM extended the use vehicles. of tablets in the inspection process to all inspection centres and mobile teams, thus eliminating human errors The lower TIV in FY2017/18 was reflected in a slight and increasing the integrity of its inspection activities. It contraction of PUSPAKOM’s mobile services and Hire has also created a digital link between its off-site centres Purchase Inspection ("HPI"), leading to a 0.9% drop in the to a Centralised Monitoring Centre ("CMC") for greater company’s revenue to RM140.13 million. Meanwhile, higher control and oversight. This has been complemented by an operating costs in the face of inflationary pressure and upgraded Computerized Automated Vehicles Inspection impact from new terms in a renewed Collective Agreement IT System ("CAVIS"), strengthening the integrity of its contributed to a 44.2% decrease in PBZT to RM8.12 million. inspection data. PUSPAKOM’s e-Management Dashboard ("PMD"), meanwhile, has been enhanced to enable real- Motivated by the need to expand its business to maintain time performance monitoring. both top and bottom lines, the year saw PUSPAKOM launch insurance sales and renewal services, with imminent plans Going forward, PUSPAKOM expects revenue to increase to extend into related services such as road tax renewal. once e-hailing ride laws are gazetted in the second half The idea is to offer a “One-Stop Centre” for added customer of 2018 which will see more vehicles mandated for convenience. roadworthiness checks. At the same time, it intends to grow its door-to-door mobile inspection service, reaching out to Customers have always been given priority at PUSPAKOM, untapped markets to optimise its current mobile service and various initiatives have been implemented to enhance capacity. It is also set to ramp up promotions of voluntary their experience. This led to the launch of MyPUSPAKOM, an vehicle inspections, and will continue to look for ways to keep improving its service delivery. 107
DRB-HICOM Annual Report BERHAD 2018 OTHER SERVICES Moving into FY2018/19, Bank Muamalat has embarked on a Five-Year Strategic Business Plan with the aim of delivering BANK MUAMALAT MALAYSIA BERHAD sustainable performance. The plan focuses on five main ("BANK MUAMALAT") objectives, namely: harnessing digital technologies, becoming the preferred investment solutions provider, to Bank Muamalat provides Islamic banking services out of a be the banker of choice for each localised community, to network of 63 branches nationwide. With total assets of be recognised as a socially responsible bank, and to excel RM24.0 billion, it is the eighth largest Islamic bank in the further in the area of customer service. country. The year has begun on a positive note, with Bank Muamalat’s The bank’s performance during the financial year under appointment by Permodalan Nasional Berhad to be an review saw it maintain its revenue at RM1.2 billion while Amanah Saham Nasional Berhad agent. growing its PBT by 34.7% year-on-year to RM229.7 million, mainly as a result of concentrated efforts to enhance its Underlining all its activities, Bank Muamalat will continue to asset quality. This led to a decrease in non-performing enhance its efficiencies, particularly in cost rationalisation financing ("NPF") ratio from 2.31% to 1.92%. Bank and asset quality improvement in order to drive better Muamalat also charted improved allowance for impairment financial performance. on financing as the it recorded a total write back of RM55.4 million as compared to a net provision of RM81.3 million in the preceding year. Gross financing stood at RM14.9 billion while total deposits grew to RM20.2 billion, equivalent to 1.3% growth from a year ago. Meanwhile, the Bank’s capital remained strong, reflected by the improvement in risk weighted capital ratio to 18.4% from 16.7% a year ago. In line with its commitment to socially responsible banking, in December, Bank Muamalat achieved a milestone by becoming the first Islamic bank to be accepted as a member of the Global Alliance for Banking on Values ("GABV"). This further strengthens its resolve to help uplift the socio- economic well-being of the customer segments it serves, and to focus on sustainable companies that have positive social, environmental and cultural impacts. 108
DRB-HICOM Annual Report BERHAD 2018 DRB-HICOM UNIVERSITY OF AUTOMOTIVE of the Center for Academic and Curriculum Transformation MALAYSIA ("DRB-HICOM UNIVERSITY") ("CACT"). As a further incentive to attract more students, DRB-HICOM University has set aside close to RM52 million DRB-HICOM University, located within DRB-HICOM’s for a scholarship package which is expected to benefit Automotive Complex in Pekan, is the only university in more than 3,000 students over a period of three years. the country that focuses on the automotive ecosystem. Established as the International College of Automotive To fund its own research, the university has secured grants Malaysia five years ago, it was conferred full-fledged amounting to RM144,460 from the National Knowledge university status on October 2015. Today, its Faculty Transfer Programme ("KTP") Fund, and another RM239,390 of Engineering & Technology and Faculty of Business & from the Public-Private Research Grant ("PPRN") under Management offer a total of 51 programmes from the the Ministry of Higher Education. Quality of research at foundation level to doctorate. DRB-HICOM University is attested by various forms of recognition. During the year, teams from the university The university has a current enrolment of 1,350 students, won silver and bronze medals and a merit at the Malaysia while a total of 1,160 students have graduated, with 80% Technology Expo ("MTE") in February 2018. Much of the gaining employment within six months. research conducted benefits the Group’s subsidiaries in terms of process improvement, greater production A key contributor to the high employability of its graduates efficiencies and upskilling of employees. is the focus on being industry relevant. This is guaranteed by the fact that most of the programmes offered are In keeping with the digital revolution, the university will be developed internally, with significant input from engaging in more digital systems to enhance its enrolment, DRB-HICOM Group subsidiaries. The curriculum, moreover, teaching, learning and marketing activities. Its business offers a balanced blend between theory and practice based programmes also incorporate modules on e-Commerce, on the ‘university by the industry, for the industry’ concept. preparing students to leverage the power of digital technology once they enter the work stream. In FY2017/18, the university introduced 25 new programmes, doubling the number offered a year previously. The focus In the longer term, DRB-HICOM University envisages now is to increase its student intake. One initiative towards becoming the ASEAN Automotive University. Towards this end is to offer part-time programmes in FY2018/19. A this end, it has been engaging with academic institutions School of Advanced and Distance Learning ("SADLe") has and professional bodies within ASEAN as well as China been set up to spearhead the part-time programme, which on knowledge sharing, developing academic exchange is to be coupled with online learning under the auspices programmes as well as conducting joint research. Among the academic institutions and professional bodies that have shown interest in such programmes are Sanya University of Hainan China, Beijing Geely University, Guangdong Industry Polytechnic, Guangdong Railway Polytechnic, Universitas Ubudiyyah Indonesia, Institute of Islamic Banking and Finance Malaysia, and Malaysia Board of Technologists. In addition, the university is collaborating with the Malaysia Automotive Institute ("MAI") to offer stipends to eligible postgraduate students in automotive related studies. 109
DRB-HICOM Annual Report BERHAD 2018 Properties Sector DRB-HICOM is involved in property development, hospitality and concession development and construction. It is currently developing Proton City in Perak, and residential properties under the Glenmarie brand in Johor. It also has concessions to develop Media City in Kuala Lumpur and an Immigration, Customs, Quarantine and Security ("ICQS") Complex at the border with Thailand. It also owns and manages the Holiday Inn Kuala Lumpur Glenmarie, Vivanta by Taj in Langkawi, and Glenmarie Golf and Country Club, in Shah Alam. PROPERTY DEVELOPMENT • Glenmarie Johor – In February 2018, 189 units of double-storey link houses were completed under Phase 1A of the Glenmarie Johor development in Tebrau, Johor. Glenmarie Johor Phase 1 is a 69-acre mixed residential freehold development comprising link houses, semi- detached units and cluster homes. Tebrau is a sought- after location due to its proximity to Johor Bahru’s central business district as well as the Malaysia-Singapore Causeway. Phase 1B, comprising 102 units of double-storey link houses, is scheduled for completion in November 2018. To date, this phase has registered a take-up of 88%. • Proton City – This 4,000-acre township in Tanjong Malim, Perak comprises industrial, residential, commercial and institutional components surrounded by lakes, the state-of-the-art PROTON manufacturing plant and Universiti CONCESSION DEVELOPMENT AND Pendidikan Sultan Idris. The development is set against CONSTRUCTION the backdrop of the majestic Banjaran Titiwangsa. MEDIA CITY DEVELOPMENT SDN. BHD. In February 2018, the 980-acre National Automotive ("MCDSB") Cluster @ Proton City ("NAC") was launched to spearhead the next wave of investment in the Malaysian automotive DRB-HICOM has a 51% equity in Media City Ventures Sdn. industry. Once completed in 2022, it will house PROTON Bhd. ("MCVSB"), the parent company of MCDSB, which holds Holding Berhad’s entire operations, as well as become a 23-year concession from the Government of Malaysia the future focal point for third-party local and foreign to design, construct and upgrade the buildings and automotive vendors, with a focus towards high-technology media facilities in the existing Angkasapuri Complex and components. thereafter manage the resulting Media City Complex. Once completed, Media City will boast the latest broadcasting During the financial year, Proton City further completed technology and infrastructure to support a comprehensive 47 units of Jasmine Bungalow and Maple Semi-Detached digital network for Radio Televisyen Malaysia. homes in the development. 110
DRB-HICOM Annual Report BERHAD 2018 The redevelopment of Angkasapuri, estimated to cost The new RM425 million complex, with greater handling RM860 million, is targeted to be completed in stages from capacity, is being developed to help ease traffic congestion September 2018 to June 2020. that has been building up over the years at the checkpoint. With better security facilities, it will also enhance national NORTHERN GATEWAY INFRASTRUCTURE SDN. security at the border. BHD. ("NGISB") NGISB celebrated a milestone on 1 November 2017 when NGISB, a 100%-owned subsidiary of DRB-HICOM, holds Phase 1 of ICQS was completed and opened to traffic. a 28-year concession beginning 14 June 2014 from the Construction of Phase 2 has begun, and is scheduled to Government of Malaysia to develop and subsequently be completed by June 2019. Upon completion, ICQS Bukit manage a new ICQS Complex in Bukit Kayu Hitam, Kedah. Kayu Hitam will serve more than three million travellers Being directly connected to the highway at the northern and one million vehicles per year. part of Peninsular Malaysia, ICQS Bukit Kayu Hitam offers smooth cross-border access from and to Thailand. 111
DRB-HICOM Annual Report BERHAD 2018 ASSET AND FACILITY MANAGEMENT GLENMARIE GOLF & COUNTRY CLUB ("GGCC") GGCC is one of the most prestigious golf courses and club houses in the country, attracting high-profile tournaments such as the international Eurasia Cup. Other tournaments hosted during the year included the 12th AmBank Group-SportExcel International Junior Golf Championship, and the 100 Plus Malaysian Junior Open Golf Championship. Total revenue from membership and events for the financial year amounted to RM22.3 million. HOLIDAY INN KUALA LUMPUR GLENMARIE ("HIKLG") HIKLG is a business and leisure resort-styled hotel in Shah Alam, Selangor. Despite a slowdown in tourism, it recorded a higher number of guest arrivals than in the previous year, achieving an average occupancy rate of 62% as compared to 59% in FY2016/17, with revenue totalling RM25.7 million. 112
DRB-HICOM Annual Report BERHAD 2018 VIVANTA BY TAJ - REBAK ISLAND, LANGKAWI Vivanta by TAJ - Rebak Island, Langkawi is a luxury resort under the globally renowned Vivanta by TAJ brand. Offering the allure of staying on a private island, the five-star resort continues to be a popular choice among local and foreign tourists, achieving an occupancy rate of 69.3% for the year and revenue of RM26.69 million. 113
DRB-HICOM Annual Report BERHAD 2018 A viable bottom Sustainability Report line from sustainability Statement by There exists a perception gap between local and global companies in the sustainability movement, with the latter being ahead in terms of understanding and adoption. Nevertheless, more local companies are embracing concepts such as Sustainable DATO’ SRI SYED FAISAL ALBAR Development Goals (“SDGs”) and incorporating these into their business approach. BIN SYED A.R. ALBAR The positive adoption is mostly due to the entire chain or spectrum of economy adopting Group Managing Director these goals, such as institutional changes which require corporate sustainability reporting or commitment, to secure financial loans, building permits, trade allowances DRB-HICOM Berhad and concessions. Bursa Malaysia’s mandatory reporting is one such sample of institutions playing their part to drive the local sustainability movement, and with time, I believe local companies will catch up with the advanced pursuits of their western counterparts. Since formation, DRB-HICOM has consistently gone beyond achieving regulatory compliance and incorporated elements of sustainability into its business practices, with a large focus on resource efficiency as well as health and safety of our staff. At present, DRB-HICOM recognises the importance of viewing sustainability in a more holistic manner, incorporating human capital, carbon emissions and local community into its sustainable policies as well as overall business practice. To drive our Group’s mission, a Sustainability Steering Committee was established in the Group to oversee and support the sustainability movement across our companies. Our current sustainability efforts focus on five key themes: Safety and Health; Energy Management; Waste Management; Human Capital and Corporate Responsibility, and quarterly reporting of data keeps us abreast of the progress as well as the challenges that we face throughout our Group. Social Factors DRB-HICOM operates throughout Malaysia, representing the primary labour provider in several locales. Therefore, in these areas, we have a direct impact not only on the environment, but also on local communities through employment, trade and economy, as well as housing demand. Our organisation undoubtedly creates a pressure on the micro environment within which we operate. Hence, it is of utmost importance that we have a sustainable approach to our business, and ensure that local communities receive the benefits of our success as well. 114
DRB-HICOM Annual Report BERHAD 2018 In the financial year 2017/18, DRB-HICOM conducted 25 For the long-term outlook, DRB-HICOM is committed to community development activities throughout Malaysia which continuously analyse and innovate our manufacturing processes included giving out more than 3,000 free motor vehicle checks at as well as business plans, to not only ensure we are efficient festive seasons, developing electric vehicle technology for public from an energy perspective, but also ensure that we are one transportation usage as well as giving back to local communities. step ahead of our competitors with regard to market demands. With regard to Safety and Health, over the past few decades, With waste generation, DRB-HICOM has yet to fully adopt a the Malaysian Government has made effort to clamp down circular economy, but has begun exploring the collection of on workplace accidents, and coupled with new and advanced food waste through Alam Flora. This can be further enlarged technology, safety at the workplace has significantly increased. across more businesses and waste categories, but will take some time. Employing a fully circular economy will need detailed While many corporations still view occupational safety as consideration and independently assessed case studies for important due to the financial impact accidents present, here all subsidiaries. This is to guarantee that a feasible and solid at DRB-HICOM, we have always viewed safety with a high level business case to go down this road can be established prior to of priority as it can impact one’s livelihood or even cost a life. fully venturing into a circular economy concept. Beyond this loss, we must consider the impact onto a family, especially if the deceased is the sole breadwinner. Challenges As a conglomerates with over 70 subsidiaries and around As compared to financial year 2016/17, we successfully decreased 56,000 employees, clearly our size is a challenge. Related to our incident cases by 11.1%. The primary measure taken to that is the diversity of our business, which include automative achieve this decrease was through educational workshops and distribution, automotive manufacturing and assembly, banking, awareness campaigns, which were conducted on a regular basis. education, waste management, postal, as well as certification. The challenge is in finding an effective system that can be The Group Human Capital Division along with the Group Safety applied across the industries. and Health Department coordinate these efforts across the Group, and a quarterly meeting is convened at the Steering Committee Despite the challenges, we know that our sustainability efforts level to ensure we keep pace with progress of the efforts. have borne fruit in many of the areas that we have focused on, with some areas beginning to show significant results. As it At DRB-HICOM, our talent pool is vital to our success, and we are stands, we are currently developing roadmaps for these, as well firm believers that an inspired and happy workforce will produce as addtional initiatives, so that there is a clearer blueprint for us quality output. Training is key to ensure that our talent can to achieve our sustainable targets. develop a hunger for innovation and that each person at all levels of a department is the right fit for the job. In the financial year Growth 2017/18, we invested RM13 million into our staff by providing With sustainability gaining traction across the globe and also over 4,000 training sessions across all our subsidiaries. locally, the entire economic chain will demand sustainable practices across our organisation. This can be sustainable In order to enhance professional work performance and develop human resource practices and sustainable usage of resources. a balanced workforce, activities that provide team building and This is where the opportunity for competitive advantage lies. social skills are conducted throughout the year. There was an average 20% increase in the number of participants for training As the economic chains pressure businesses to be sustainable, activities, which is a good sign of employee participation and merely adhering to regulatory requirements would be a morale. We also recognise the trend of the digital world today, disadvantage to the Group, therefore, DRB-HICOM is committed and are preparing for Industry 4.0 which will assume a greater to strategising and targeting our sustainability goals through role in the future economy. benchmarked reporting. As the automotive and construction industry moves toward more sustainable concepts, creative Resource Management thinking and innovation will continue to take root in DRB- Beyond the resources explored for our manufacturing, HICOM, and with time, we should be able to lead the local DRB-HICOM has begun to explore resource management from an market in being sustainable across our entire business portfolio. organisational perspective, monitoring our energy usage as well as our waste generation data. Syed Faisal Albar Over the past two years, we have required our subsidiaries to declare and work toward reducing their energy consumption, as this is the simplest and lowest hanging fruit for any business. To date, we have taken measures to decrease our energy consumption by almost 9% as compared to the previous year. Moving forward, we intend to work with more subsidiaries to reduce energy consumption, as well as conduct equipment audits, as ageing or inefficient equipment can be a major cause of energy wastage. 115
DRB-HICOM Annual Report BERHAD 2018 ABOUT THIS REPORT DRB-HICOM Berhad is proud to present its second Sustainability Report and the progress of making our Group a more sustainable business. Sustainability has been ingrained in our values since the inception of our Group. With our diversified business in multiple sectors, we are conscious of the impact our businesses have on the environment, workplace, local community and economy. Reporting on our sustainability initiatives not only gives us an opportunity to showcase our progress and performance, but also identify expectations and concerns of our stakeholders. Through this exercise, we hope to unveil what sustainability means to our Group and our stakeholders, including the efforts taken to make DRB-HICOM a responsible and sustainable Malaysian conglomerate. Our Reporting Approach Scope and Boundaries This report has been prepared in reference to the framework This report covers the sustainability performance and and guidance provided by the Global Reporting Initiative progress of all our businesses in Malaysia, unless otherwise (“GRI”) Standards. The content of the report is based on the stated. This report has encapsulated the overall sustainability reporting principles as defined by GRI Standards, which performance of our Group for the period starting from 1 April includes: 2017 to 31 March 2018. Our inaugural sustainability report was published in 2017 and has captured information from 1 • Stakeholder Inclusiveness - capturing our stakeholders’ January 2016 to 31 December 2016. We are determined to expectations and concerns publish our sustainability performance and progress annually • Sustainability Context - presenting our performance in through our sustainability report. References to DRB-HICOM, the wider context of sustainability the Company, the Organisation, the Group and we refer to • Materiality - identifying and prioritising the key DRB-HICOM and/or its sectors and subsidiaries. sustainability issues that our Group encounters • Completeness - reporting all sustainability topics that Feedback are relevant to our Group and influence our For further details, you may contact: stakeholders Name : Mahmood bin Abdul Razak The Material references included in this report are as stated Designation : Head, Group Strategic Communications Division below: Email : info@drb-hicom.com • GRI 203 Indirect Economic Impacts 2016 • GRI 302 Energy 2016 • GRI 306 Effluents and Waste 2016 • GRI 403 Occupational Health and Safety 2016 • GRI 404 Training and Education 2016 • GRI 407 Freedom of Association and Collective Bargaining 2016 • GRI 413 Local Communities 2016 116
DRB-HICOM Annual Report BERHAD 2018 Sustainability Report B A C AWARDS AND RECOGNITION A. HR ASIA AWARDS - BEST COMPANIES TO WORK FOR C. MALAYSIA HR AWARDS 2017 – EMPLOYER OF CHOICE IN ASIA 2017 AWARD (PRIVATE SECTOR) DRB-HICOM was acknowledged as one of the Best DRB-HICOM won Bronze under the Employer of Choice Companies to Work for in Asia 2017, scoring above Award (Private Sector), being recognised for its continuous the industry average rating on all categories that commitment and sustainability for the development of its include workplace culture, employee engagement, human capital. career advancement and development opportunities. D. ASIA SUSTAINABILITY REPORTING AWARDS 2017 B. HR EXCELLENCE AWARDS 2017 – HR LEADER OF THE DRB-HICOM was nominated as the finalist of Asia’s Best YEAR AWARD Sustainability Report within an Annual Report. DRB-HICOM’s former Head of Group Human Capital, the late Muhammad Rizal bin Md. Zain, was awarded the HR Leader of the Year Award for his contribution in implementing considerable changes to the business. 117
DRB-HICOM Annual Report BERHAD 2018 OUR COMMITMENT TO SUSTAINABILITY SUSTAINABILITY VISION SUSTAINABILITY MISSION A sustainable business is a profitable business. We understand that our business depends on a large amount of resources which has a significant impact on the environment and society at large. We see a potential threat to our long-term success if we don’t hold ourselves accountable for such impacts. As a responsible Group, we are determined to take accountability for the footprints we leave behind. We are determined to operate responsibly through the integration of Social, Economic and Environmental (“SEE”) principles throughout our Group’s value chain. This is a commitment for all our business sectors, and the Group as a whole, as we work together to incorporate sustainability into our daily operations. In 2015, the Sustainable Development Goals (“SDGs”), also known as Global Goals, were set up by the United Nations. These are a set of 17 Goals that was a call of action to end poverty, protect the environment and help people lead a peaceful and prosperous life. Malaysia is committed to support and implement the 2030 Agenda for Sustainable Development and its 17 Goals. We at DRB-HICOM reaffirm our support, aligning to the national aspirations towards achieving the national SDGs. We have mapped our material factors influencing our business to relevant SDGs. We are making progress in achieving these goals within and outside the Group. 118
DRB-HICOM Annual Report BERHAD 2018 Sustainability Report Business Themes GRI Standards Disclosure Indicator Key Initiatives SAFETY AND HEALTH 403-1: Workers representation in • DRB-HICOM Emergency Assistance 3 GOOD HEALTH 8 DECENT WORK ECONOMIC formal joint management– Team (“D-HEAT”) AND WELL-BEING GROWTH worker health and safety • Injury Prevention and Intervention committees Programmes 403-2: Types of injury and rates of injury, occupational diseases, lost days, absenteeism, and number of work-related fatalities ENERGY MANAGEMENT 302-1 Energy Consumption within the • PROTON Green Initiative 7 AFFORDABLE AND CLEAN 12 RESPONSIBLE COMSUMPTION 13 CLIMATE ACTION organisation • Energy Management System in ENERGY AND PRODUCTION Manufacturing & Engineering 302-4 Reduction of energy consumption WASTE MANAGEMENT 306-2 Waste by type and disposal • Separate@Source Programme 3 GOOD HEALTH 12 RESPONSIBLE COMSUMPTION method • Buy Back Center AND WELL-BEING AND PRODUCTION • Food Composting • Material Recovery Facility • Awareness Programmes (Eco-Ranger, Waste is Amaze) Note: All initiatives are from Alam Flora HUMAN CAPITAL 404-1: Average hours of training per • Seminar Skor SPM DRB-HICOM dan 4 QUALITY 8 DECENT WORK ECONOMIC year per employee Berita Harian EDUCATION GROWTH • DRB-HICOM We Care Programme 404-2 Programmes for upgrading • Human Capital Engagement Day employee skills and transition assistance programmes 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk 413-2: Operations with significant actual and potential negative impacts on local communities CORPORATE RESPONSIBILITY 203-1 Infrastructure investments and • Breast Cancer Screening 3 GOOD AND HEALTH 4 QUALITY EDUCATION 7 AFFORDABLE AND CLEAN services supported • Back to School Programme WELL-BEING ENERGY 413-2 Operations with significant actual and potential negative impacts on local communities 119
DRB-HICOM Annual Report BERHAD 2018 OUR APPROACH TO SUSTAINABILITY Themes For the inaugural sustainability report published in 2017, we carried out assessments to identify economic, environmental and social concerns that impact our operations and those that were of the utmost importance to our stakeholders. Safety, Health and Environmental (“SHE”) matters - occupational safety and health, waste management as well as energy consumption and reduction concerns were identified as having significant impact to the Group. Similarly, for social matters, developing human capital stood out as having significant impact to us, followed by the Group’s corporate responsibility. Based on the key concerns identified, we have formed specific themes and assigned teams to take responsibility in managing these themes and their impacts. The teams have developed specific goals, targets and initiatives to ensure there is continuous progress within the Group in managing all the material concerns. We are certain this will ensure a sustainable business model for the Group. OCCUPATIONAL ENERGY WASTE TRAINING AND COMMUNITY SAFETY AND COMSUMPTION MANAGEMENT EDUCATION RELATION AND HEALTH AND CONTRIBUTION REDUCTION DRB-HICOM SUSTAINABILITY THEMES SAFETY AND ENERGY WASTE HUMAN CORPORATE HEALTH MANAGEMENT MANAGEMENT CAPITAL RESPONSIBILITY Managing Our Supply Chain We have built a strong relationship with our vendors and suppliers over the years, all of whom have been instrumental in the success of our business. We provide equal business opportunities to all suppliers through fair tendering and a Request for Quotation (“RFQ”) process whereby all participants are evaluated transparently by the appointed committee members. Points are awarded to locally-based suppliers in our tender/RFQ evaluations where found practical. Prior to invitation in any tender or RFQ, a supplier will be screened through our pre-qualification (“pre-Q”) evaluation. Only the suppliers who pass the pre-Q will qualify to participate in any tender or RFQ. DRB-HICOM is committed to conduct business in a transparent and ethical manner. The Ethics in Procurement clause in our Group Procurement Policy (“GPP”) outlines the behaviours and conditions that the procurement personnel must adhere to. We manage conflicts of interest, procurement relationships and ethical conduct of suppliers through our Invitation To Bid (“ITB”) documents that are issued to participating suppliers during all tender exercises. The ITB documents provide the requirements suppliers have to strictly adhere to. The following are the relevant clauses: 1. Clause 2.7 : Confidentiality 2. Clause 2.8 : Bidder’s Undertaking 3. Clause 2.16 : Bribery and Solicitation 4. Clause 2.17 : Compliance to Safety, Health and Environment Regulations and Guidelines 5. Clause 2.18 : Immigration Regulations Any unethical behaviour is to be reported directly to the DRB-HICOM Group’s toll-free Whistleblower hotline: 1-800-88-2005. This is mentioned in both GPP and ITB. 120
DRB-HICOM Annual Report BERHAD 2018 Sustainability Report SUSTAINABILITY GOVERNANCE Progress on sustainability within the Group is dependent on a good governance structure. DRB-HICOM is in the process of taking sustainability from a topic not included in the Board’s agenda to one that is considered a key component in the Board’s business strategy. This outcome is achieved through the formation of a governance structure where sustainability considerations are embedded at all levels within the organisation. Governance Structure The highest level where sustainability matters are considered is with the Board of Directors. The Board Risk and Sustainability Committee (“BRSC”) reports to the Board of Directors and are responsible for the effective oversight of sustainability initiatives (in particular, sustainability reporting guidelines prescribed by Bursa Malaysia). The BRSC delegates the Sustainability Steering Committee (“SSC”) the responsibility of implementing effective initiatives that inculcate a sustainability driven culture at DRB-HICOM. The SSC is also obligated to set goals and targets for key sustainability matters identified. The Sustainability Working Committee (“SWC”) reports to the SSC and is responsible for managing all related information and perform assessments on sustainability related programmes. SWC also provides incentives for the employees to be environmental and socially responsible, and work together to help DRB-HICOM progress in a sustainable direction. Board Risk and Sustainability Committee (”BRSC”) Sustainability Steering Committee (”SSC”) Sustainability Working Committee (”SWC”) Group Corporate Automotive Services Automotive Properties Support Services Sustainability Risk Management Risk Management is important for the Group to identify and manage risks more effectively. By understanding the risks within our business processes, we are able to evaluate the possibilities eviews of the ris rofiles the ontrol ro ed res and stat s of the a tion lans are to mitigate or even transform it into opportunities. Generally, ond ted on a arterly asis sustainability is perceived as the preventive overlay for risks. At DRB-HICOM, we categorise risks into several groups; these include sustainability-related reputational risk, industrial risk, and organisational risk, among others. We have established a Signifi ant ris iss es and stat s of comprehensive system towards managing these risks within DRB- a tion lans are reviewed and dis ssed at to management level HICOM. The Group’s three lines of defense provide assurance to manage Management of the res e tive om anies are risks at various levels within the Group. Several initiatives have rovided with re orts to ena le them to review been implemented to measure and mitigate risks at all sectors, dis ss and monitor the ris rofiles and units and divisions, on a frequent basis. This ensures that risks im limentation of a tion lans identified are assessed thoroughly to reduce the severity of any possible impact. Our Sustainability Risk Management Approach For further information on risk management at DRB-HICOM, please view information provided between pages 74 and 79. 121
DRB-HICOM Annual Report BERHAD 2018 ENGAGING OUR STAKEHOLDERS Engaging our stakeholders to understand their expectations and concerns on our businesses helps us identify areas within our operations that require improvement. Taking effective actions for the identified concerns and expectations will automatically improve the performance of our Group. We also believe in maintaining transparent communication with our stakeholders to ensure that they are aware of our performance, and support our growth as we progress. Our Stakeholders We nurture our relationship with our employees, who are the backbone of our business; the customers, to whom we strive to deliver quality products and services; suppliers and contractors, that provide products and services to us; local communities, to whom we are accountable for; and our esteemed investors and regulators. These are key stakeholders who have the greatest impact on our organisation, and with whom we engage regularly. Frequency of Stakeholders Mode of Engagement Concerns Expectations Engagement Customers • Website / Social Media Platforms • Continuous • Marketing Promotions and Activation • As needed • Media Conferences • As needed • Customer Call Centres • Continuous • Consumer Surveys • Annually Employees • DRB-HICOM Talent Development • Continuous Programme 1. Management of health 1. Provide training • Excellence Award and Scholarship • Annually and safety and education to Programmes risks in all operations all employees • Code of Ethics and Business Practice • Continuous (“COEBP”) 2. Total energy 2. Community • Whistle Blower Policy • Continuous consumption in all engagement, • Dialogue with National and • As needed operations impact assessment In-House Unions and development • DRB-HICOM Safety, Health and • Quarterly 3. Impact of programmes in all Environment Council infrastructural operations developments, Suppliers and • Business Negotiation • As needed investments and 3. Safe disposal of Contractors • DRB-HICOM Group Procurement • Continuous services effluents and Policy (“GPP”) waste from all • Vendor Development Programme • Annually operations that have least impact on communities Local Communities • Participation In and Sponsorship • As needed and biodiversity of Community Service Events / NGO Events • Social and Environmental • As needed Contribution Programme • Safety, Health and Environmental • Quarterly Campaigns 122
DRB-HICOM Annual Report BERHAD 2018 Sustainability Report Frequency of Stakeholders Mode of Engagement Concerns Expectations Engagement Investors • In-House, One-to-One and Small • Ad hoc 4. Violation of freedom 4. Assessment of Group Meetings with Stakeholders of association and suppliers on • Annual General Meeting (“AGM”) / • Annually/ collective bargaining environmental Extraordinary General Meeting As needed of workers criteria to mitigate (“EGM”) of Shareholders negative impacts in • Media Briefings • As needed 5. Risks and incidences supply chain • Dialogue Between the Group and • Ad hoc related to corruption Investors 5. Diversity in • Roadshows and Teleconferences • As needed 6. Water use by all representation operations, of all employee Regulators • Attend Workshops and Seminars • Continuous Greenhouse Gas categories (age organised by Regulatory Agencies (GHGs) and other group, gender, to Stay Abreast of Any Regulatory significant emissions minority group Requirements produced by etc.), and equal • Pro-Active Engagement / Consultation • Continuous operations opportunity with the Relevant Regulatory Bodies on Corporate Compliance Matters 6. Assessment of suppliers on human rights criteria to mitigate negative impacts in supply chain emissions produced by operations 123
DRB-HICOM Annual Report BERHAD 2018 MATERIALITY ASSESSMENT With reference to the GRI Standards reporting guidelines, our report is developed based on the Materiality principle that encompasses economic, environmental and social sustainability issues of our operations. We conducted focus group discussions to understand our stakeholders’ concerns. Feedback from stakeholders were compiled by external consultants. DRB-HICOM has conducted the materiality assessment and validation through discussions with respective working groups. The Materiality matrix was compiled and mapped according to the influence of sustainability issues to stakeholders and significance of economic, environmental and social impacts to DRB-HICOM. Seven material sustainability issues were identified as highlighted in the materiality matrix below: 1 1. Occupational Health and Safety 8 2 2. Training and Education 3. Energy 4. Indirect Economic Impacts 5. Local Communities 3 6. Effluents and Waste 7. Freedom of Association and INFLUENCE OF 4 5 Collective Bargaining STAKEHOLDER ASSESSMENT & 6 8. Anti-Corruption DECISION 9. Water 7 10. Supplier Environmental Assessment 11. Diversity and Equal Opportunity 9 12. Emission 13. Human Right Assessment 10 11 12 13 Respective indicators can be found in GRI Standards Content Index on pages 156-157 SIGNIFICANCE OF ECONOMIC ENVIRONMENTAL & SOCIAL IMPACTS Climate Check Evaluation of Previous Reports (comparative analysis on: peers, best-in-class and international standards) External Stakeholder Management Interactions Communication (management meetings and focus group (compiled survey results by external consultant) discussions) Materiality Assessment Validation (discussions with theme and sustainability GRI Standards Mapping committee) Our Materiality Assessment Approach 124
DRB-HICOM Annual Report BERHAD 2018 Sustainability Report Safety and Health Key Highlights in FY2017/18 11.1% 42.7% Reduction on Total Number of Reduction on Total Lost Time Incidents Injuries Competency Based Hiring and Training Launched for SHE Practitioners Behaviour- Based Safety More than Programme 150 in Composites Technology Research Malaysia Sdn. Bhd. for SHE Practitioners throughout the Group 1 2 2 NO POVERTY ZERO HUNGER 3 4 5 6 7 Target for Safety and Health in FY2017/18 GOOD HEALTH QUALITY GENDER CLEAN WATER AFFORDABLE AND AND WELL-BEING EDUCATION EQUALITY AND SANITATION CLEAN ENERGY To reduce by 2% total number of 8 9 10 11 12 incidents against FY2016/17 level DECENT WORK INDUSTRY, INNOVATION REDUCED SUSTAINABLE RESPONSIBLE AND INEQUALITIES CITIES AND COMSUMPTION ECONOMIC GROWTH COMMUNITIES AND PRODUCTION ACHIEVED INFRASTRUCTURE 13 14 15 16 17 CLIMATE LIFE LIFE PEACE, JUSTICE PARTNERSHIPS ACCTION BELOW WATER ON LAND AND STRONG FOR THE GOALS INSTITUTION 125
DRB-HICOM Annual Report BERHAD 2018 Why It Matters At present, DRB-HICOM stands as one of the largest and most diversified conglomerates in Malaysia. We put forward a formidable force with about 56,000 employees across the nation, mainly involved in the Automotive, Services, and Properties, sectors. With a diverse range of operations that are interlinked in generating sustainable value to the Group, maintaining our employees’ wellbeing is undoubtedly a top priority for the Group. Besides striving to build a healthier and resilient workforce, we believe a strong safety and health culture will increase the productivity of our business operations and protect our brand’s reputation. How We Approach It All our practices pertaining to Safety, Health and Environment (“SHE”) are guided by the Group’s SHE policy. The policy adopted four key principles, namely compliance, reduction of pollution, communication and continual improvement, to underpin our overarching commitment towards protecting the environment where we operate as well as our employees’ workplace safety 1 COMPLIANCE and health. 2 Every employee in DRB-HICOM is accountable for adhering to REDUCTION OF the policy while remaining vigilant for potential SHE hazards in POLLUTION their daily operations. The SHE Council is headed by the Group Managing Director with the Group SHE acting as secretariat to the council. The Council, with active participation from Senior Management of the Group, meets quarterly to review the Group’s SHE strategy and examine the progress on the Group’s SHE performances and audit results. 3 COMMUNICATION Ultimately, the establishment of the Council is to ensure safe work practices, create conducive working environment and build SHE culture within DRB-HICOM in order to sustain ideal health levels of all our employees. 4 CONTINUAL IMPROVEMENT A strong safety culture relies on effective communication in the workplace. Today, there are more than 150 SHE practitioners across the Group who ensure and drive compliance monitoring in regard to safety and health. Key Principles in DRB-HICOM ‘SHE’ Policy 126
DRB-HICOM Annual Report BERHAD 2018 Sustainability Report Integrated Reporting Occupational Safety, Health & Environmental (“IROSHE”) In 2015, Group SHE introduced a web-based data management system – IROSHE that enables us to monitor 14,333 Total Number of Workdays on our SHE performance not only at Group level but also at the subsidiaries. It is compulsory for all subsidiaries to report their SHE performance (e.g. energy, waste and FY2016/17 safety & health) via IROSHE on a monthly basis. 39,753,022 IROSHE will help in generating effective reports and analysis from the data collected. All results will be 8,212 subsequently reported to the SHE Council. FY2017/18 Our Performance We track our Total Lost Time Injuries 1 and Total Number Total Lost time Injuries of Incident Cases 2 to better manage and control potential risk. Consequently, these measures are making a markedly positive impact on our performance. In FY2017/18, we managed to reduce the total number of incident cases by 11.1%. It went down from 760 to 676 incidents, which is equivalent to 84 fewer incidents than the previous year. This result has exceeded our target of 2% reduction of FY2016/17 level. 760 Total Number of Incidents Moreover, we have achieved 42.7% reduction in the total lost time injuries from 14,333 to 8,212 lost workdays. FY2016/17 This indicates a decrease of 6,121 days in total number 39,753,022 of lost workdays due to injury or illness as compared to FY2016/17 3. 676 Near Miss Reporting FY2017/18 We encourage our employees to report near miss incidents across all operations as part of the measures to prevent any such recurrence. Our near miss reporting system is Total Number of Incident Cases designed to ensure that all near miss incidents (including minor incidents) are reported, recorded and investigated in a consistent and effective manner. 1 Total Lost Time Injuries (Total Lost Workdays): The number of workdays on which the employee would have worked but could not because of occupational injury or occupational poisoning or occupational disease 2 Total Number of Incident Cases: Incident cases include occupational injury/disease, fatality, pandemic case, fire, natural disaster and property damage 3 The data disclosed represents 25 selected subsidiaries 127
DRB-HICOM Annual Report BERHAD 2018 Key Initiative 1: DRB-HICOM Emergency Assistance Team (“D-HEAT”) Established in the wake of floods in Pahang during December 2014 to January 2015, D-HEAT is a trained team that responds to any disaster or crisis when the Management of DRB-HICOM deems fit for it to be deployed. D-HEAT members are selected according to the criteria issued by Fire and Rescue Department of Malaysia (“BOMBA”). The members have undergone various training courses under the guidance of Balai Bomba Seksyen 15, Shah Alam. Some of the trainings have included light Search and Rescue (Land and Water), Self-Contained Breathing Apparatus (“SCBA”), first aid, firefighting and rappelling. D-HEAT Search and Rescue Navigation (“SARNAV”) Training at Taman Botani Negara Shah Alam, Selangor In FY2017/18, D-HEAT members underwent various training courses under the supervision of BOMBA Kota Anggerik and Forest Ranger Taman Botani Shah Alam. On 24 and 25 March 2018, in collaboration with BOMBA, Kota Anggerik had organised a Search & Rescue Navigation (“SARNAV”) training session at Taman Botani Negara Shah Alam, Selangor. Key Initiative 2: Injury Prevention and Intervention Programmes In our continual efforts to nurture SHE culture and instil greater awareness among employees, DRB-HICOM conducts various injury prevention and intervention programmes to minimise the risk of injury. Several activities and training programmes have been conducted by our subsidiary companies, including Composites Technology Research Malaysia Sdn. Bhd. (“CTRM”), Pos Malaysia and PROTON, to ensure a thorough understanding of safety and health roles and responsibilities. The activities and programmes undertaken by the aforementioned subsidiaries in FY2017/18 include: CTRM Pos Malaysia PROTON OCCUPATIONAL HEALTH AND OCCUPATIONAL HEALTH AND OCCUPATIONAL HEALTH AND SAFETY SAFETY SAFETY Safety, Health and Enviroment SHE Mobile Campaign SHE Campaign (”SHE”) Campaign Accident Prevention Team (”APT”) Cutting Apparatus - Knife ROAD SAFETY SoHELP Programme Participation Improvement Defensive Driving SHE D’Hearty - Counselling for Behavior Based Safety (”BBS”) MVA Victim oad Safety Briefing and Programme Inspection Road Hazard Mapping Plant Safety Audit Commuting Safety Support ROAD SAFETY Fire Training and Evacuation Programme Dengue Prevention - Fogging Road Safety Campaign Safety Inspection Video and Misting. Forklift and Reach Truck Improvement ROAD SAFETY Integrated Gemba with Health Motorcycle Defensive Management System (Unsafe Act Riding Training and Unsafe Condition) Motorcyle Safety Audit Road Safety Pledge Advocacy Programme 128
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