TURNAROUND MANAGEMENT - SPECIAL COMMENDATION
Peter Leong - Comfort Group
By Karen Cooper

Peter Leong is writing a book in his spare time. Not a book he expects to be published, but one which might help his two young sons make sense of the financial world. "I want to be able to pass something on to them, even if they can't understand it fully until they're 30," says the group financial controller at Singapore's biggest taxi operator, Comfort Group.

His kids are not the only ones benefiting from their accountant father's varied career, which included investment banking, consulting and fund management before joining Comfort in 1996. Leong considers himself head coach of his 30-strong finance team and he must be doing something right. He's lost less than five team members in the last five years.

His passion for passing on knowledge has also helped Comfort, which has seen a remarkable about-turn in the past five years. For these efforts, he earned a Special Commendation for Turnaround Management in this year's Best Practices Awards.

Shaking The Blues

Like so many companies in the wake of the late 1990s regional economic crisis, Comfort tripped badly on property investments. Hefty provisions and a 44 percent drop in net profit marred its 1998 accounts. Its shares slumped to an all-time low of S$0.21 in September 1998 and results the following year were little better.

Spirits at the company were as blue as its distinctive cabs. A new strategy was needed - and fast. "We had to ask ourselves: how can we move forward by tapping what we've got and make the best out of it," Leong says. The CFO helped launch a search for new revenue streams linked to core businesses. The company expanded into vehicle servicing, crash repairs, towing and buying diesel in bulk to sell on to its taxi drivers.

Drawing on internal funds, Leong approved the acquisition of new workshops and diesel dispensing facilities. He also signed off on a S$36 million upgrade of its CabLink global positioning satellite system. Today, the system handles 20,000 phone bookings daily compared to 2,800 when it was set up six years ago.

More difficult for some colleagues to accept, he says, was his enthusiasm for concepts such as cost of capital and economic value added. This was, after all, an unsexy company that began life 30 years ago as a cabbies' co-op and is still 37 percent owned by Singapore's trade union movement. His colleagues needn't have fretted. Comfort's return on equity shot up to 14.7 percent, more than double its 1998 level of 5.7 percent. Even better, its average cost of capital is down to 8 percent, a respectable figure for a service company in Asia.

Comfort's cost of capital management has been aided by another Leong innovation - a floating rate medium-term note. The S$200 million (US$110 million) facility - only the fourth set up by a Singaporean company - is entirely flexible. Leong can use it to borrow from one month up to seven years. It has helped fund annual fleet replacement costs and shave the interest bill on Comfort's debt of US$27 million.

To enhance value he also set a clear dividend policy. Comfort pays at least 30 percent of net profit in dividends and made its first interim payout last year. So how does Leong's report card look? Turnover hit US$227 million in fiscal 2001, almost double that in 1996 to 1997. Net profit rose to a record US$32 million over the same period from US$18 million. Earnings jumped to S$7.4 a share from S$4.1.

Comfort shares trade at S$0.66 and outperformed the Straits Times Index last year. Leong's book may never make the bestseller lists, but his kids should one day find the chapter on fixing troubled companies a good read.