Chairman's Statement

DEAR SHAREHOLDERS,

The year 2020 was an unparalleled year for Koh Brothers Group Limited and its subsidiaries which tested our resilience and determination to succeed. Since the implementation of the Circuit Breaker measures in Singapore on 7 April 2020, the economic activities in many industries slowed to a near standstill. All our sectors were affected, with the Construction and Building Materials Division being the hardest hit as construction activities came to a halt while Singapore battled to contain community cases.


To overcome the difficult period, we have taken a proactive approach through financial prudence, operational efficiency and a focus on improving productivity by staying flexible and maintaining a constant lookout for opportunities.

 

OUR FINANCIALS

COVID-19 has a significant financial impact globally. The Singapore economy was not spared and the government had to introduce various stimulus and support packages to cushion the blow of this global pandemic. Due to the severity of the COVID-19 situation, FY2020 revenue decreased 31% to S$243.1 million as compared to S$353.7 million in FY2019 mainly due to lower revenue recognition from the Construction and Building Materials Division. The Singapore government’s circuit breaker measures from April to June 2020 had severely impacted the Group’s business, causing a halt in most of our construction projects, delay to project schedules, increased costs and disruption in project management.

The Group therefore reported a net loss attributable to shareholders of S$14.8 million in FY2020, from a net profit attributable to shareholders of S$5.8 million in FY2019. Cash and bank balances at the end of the financial year stood at S$101.8 million while shareholders’ equity stood at S$287.9 million as at 31 December 2020. The Group’s current ratio remains healthy at 1.9x with net gearing ratio of 0.9x as at 31 December 2020. Net asset value per share was 69.80 cents as at 31 December 2020 compared to 73.17 cents as at 31 December 2019.

To conserve cash, our Management and staff have taken a 10% pay cut. Directors also took a 10% reduction in their annual Directors’ fees. Business Divisions were also given guidelines not to commit to any capital expenditure items which were not critical to operations. We have taken this course of action as we are encountering an uncertain situation.


CONSTRUCTION AND BUILDING MATERIALS

As a result of the COVID-19 situation, the Construction and Building Materials Division recorded a lower revenue in FY2020 at S$230.1 million compared to S$351.2 million for FY2019. This was mainly due to mandatory closure of our project sites during the Circuit Breaker period. Work at our project sites only gradually started to resume in the second half of FY2020.

Our construction workers were also badly hit by the COVID-19 pandemic. During the Circuit Breaker period, our construction workers were re-housed in designated housing assigned by the Government and their movement were restricted as they were confined and not able to mingle freely. Following the COVID-19 pandemic, new rules were introduced on distancing measures on dormitory living for foreign workers. To resolve the issue on housing our workers after the Circuit Breaker period and to meet the new guidelines, we have built construction temporary quarters (CTQ) to house our construction workers. We are also looking into how we can make our projects more efficient while exploring new technologies, where applicable.

Based on the latest projections from the Building and Construction Authority, the total construction demand in 2021 is projected to range between S$23.0 billion and S$28.0 billion. This is an improvement from the preliminary estimate for construction demand of S$21.3 billion in 2020. As in the previous year, the public sector is expected to drive the construction demand in 2021. Some of the upcoming public sector projects scheduled to be awarded include various contracts under the Jurong Region MRT Line, the Cross Island MRT Line Phase 1 and the Deep Tunnel Sewerage System Phase 2.

The Group’s Construction Division had announced that Penta-Ocean Construction Co., Ltd (“POC”) and Koh Brothers Eco Engineering Limited (“KBE”) entered into a share subscription agreement pursuant to which POC will subscribe for 810 million new ordinary shares in the capital of KBE at an issue price of S$0.047 for each Subscription Share. The aggregate consideration of S$38.07 million shall be satisfied by POC in cash. The deal, which is subject to regulatory and shareholders’ approval, will boost our Construction Division’s capabilities to bid for future capital-intensive projects.


REAL ESTATE

Our Real Estate Division recorded an increase in revenue to S$15.7 million in FY2020 from S$6.0 million in FY2019 due to strong demand for our development in Van Holland. Van Holland is a 69-unit residential development located in the heart of the prime and vibrant Holland Village lifestyle enclave. Our real estate development, Nonhyeon I’PARK, in Seoul, South Korea is completed. The project has been well received and is fully sold.

For the whole of 2020, developers in Singapore had launched 10,833 units for sale and sold 9,982 units, as compared to 11,345 units launched and 9,912 units sold in 2019. Private home prices were also up by 2.2% in 2020. The private residential market is expected to remain stable and going forward, the Group will step up efforts to replenish our land bank selectively. Akin to FY2019, we will also to continue to look for strategic acquisitions that will allow us to maximise shareholders’ returns.

 

LEISURE & HOSPITALITY

The Leisure and Hospitality Division recorded a decrease in revenue from S$3.3 million in FY2019 to S$2.0 million in FY2020 mainly due to the COVID-19 situation. Though the current outlook looks uncertain with international travel curtailed, we expect that our Leisure & Hospitality Division will benefit when borders open and international travel resumes after the rolling out of COVID-19 vaccination programmes in various countries.

 

PROPOSED DIVIDEND

The pandemic is a timely reminder of the importance of prudency. In view of the current challenging environment and as part of prudent cash and capital management, there is no dividend recommended for the year ended 31 December 2020.

 

ACKNOWLEDGEMENTS

The Group is only able to come so far with the unwavering grit of colleagues with a “can-do” attitude. On behalf of the Group, we would like to extend our heartfelt thanks to our management and staff for their hard work in ensuring that the Group succeeds in its endeavours.

We would also like to extend our sincere appreciation to our clients, business associates, partners and shareholders for their constant support over the years. It is only with their invaluable support that we are able to succeed. Together, we can ride through this storm.

 

Koh Tiat Meng
Executive Chairman

 

 

Keng Siang (Francis)
Managing Director & Group CEO