DEAR SHAREHOLDERS,

In 2023, the global economy continued to witness heightened geopolitical tensions, with ongoing unrest in the Middle East and amidst the Russia-Ukraine war, elevated interest rates, and persistent inflationary pressures, all of which have weighed on economic growth. Despite expectations of a soft landing supported by moderating inflation and a gradual normalisation of global economic conditions, heightened uncertainty from ongoing geopolitical tensions could lead to further downside risks.

To better mitigate the effects of these ongoing macro uncertainties, the Group remains focused on cost management and operational streamlining efforts to improve competencies, develop innovative work solutions and increase efficiencies. Moreover, we are committed to leveraging our strong track record to pursue more high-value construction projects as outlook for demand, particularly in the public sector, remains good. By doing so, we aim to optimise our operations and expand our capabilities to meet the evolving needs of the construction industry.

OUR FINANCIALS

Against this backdrop, we continued to deliver resilient topline performance for the financial year ended 31 December 2023 (“FY2023”). For FY2023, revenue rose 1% to S$356.2 million, from S$353.1 million the previous year (“FY2022”). The increase in revenue was mainly contributed by Van Holland, a residential development property under the Real Estate division. Gross profit, however, declined 71% to S$7.5 million in FY2023 from S$26.0 million in FY2022. This was mainly attributed to the finalisation of construction projects and prolonged construction period for certain projects, resultingin higher material, manpower and subcontractor costs.

The Group registered a 96% decline in other gains to S$0.60 million in FY2023, mainly due to an absence of fair value gain on investment properties and lower gain recognised from disposal of properties, plant and equipment.

The Group saw a 67% increase in share of profit from associated companies and joint ventures to S$2.7 million in FY2023 from S$1.6 million a year ago due to fair value gain on investment property held by a joint venture.

Overall, the Group incurred a loss before income tax of S$25.8 million in FY2023. A profit before income tax of S$9.2 million was recorded in the previous year.

Correspondingly, the Group recorded a net loss attributable to shareholders of S$22.0 million in FY2023, as compared to a net profit attributable to shareholders of S$6.0 million in FY2022.

The Group was able to maintain a strong balance sheet with cash and bank balances of S$95.8 million while shareholders’ equity stood at S$264.9 million as at 31 December 2023. The Group’s current ratio remains healthy at 1.3x with a net gearing ratio of 0.5x as at 31 December 2023. This leaves us in a comfortable financial position and provides us with sufficient resources to explore opportunities without the risk of over-exposure. The Group’s net assets value per share was 64.22 Singapore cents as at 31 December 2023.

CONSTRUCTION AND BUILDING MATERIALS

According to the projection by the Building and Construction Authority Singapore (“BCA”) on 15 January 2024, total construction demand in 2024 is projected to be between S$32 billion and S$38 billion, with the public sector contributing about 55% of the total demand. The public sector is expected to drive total construction demand in 2024, reaching between S$18 billion and S$21 billion, mainly from public housing and infrastructure projects. In addition, BCA expects a steady improvement over the medium term with projection of construction demand to reach between S$31 billion and S$38 billion per year from 2025 to 2028.

For our Construction and Building Materials division, we have several ongoing projects including MRT Circle Line 6, Deep Tunnel Sewerage System Phase 2 contract, Influent Pumping Station at Tuas Water Reclamation Plant. We also secured a Mechanical, Electrical and Instrumentation Control and Automation works for the industrial liquids at Tuas Water Reclamation. We will be focused on the smooth completion of these projects to better manage the higher material, manpower and subcontractor costs.

With our long track record in the construction industry and supported by the complementary capabilities of our Building Materials division, our Group is in a good position to benefit from the sustained demand for basic building materials, infrastructure, water and wastewater treatment, and environmental projects. Looking ahead, we will navigate the challenging environment by leveraging on our strong track record and strategic partnerships, to tender for higher value construction projects.

For FY2023, the Construction and Building Materials division reported a 15% decrease in revenue from S$288.2 million in FY2022 to S$245.1 million in FY2023. The division accounted for approximately 69% of the Group’s total revenue.

Our Building Materials division which operates batching plants and precast yards in Singapore and Malaysia, supplies ready-mix concrete and pre-cast concrete products such as facades, household shelters, bathroom units, columns, and planks. We supply to the HDB market and private developers. As some of the major upcoming public sector projects scheduled to be awarded in 2024 include the HDB’s new Built-To-Order (“BTO”) developments, a stable pipeline of opportunities for basic building materials is expected. At the same time, we are committed to increasing our research and development efforts to create more environmentally friendly products. By doing so, we hope to meet the needs of our customers while contributing to sustainable development.

REAL ESTATE

Under our real estate development division, we are pleased that both Van Holland and our JV project – Hyll on Holland – have been fully sold. We remain dedicated to our prudent approach of seeking out distinctive development opportunities. Our Real Estate division achieved higher growth, with revenue rising from S$62.2 million in FY2022 to S$107.1 million in FY2023.

On the property development front, latest statistics from the Urban Redevelopment Authority indicated that for the whole of 2023, prices of private residential properties increased by 6.8%, moderating from the 8.6% increase in 2022. Amidst an environment marked by inflation and higher borrowing cost coupled with the impact of government adjusted cooling measures introduced in April 2023, the Group expects the private residential market to remain challenging. We will continue to carefully identify promising and attractive sites to bolster our land bank and explore potential partnerships with other developers to diversify risks and optimise/efficient capital utilisation.

LEISURE & HOSPITALITY

On the hospitality front, the latest statistics from the Singapore Tourism Board (“STB”) showed that Singapore’s international visitor arrivals reached 13.6 million in 2023, meeting STB’s forecast of between 12.0 million and 14.0 million visitors. The figure is about 71% of pre-pandemic levels and more than double the 6.3 million visitors in 2022. Meanwhile, tourism receipts for the current year are estimated to reach S$24.5 billion to S$26.0 billion, exceeding STB’s forecast of S$18.0 billion to S$21.0 billion set out in 2023. Barring any unforeseen circumstances, we are confident that international tourism recovery is on a strong trajectory and will continue its strong momentum into 2024.

Our Leisure and Hospitality division has recorded an increase in revenue from S$2.6 million in FY2022 to S$4.0 million in FY2023. We expect our Leisure & Hospitality division will continue to contribute positively to the Group in 2024.

EMBARKING ON THE ESG JOURNEY

The Group remains committed to deliver the best value to our stakeholders in a sustainable manner, while navigating today’s challenging operating environment. With the continued support of our business partners and employees, the Group has adapted to the evolving business landscape by adjusting our ways of working to ensure business viability, and supporting the well-being of our employees and local communities.

The Group strives to be a forward-thinking builder, incorporating sustainable principles into the design, construction, and management of all our projects. We are dedicated to upholding the highest standards in environmental stewardship, safety, social responsibility, and governance practices. We aim to create enduring value for all our stakeholders through a responsible, ethical, and conscientious approach.

In the future, the Board will collaborate closely with our management team to assess sustainability-related matters, including risks and opportunities. We will also work closely with our business stakeholders to strengthen health and safety protocols, prioritising the well-being of our employees, customers, contractors, and the wider community. .

ACKNOWLEDGEMENTS

The Board would like to express its sincere gratitude to the late Mr Koh Tiat Meng, Koh Brothers’ Founder and Executive Chairman, who passed away on 8 July 2023, for his foresight, strong leadership, commitment and contributions. The late Mr Koh was instrumental in strategically expanding the Group’s businesses and spearheading business activities into China, Malaysia, Indonesia and Vietnam.

On behalf of the Board of Directors, I would also like to take this opportunity to record our sincere appreciation to our stakeholders, clients, business associates, partners, shareholders, and employees for their continued support. Looking ahead, we will continue to stay prudent, innovative, enterprising, quality conscious and flexible in responding to new changes and challenges.