DEAR SHAREHOLDERS,

The global economy has been facing headwinds that contributed to ongoing uncertainty and a bleak outlook. Inflationary pressures, coupled with interest rate hikes, have added to the complexity of the economic landscape. Additionally, geopolitical tensions have further weighed on global economic prospects. All of these factors have combined to create a challenging environment that requires careful attention and management.

The recent surge in interest rates by the US Federal Reserve has resulted in higher cost of financing. Coupled with increased inflationary pressures and supply chain disruption stemming from geopolitical tensions, the prices of essential materials and labour have significantly increased.

To overcome the effects of these headwinds, the Group has streamlined our operations, redeployed staff, and realigned our operating structure to improve competencies, develop innovative work solutions, increase efficiencies, step up training efforts and harness internal synergies. Moreover, we are committed to exercising prudent cost management strategies and leveraging our strong track record to pursue more high-value construction projects as the demand for such projects increases. By doing so, we aim to optimise our operations and expand our capabilities to meet the evolving needs of the construction industry.

OUR FINANCIALS

Notwithstanding this challenging backdrop, we are pleased to report that the Group has seen another set of resilient financial performance.

The Group achieved a 40% growth in revenue of S$353.1 million for the financial year ended 31 December 2022 (“FY2022”) as compared to S$252.6 million for the financial year ended 31 December 2021 (“FY2021”). The Group reported a 21% increase in gross profit to S$26.0 million in FY2022 from S$21.6 million in FY2021, largely due to improved gross margin from the Construction and Building Materials division.

The Group registered a 74% increase in other gains to S$15.0 million in FY2022, mainly due to higher gains recognised from the disposal of property, plant and equipment. The Group recorded a net profit attributable to shareholders of S$6.0 million in FY2022, declining from S$6.9 million in FY2021.

Overall, the Group maintained a strong balance sheet with cash and bank balances of S$82.4 million while shareholders’ equity stood at S$288.9 million. The Group’s current ratio remains healthy at 1.3x with a net gearing ratio of 0.7x as at 31 December 2022. 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 asset value per share was 70.04 Singapore cents as at 31 December 2022.

CONSTRUCTION AND BUILDING MATERIALS

The Building and Construction Authority Singapore (“BCA”) has reported that the preliminary total construction demand or 2022 reached S$29.8 billion, aligning with BCA’s earlier forecast of S$27 billion to S$32 billion and similar to the S$29.9 million recorded in 2021. The sustained strong demand was primarily driven by residential and infrastructure projects in both public and private sectors. Moving forward, the BCA projects the total construction demand for 2023 to range between S$27 billion and S$32 billion, with the public sector contributing about 60% of the total construction demand, amounting to between S$16 billion and S$19 billion. Public sector demand will be largely driven by public housing and industrial and institutional building construction, with an increasing number of projects for water treatment plants, educational buildings, and community clubs. Civil engineering construction demand is also expected to remain robust with ongoing support from MRT line construction and other infrastructure works.

With over 55 years of experience 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. As a major player in the industry, we are confident in our ability to capitalise on these opportunities and deliver successful projects that meet our clients’ needs while ensuring that our work aligns with the broader goals of sustainable development and environmental responsibility.

For FY2022, the Construction and Building Materials division reported a 23% increase in revenue to S$288.2 million from S$233.5 million in FY2021. This was mainly due to higher revenue recognition as a result of the resumption of more construction activities post-COVID-19 pandemic. This accounted for approximately 82% of the Group’s total revenue. As at 31 December 2022, the Group’s construction order book stood at S$684.6 million.

Our Building Materials division operates batching plants and precast yards in Singapore and Malaysia, providing readymix concrete and precast concrete products such as facades, household shelters, bathroom units, columns, and planks. Our main customers are HDB and private developers. As the authorities aim to further ramp up Build-To-Order flats supply, industrial and institutional building, MRT line, and other infrastructure works, a stable pipeline of opportunities for basic building materials is expected. As such, the Group is considering expanding our production capacity within this division. 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 division, we are pleased that both Van Holland and our JV project – Hyll on Holland – is progressing well with active marketing.

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$17.7 million in FY2021 to S$62.2 million in FY2022.

While the private residential property price index rose by 8.4% in 2022, a slight decrease from the previous year’s 10.6% increase, we remain cautiously optimistic about the market’s resilience amidst geopolitical and macroeconomic uncertainty, rising inflation, and higher interest rates. 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

The hotel industry in Singapore has experienced a significant boost due to the relaxation of international travel restrictions. Our Leisure and Hospitality division has recorded an increase in revenue from S$1.5 million in FY2021 to S$2.6 million in FY2022. With the recent announcement of China’s borders reopening, Singapore is poised to welcome a significant increase in international visitors. This is positive news for Oxford Hotel and Alocassia Apartments.

EMBARKING ON THE ESG JOURNEY

The COVID-19 pandemic has highlighted the significance of addressing environmental, social, and governance (“ESG”) issues. Our Company recognises that creating a sustainable business is crucial for our long-term success and accountability towards our impact on the environment, customers, employees, and the wider community. As part of our commitment to embedding sustainability into our business strategy, our Board guides and supports our management team in implementing ESG investing strategies that promote sustainable investing and contribute to our long-term competitive advantage.

OUTLOOK

Looking ahead, the outlook for the global economy is gloomy, with the risk of a global recession. Various challenges remain, such as the ongoing Russia-Ukraine conflict, which contributed to the elevated volatility in both global food and energy prices. This, coupled with ongoing supply chain issues and sticky inflationary pressures, have resulted in significant interest rate hikes by the US Federal Reserve and many other Central Banks globally. For our Group, we expect the construction and real estate sectors to remain challenging with an increasingly competitive environment, manpower shortage, higher interest rates, material and operating costs.

PROPOSED DIVIDEND

To thank shareholders for their continuous support, the Board has proposed a final dividend of 0.20 Singapore cent per share to be approved by shareholders at the forthcoming Annual General Meeting.

ACKNOWLEDGEMENTS

On behalf of the Board of Directors, I wish 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.