Extracted from Annual Report 2021
Following a challenging year in FY2020, and given the uncertain economic environment arising from the global pandemic, I am pleased to inform shareholders that in the financial year ended 30 June 2021, the Group was resilient and managed to turn around our financial results to achieve profitability.
Singapore’s GDP showed positive growth in the first half of 2021, although the growth was due to the low base in the second quarter of 2020 when GDP contracted by 13.3%. For 2021, Singapore’s GDP expanded by 1.5% in the first quarter, followed by 14.7% in the second. Likewise, the construction sector grew sharply by 106.2% on a year-on-year basis in the second quarter of 2021, compared to the similar time period last year when construction activities ground to a halt during circuit breaker measures
While the Ministry of Trade and Industry in a media release on 11 August, upgraded Singapore’s official growth forecast for 2021to between 6% and 7% (up from the range of 4% to 6%), it anticipates that labour shortages arising from prevailing border restrictions on the entry of migrant workers, are likely to weigh on the recovery of the construction sector. Amidst the spread of more contagious strains of the coronavirus, demand for global travel is also expected to remain sluggish.
The year under review was one of reinvention and continual change. The coronavirus pandemic persisted through 2020 and the first half of 2021, and despite the rollout of the national vaccination programme, conditions continued to be challenging. The Group has had to continually adjust work schedules and adopt appropriate measures to minimise disruptions to business activities. Despite the pandemic’s ramifications on the construction, property and hospitality industry, the Group posted revenue of $325.6 million, a slight increase from last year’s $322.7 million. Profit attributable to shareholders registered at a respectable $3.0 million given the challenging circumstances. The Group incurred a loss of $2.1 million in the previous year.
In spite of the challenging market in FY2021, we stay committed to sharing our earnings with our shareholders to show our appreciation for their support. The Board is proposing a final dividend of one cents per share for FY2021, subject to shareholders’ approval at our upcoming Annual General Meeting (AGM) scheduled on 29 October 2021.
Leasing activities for our joint venture project, Tekka Place, continued after last year’s circuit breaker and occupancy of the mall is now close to 80%. Through this challenging period, we supported the tenants at Tekka Place with rental reliefs and also passed on Government pandemic reliefs.
Due to border and travel restrictions, the hospitality sector has borne the brunt of the pandemic, with international travel coming to an almost standstill. Even with the progress of vaccination programmes around the world, recovery for global travel, both business and leisure, will be slow. The operation of Tekka Place’s apart’hotel, Citadines Rochor Singapore, will remain challenging. In the meantime, Citadines Rochor continues to take on Government contracts to serve as a quarantine facility.
The residential market in Singapore has remained resilient. Three more semi-detached units and one bungalow from the Group’s prestigious freehold residential project, One Tree Hill Collection in Orchard Road, were taken up. To date, more than half of the landed homes in the development have been sold. Partial TOP was obtained in June 2021, with full TOP expected in the last quarter of 2021. Marketing of the remaining units continue.
In Malaysia, due to the various Movement Control Orders implemented by the local government from January to June 2021, no new phases of Twin Palms Sungai Long were launched during the financial year. Despite the restrictions, the Group was still able to sell 16 of the landed home units during the year under review, which brings the total number of units sold to date to 417 units or 94% of the 444 units launched so far.
After circuit breaker measures were lifted, activities at the Group’s Construction sites gradually started resuming operations in the third quarter of 2020. Progress was slow as LCBC worked to comply with strict Safe Management Measures. Manpower constraints and disrupted supply of construction materials also impacted productivity. Pre-pandemic secured projects were affected by lower margins due to higher unexpected operational costs, including those related to compliance with BCA’s COVID Safe-Restart Criteria. Despite that, the division still managed to report revenue of $272.5 million, albeit a 7.6%, decrease from last year’s $294.8 million.
During the year under review, the division secured a $187.2 million contract, bringing its total order book to $1.81 billion at the end of the financial year. The contract was awarded for the construction of three multi-user general industrial buildings at Kallang Way. LCBC also completed two out of three phases for the Family Justice Courts, and construction activities for its other projects including the Tanah Merah MRT project, North-South Corridor and the Mandai Rejuvenation project are ongoing, as we work around additional measures introduced to curb the spread of Covid-19 in the community. We have adopted new technologies in our workflow processes, including the use of drones, 4D Scheduling, Virtual Reality and Laser Scanning, and are continually exploring ways to improve productivity in our projects through digital transformation.
Mr Daniel Soh and Mr Andrew Chua had advised the Board of their intention to retire as Independent Directors at the Group’s upcoming AGM. On behalf of the Board, I thank them for their valued advice and contributions to the Group, Mr Soh has been an Independent Director and Chairman of the Audit and Risk Committee since 2013 and Mr Chua, an Independent Director since 2015.
At the same time, the Board members and I would like to welcome Mdm Constance Lee and Mr Kenneth Ho, who joined the Board as Independent Directors in August and September 2021 respectively. Mdm Lee is a Chartered Accountant by training and previously served the Group as Executive Director from 2001 to 2010. Having spent more than two decades overseas, Mr Ho brings with him a wealth of experience in business development and operations in China and the emerging markets of Indochina. I have no doubt that their valuable expertise and insights will be of great benefit to the Group.
Given the current situation, forecasting the future is especially difficult. We expect uncertain global economic conditions to persist, depending on how the pandemic evolves, particularly with the emergence of new variants of the virus. We are bracing for another tough year in FY2022, and expect Group performance to be impacted by rising operational costs, a tough labour market and a shortage of experienced and skilled manpower.
Global economic growth is expected to resume, with anticipated improvement in construction demand for 2021 according to the BCA (between $23 billion and $28 billion). Although the Group remains well-positioned to leverage its solid track record to tender for new projects, it will be selective in its process.
That said, we will continue to monitor market conditions closely, and take a conservative approach towards pursuing construction projects and investment opportunities. We will continue to practise prudent balance sheet management, and managing working capital to ensure liquidity, while being mindful of operational expenditure.
Operationally, we are constantly striving to improve our work methods, and the skills and capabilities of our people. We will continue to advance the Group’s digital capabilities, developing innovative technological solutions to improve our project productivity and efficiency.
Finally, I wish to put on record, my appreciation for the wise counsel and guidance provided by my fellow Directors that helped steer the Group through this challenging year. I would also like to thank our shareholders, clients, business associates, and employees for their hard work and dedication, whose commitment has been, and will continue to be, instrumental to the Group’s success.
May you and your loved ones stay safe and healthy.
Raymond Lum Kwan Sung
15 September 2021