Extracted from Annual Report 2022
Year In Review
The year under review was one of lingering uncertainty, both economic and geopolitical, and the past year has seen a continuation of our most challenging period in recent times. Despite Singapore's progressive emergence from the Covid-19 pandemic, its ramifications continued to cast a shadow over the business environment in FY2022, and many of the same concerns have persisted. Operations have also been hampered by the development of more recent issues, including significant inflationary pressures and geopolitical tensions, particularly the Russia-Ukraine war. The significant easing of pandemic measures notwithstanding, the Group continued to face persistent operational challenges. Manpower shortage and corresponding higher labour cost, global supply chain disruptions and increasing raw material prices impacted our bottom line. All these had a debilitating impact on our business and negatively impacted our financial performance especially during the second half, resulting in a disappointing overall financial result for the Group and our shareholders. Although the Group posted higher revenue of $416.8 million, 28% higher than last year's $325.6 million, challenging business conditions had a significant impact resulting in the Group reporting a loss of $10.8 million attributable to shareholders.
Notwithstanding the negative bottom-line performance and in consideration of any lingering impacts from the Covid-19 pandemic and global uncertainties, the Board has recommended to maintain the Group's final dividend at one cent per share for FY2022, subject to shareholder's approval at our upcoming Annual General Meeting (AGM) scheduled on 28 October 2022.
Property & Investment
Leasing activities for our joint venture project, Tekka Place, continued during the year and occupancy of the mall is around 80%. We will work diligently to continue with promotional campaigns to stimulate footfall and bolster tenants' sales. As the impact of the pandemic starts to subside, the embattled hospitality sector started to experience some recovery. With reciprocal green lanes and the Vaccinated Travel Framework, Singapore saw some 1.5 million visitor arrivals in the first half of 2022. Tekka Place's apart'hotel, Citadines Rochor Singapore, is starting to see a robust rebound with room occupancy reaching 87% for August 2022. Outlook for the hospitality industry is expected to remain good for the rest of the year, barring any unforeseen border restrictions. However, challenges like manpower shortages, inflationary cost pressure and rising interest costs is expected to persist, at least for the short term. The residential market in Singapore continues to remain resilient. A further four semi-detached units from the Group's prestigious freehold residential project, One Tree Hill Collection in Orchard Road, were sold leaving two semi-detached units unsold. In Malaysia, movement restrictions were fully lifted in September 2021 and there was a gradual improvement in market sentiment. While there were no new launches of residential units at Twin Palms Sungai Long, the Group released nine units of shop lots for sale in February 2022. Despite challenging conditions and uncertain outlook, 22 units of landed homes were sold during the financial year, bringing the total number of units sold to date to 439 units or 97% of the 453 units launched so far. The Group plans to release more residential units for sale later in the current financial year FY2023. The Group also completed the disposal of the serviced residence at Kelaty House in October 2021. The serviced residence was the last asset the Group held in the United Kingdom. That said, we remain vigilantly on the lookout for investment opportunities that will yield good returns.
After dealing with unprecedented disruptions, construction activities regained some momentum during the year. However, the sector continued to face challenges including that from labour shortage and inflationary pressures on raw materials, resulting in delays and increased operational costs. The division reported higher revenue of $335.3 million, compared to $272.5 million last year but incurred a loss of $12.6 million for the year due to the aforementioned reasons. There were no new civil engineering projects added to LCBC's order book during the year under review. This allowed LCBC to focus on execution and management of operational costs of their existing projects. Contract T315, which involves addition and alteration works to the existing Tanah Merah Station and viaducts, received a certificate of substantial completion for works relating to the basic structure of the reception track. Operationally, LCBC continued to build on their digital transformation efforts with new implementations including AI proximity sensors, Dynamo Script for Revit and online work schedule management, to name a few. In a nod to its digital capabilities, LCBC was lauded for its innovative adoption of construction technology to improve productivity and collaboration, at the BCA's inaugural IDD Awards. The division took home the Gold award in the Firm category and the Gold Plus project category award for Contract N110, the North-South Corridor Tunnel. It also received the Construction Excellence Merit and the Design and Engineering Safety Award for Tekka Place. In September 2022, LCBC further took home two out of four awards at BCA's inaugural Built Environment Transformation Awards. Woodlands North Coast was recognised in the Industrial category while PSA Liveable City topped the Commercial category. The other two categories are Institutional and Residential Buildings. The awards recognise a project's high sustainability standards, productivity and digitalisation amongst other considerations. Separately, LC Interior formed a joint venture with Brandsbridge Pte Ltd in August 2022. Established in 2013, Brandsbridge provides design and interior contracting services in the retail and commercial space in Singapore, Malaysia, Indonesia, and Thailand. This new collaboration builds on the experience and trusted track record of both firms to deliver complementary and more comprehensive interior-retrofitting services for the retail market. During the financial year under review, LC Interior also secured a $27 million contract for addition and alteration works at VivoCity. Awards-wise, LC Interior also garnered the Workplace Safety and Health (WSH) Performance, Silver Award.
Senior Management Changes
Mrs Foo Yoke Heng, one of our long-serving colleagues on the Senior Management team, announced her decision to retire from her position as Human Resources Director. In her more than 20 years with the Group, Mrs Foo played an important role in building our capabilities and establishing internal policies. We thank her for her invaluable service and solid contributions to the Group. At the same time, I am pleased to announce the promotions of Ms Yap Lay Hoon and Ms Dawn Lim to the Senior Management team. Ms Yap has been promoted to Financial Controller, while Ms Lim will serve as Head of Corporate Services (Corporate Communications and Human Resources). Both ladies have accumulated many years of experience in their respective fields, which coupled with their enterprise knowledge of the workings of the Group, ideally position them to add value to the Senior Management team.
Today's global business landscape has been made harsher by lingering concerns of the pandemic and geopolitical risks that came into play. Globally, economic damage from the Russia-Ukraine conflict is expected to cause a significant slowdown in global growth in 2022 and add to inflationary pressure, as reported by the International Monetary Fund, in their April 2022 World Economic Outlook report. Locally, the Singapore construction sector maintains an optimistic outlook with a steady pipeline of projects. The BCA projects that the value of construction contracts to be awarded in 2022 will be between $27 billion and $32 billion, around the same level recorded in pre-pandemic 2019. Of these, 60% is expected to come from public sector projects, supported by the strong pipeline of public housing projects, healthcare developments and infrastructure projects like the Cross Island MRT Line. In the medium-term (between 2023 to 2026), public sector projects are also expected to lead the demand with upcoming MRT projects, including Phases 2 & 3 of the Cross Island Line and its Punggol Extension and the Downtown Line Extension to Sungei Kadut, the Toa Payoh Integrated Development, redevelopment of Alexandra Hospital and a new integrated hospital at Bedok. However, the Group realistically expects sector challenges to remain prevalent. An increasingly competitive landscape, increased manpower and construction material costs will undoubtedly lead to compressed margins. That said, we will continue to forge ahead and focus on completing our existing projects. And while the Group remains well-positioned to tender for new projects, we will continue to monitor the market vigilantly and exercise prudence as we evaluate projects and other business opportunities. Although the challenging business environment in which we operated in during the year placed significant pressure on our people, Lum Chang is a resilient organisation with a strong and experienced management leadership team and the Group is confident that we will prevail during these difficult times. With that, I wish to record my appreciation for the insightful counsel provided by my fellow Board Members to steer the Group during this challenging year, the resilience of the Senior Management team, and the commitment of every Lum Chang employee. My thanks also go out to our partners, clients and shareholders for their confidence and support during a challenging year. May you and your loved ones stay safe and healthy.
Raymond Lum Kwan Sung
16 September 2022