Extracted from Annual Report 2023
Year In Review
The financial year under review presented continued challenges for our Group.
Aside from ongoing geopolitical tensions, global inflationary pressures continued to be felt around the world and region, slowing global growth. These together with supply chain disruptions, labour shortage and escalating material costs resulted in challenging operating conditions for our Construction Division. The Division incurred another year of loss, and as the largest contributor to Group revenue, impacted the Group’s financial results. For FY2023, the Group reported a loss of $28.7 million attributable to shareholders.
Despite reporting a loss, the Group still managed to generate revenue of $393.4 million, although 6% lower than last year.
Even though Singapore’s overall growth in the second quarter of 2023 was 0.5% on a year-on-year basis, the growth experienced by the construction sector was encouraging. The sector, supported by an increase in both public and private sector construction output, grew by 6.8% for the same quarter and 6.9% growth in the previous quarter.
In view of the reported growth in the construction industry, the Group is cautiously optimistic and will constantly be on the lookout for opportunities as they arise. As at 30 June 2023, the Group’s construction order book stood at $1.3 billion.
The Board has proposed a final dividend of 1.0 cents per share for FY2023, subject to shareholders’ approval at our upcoming Annual General Meeting (AGM) scheduled on 27 October 2023. This together with the interim dividend of 0.75 cents per share already paid, translates to a full year dividend of 1.75 cents per share.
Property & Investment
Retail occupancy at our joint venture project, Tekka Place, is currently at 80%. We will actively market the remaining vacant units, while continuing with promotional campaigns to boost footfall and drive tenant sales.
Meanwhile, Singapore’s international tourist visitor arrivals reached 1.3 million in the month of August 2023. Singapore Tourism Board (STB) expects the sector to continue its growth momentum for the rest of the year with tourism activity also expected to recover to pre-pandemic levels by 2024. Average room occupancy at Tekka Place’s apart’hotel, Citadines Rochor, has been robust, averaging 87% over the financial year under review. The apart’hotel is expected to benefit from the continued recovery of tourism.
Construction of all units in the Group’s prestigious freehold residential project, One Tree Hill Collection, have been completed with TOP obtained. The remaining two units were sold during the year under review.
In Malaysia, the property market continued to remain robust ever since the easing of pandemic restrictions and the resumption of economic activities. The Group launched 24 units of semi-detached homes in December 2022 and another 24 bungalows in May 2023. As at 12 September 2023, 12 semi-detached units and 11 bungalows from the two launches have been sold. The Group is expected to launch another phase of 34 bungalow units in mid-2024.
For the year under review, revenue reported for our Property Division was lower at $26.3 million compared to $80.2 million for the previous year, largely due to the completion of One Tree Hill Collection.
The construction sector continued to gather momentum allowing our Construction Division to focus on shortening delays and working towards completing existing projects. While construction activities have almost resumed to prepandemic levels, challenges remain prevalent. Although our Construction Division reported revenue of $365.9 million marking an increase of 9% over the last financial year, continued manpower shortages, global supply chain disruptions, increasing costs of labour and raw materials, interest rate hikes and rising inflation impacted business operations, and the division incurred a loss of $21.6 million before tax for the year under review.
On a more positive note, Lum Chang Building Contractors clinched a $110.0 million contract for the construction of a hotel development along Orchard Road, while Lum Chang Interior secured contracts for the conservation and addition and alteration works at Red Cross House, construction of an apartment block at Upper Wilkie Road, and the erection of a hotel at Cavan Road, with the three contracts amounting to $62.6 million.
Separately, for its work on the St James Power Station, LC Interior received two design awards - the Special Category Design Award from Singapore Institute of Architects, and the Distinction Award for Conservation and Innovation at the Urban Redevelopment Authority’s Architectural Heritage Awards. LC Interior was also recognised for its commitment to safety with the Silver Workplace Safety and Health (WSH) Performance Award.
The Group’s pursuit towards sustainable growth requires us to consider the impact of our operations on the environment in our growth journey.
The Group reaffirms our commitment to sustainability with the publication of our maiden stand-alone sustainability report guided by the Global Reporting Initiative (GRI) standards, which also includes our inaugural climate report based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Lum Chang is committed to acting responsibly and maintaining a high standard of corporate governance, integrity and ethics, which are non-negotiable attributes in the way we do business.
The sustainability report can be found online at our corporate website and on SGXNet.
Looking ahead, uncertain global economic conditions are likely to persist amid the ongoing geopolitical tensions, and business conditions will undoubtedly remain challenging.
In its August 2023 report, the Ministry of Trade and Industry has deemed that Singapore’s external demand outlook for the rest of 2023 remains weak, and downgraded the GDP growth forecast from between 0.5% and 2.5% to between 0.5% and 1.5% for 2023.
In this challenging environment, the construction industry has been and continues to be supported by steady levels of public sector demand. The Building and Construction Authority expects total construction demand in 2023 to range between $27 billion and $32 billion, similar to that of last year. The public sector is expected to contribute around 60% of total construction demand, supported by the strong pipeline of public housing, educational buildings, community clubs, water treatment plants, MRT line construction and other infrastructure works.
That said, the Group expects the coming year to remain challenging in terms of continued manpower shortages, rising raw material and energy prices, supply chain disruptions and high interest rates. The Group is committed to maintaining business stability by managing risks effectively and concentrating efforts to improve performance. The depth of our capability enables us to deliver complex contracts and we will leverage this competitive strength to selectively bid for new projects, while remaining disciplined with capital management. In parallel with efforts to secure projects, the Group is continuing to renew overall cost structure to better manage it and achieve greater efficiencies.
In closing, I would like to express my sincerest appreciation to my fellow Board Members for their insightful counsel, the Senior Management team and all employees for their hard work and resilience. My thanks also go out to our partners, clients and shareholders for their continued confidence and support.
Raymond Lum Kwan Sung
15 September 2023