Extract from Annual Report 2015
With the prevailing global economic uncertainty, BBR is striving to reach for higher grounds and leverage on innovation as the growth strategy for the Company.
Armed with more than 20 years of excellent track record and a strong reputation, BBR is geared up for sustainable growth which encompasses not only strengthening our robust business model, but harnessing stronger revenue growth. We remain focused and vigilant in strengthening our core competencies while staying invested in the technology of the future.
YEAR IN REVIEW
In financial year 2015 ("FY2015"), the Group reported $425.5 million in revenue, which is a 36.6% decrease compared to financial year 2014 ("FY2014"). General Construction and Specialised Engineering segments contributed 50.6% and 35.6% respectively to group revenue, while Property Development generated 13.8%. Revenue from Green Technology was not yet significant in FY2015.
The Singapore business units contributed $319.3 million or 75% of the total revenue while the Malaysia division generated $106.2 million or 25% of the total revenue.
The decrease in revenue for FY2015 was due to lower revenue recorded for the general construction and property development segments, offset by higher specialised engineering revenue which is derived mainly from Malaysia. With the completion of a few major general construction projects at the end of 2014, the remaining projects under construction contributed to lower revenue in the current year. Construction at Bliss @ Kovan was very active in FY2014 which accounted for higher property development revenue contribution in FY2014 compared to FY2015. Bliss @ Kovan attained temporary occupation permit ("TOP") in November 2015 and the remaining revenue for sold units were recognised.
Gross profit for FY2015 declined to $25.2 million from $28.7 million in FY2014, largely weighed down by lower profit contributions from specialised engineering and property development segments, even though it was partially offset by improved returns for general construction activities in FY2015. While gross profit for its property development in Singapore fell due to lower revenue, contribution from specialised engineering also decreased as it was affected by the Groups new business, i.e. prefabricated pre-finished volumetric construction. Overall, the Group's gross margin grew to 5.9% for FY2015 from 4.3% in FY2014, due mainly to improved performance by the general construction segment.
INNOVATION FOR GROWTH
Casting our sights over the growth horizons, BBR seeks to keep abreast of the building and construction technology innovation curve by investing in Prefabricated Pre-finished Volumetric Construction ("PPVC") method through the acquisition of Moderna Homes Pte. Ltd. ("Moderna Homes") in September 2014. Currently a 75% owned subsidiary of BBR, Moderna Homes possesses the competence to design and assemble prefabricated buildings and Prefabricated Bathroom Units ("PBU").
PPVC technology is slated to be the key smart technology for boosting productivity in the building & construction sector. The recent spike in construction project tenders by government agencies in Singapore specifying PPVC applications attests to the upturn of the growth cycle for the adoption of PPVC construction technology.
In addition, Moderna Homes is proud to be one of four selected companies which has been awarded In-Principle Acceptance Certificates for its PPVC design system by seven Singapore government agencies for use in local projects, through the Building Innovation Panel. PPVC system has been recognised for its level of innovation and the expected 20% improvement in construction productivity. As the bulk of prefabrication works are moved to a controlled environment off-site within a factory, not only will there be reduced noise and dust pollution, site safety will also be improved. Moderna Homes has carved a unique market leadership in the steel PPVC method which can deliver up to 40% improvement in labour productivity and shortened construction timeframe.
BBR's first win came in the form of the Hall of Residence in Nanyang Technological University for 1,582 hostel rooms. Hailed as the first public high-rise development in Singapore using PPVC, the project is due to be completed in the third quarter of 2016.
Moderna Homes is also involved in another residence hall construction project by Nanyang Technological University at Western Water Catchment, for supply of 712 hostel rooms. Delivery and installation of the boxes at the site are expected to be completed in the first half of 2017
Another project, The Wisteria, is the first residential development under the Government Land Sale programme to adopt PPVC technology and PBU. This initiative by the Singapore government is a further testament of PPVC methodology which will reduce construction time and dust, increase productivity and improve quality of construction.
DELIVERING GREEN ENERGY
With the current prevailing lows in oil prices globally, the outlook of the green technology segment has momentarily been dampened by the lowered tariff surcharge rates for solar energy. We hold the long term view that renewable energy will increasingly be the alternative source to fossil fuels in Singapore and will continue to seek new projects in the implementation.
BBR's first major solar leasing contract was with the HDB for the design, installation, operation and maintenance of a 6 MW peak gridtied solar photovoltaic ("PV") system to be installed on the rooftops of 80 HDB flats in Ang Mo Kio Town. In a power purchase agreement signed with Ang Mo Kio Town Council, electricity generated from the solar panels over 20 years will be translated into revenue upon commissioning of completed blocks over time, commencing in the last quarter of 2015.
Another exciting solar project embarked by BBR is our participation in the floaing PV testbed project at Tengeh reservoir jointly led by Singapore Economic Development Board and the Public Utilities Board. The PV test-bed project at Tengeh reservoir will allow companies to develop, test and evaluate the economic and technical feasibility of installing floating solar PV systems on water, as an alternative to deploying solar systems on rooftops.
Implemented over two phases, BBR is among one of the nine consortia which have been chosen to participate in the deployment of ten floating PV systems, each with a capacity of around 100 kWp.
THe Group's financial position continues to be stable, with net assets at $132.8 million as at 31 December 2015, as compared to $134.3 million as at 31 December 2014. Net asset value per share is at 43.12 cents.
Cash and cash equivalents and pledged deposits decreased to $29.2 million as at 31 December 2015 from $44.6 million as at 31 December 2014, mainly attributable to repayment of property development land loan, purchase of land and buildings, construction costs of solar leasing infrastructure atop HDB flats and loans to a jointventure to partially finance a mixed residential and commercial development along Yishun Avenue 4. The disbursements were partially offset by net cash from operations, long-term loans to finance property, plant and equipment purchases and loan repayments by an associate. Cash received from operations was $22.7 million, attributable to sales proceeds from sold units at Bliss @ Kovan upon TOP and partially offset by reductions in cash arising from higher trade receivables.
Market capitalisation was approximately $56.0 million based on the closing share price of 18.2 Singapore cents as at 31 December 2015.
BBR CORPORATE HEADQUARTERS
In September 2015, the Company has completed the acquisition of its existing offices premises, which is a leasehold property located at 50 Changi South Street 1, Singapore 486126. Named BBR Building, it will be the nerve centre of all BBR business operations and future growth.
The management plans to enhance the energy efficiency of the building by installing solar panels on the rooftop to tap solar energy and reduce its reliance on electricity generated by fossil fuels. This marks our support for environmental sustainability in built environments, subject to approvals by the relevant government authorities for the proposed installation.
Over the years, BBR has consistently delivered good returns to our shareholders. This year, the Board has proposed a final dividend of 0.4 cents per share. This translates to a dividend yield of 2.2 per cent based on the closing share price of 18.2 Singapore cents as at 31 December 2015 and a dividend payout ratio of 52.6 per cent for FY2015.
BUSINESS OUTLOOK FOR 2016
On 24 February 2016, the Ministry of Trade and Industry announced that the Singapore economy grew by 1.8 per cent on a year-on-year basis in the fourth quarter of 2015, unchanged from the third quarter. On a quarter-on-quarter seasonallyadjusted annualised basis, the economy expanded by 6.2 per cent, extending the 2.3 per cent growth in the previous quarter.
The construction sector grew by 4.9 per cent year-on-year, faster than the 3.0 per cent growth in the previous quarter. Growth was supported by public sector construction activities. On a quarter-on-quarter seasonallyadjusted annualised basis, growth in the sector accelerated to 6.0 per cent, from 0.2 per cent in the preceding quarter.
The industry outlook in Singapore remains challenging in the next 12 months with increasing competition and manpower shortages. The Group will continue to focus on its core business by leveraging its strong track record in building construction and civil engineering to secure more projects as well as enhancing cost effectiveness and efficiency optimisation in the management of on-going projects. BBR will also continue to conduct feasibility studies to undertake new property development projects.
Our ongoing projects in Malaysia are progressing well and current order book is healthy. However, the local government has been reviewing future expenditures on infrastructure, and the spending budget is expected to decrease, in line with a slowdown in global economy, as well as sharp falls in state revenue as a result of depressed oil prices. Likewise, the construction industry outlook in Malaysia is expected to encounter challenging times.
A NOTE OF APPRECIATION
On behalf of the Board, I would like to express my deepest appreciation to all stakeholders who have been instrumental in BBR's success over the past years - customers, business associates, management team, staff and shareholders.
Geared up for sustainable growth, BBR is ready for the new opportunities and challenges which the future holds. We will grow from strength to strength in building our market leadership in the construction industry to meet the urbanisation needs of Singapore and beyond.
Prof. Yong Kwet Yew