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Chairman's Statement
CHAIRMAN'S AND CEO'S MESSAGE
Extract from Annual Report 2022
Dear Shareholders,
Despite the gradual relaxation of Covid-19 control measures, the world was beset by several negative developments in 2022; among them the escalating geopolitical and trade tensions between major world powers, the war in Russia and Ukraine, global inflationary pressures, and an increase in interest rates by Central Banks.
Although declining freight rates and commodity prices in the first two months of 2023 are potential signs that inflationary pressures may have peaked, the construction industry's labour shortages, the high cost of labour, and higher prices of building materials are three major challenges for the year ahead.
In a report released on February 13 by the Ministry of Trade and Industry ("MTI"), Singapore's economy grew by 3.6% in 2022. At the height of the Covid-19 epidemic in 2020, it posted a negative growth rate of -4.1%. While the economy recorded a growth rate 7.6% in 2021, this is mainly attributed to the low base effect of 2020.
For 2023 MTI projects the economy to grow within the range of 0.5% to 2.5%. Latest quarterly statistics show a slowdown in the economy. The Singapore economy grew by 2.1 per cent on a year-on-year basis in the fourth quarter of 2022, moderating from the 4.0 per cent expansion in the previous quarter. On a quarter-on-quarter seasonally adjusted basis, the economy expanded marginally by 0.1 per cent, easing from the 0.8 per cent growth in the third quarter.
The construction industry grew by 10.0% year-on-year, outpacing the third quarter's 8.1% year-on-year growth. The Building and Construction Authority ("BCA") estimates that the value of building contracts to be awarded in 2023 will be between $27 billion and $32 billion. Like 2022, the public sector, is estimated to contribute between $16 billion and $19 billion, accounting for 60% of the building demand.
Private sector demand is expected to stay constant at between around $11 billion and $13 billion in 2023. The demand for both residential and industrial building construction is projected to stay at the same level as in 2022. Demand for construction of high-specification industrial buildings, such as data centres, integrated business parks, and special purpose warehouses, is robust. The demand for construction of commercial buildings is expected to rise in the private sector as a result of some projects being re-scheduled from 2022 to 2023 due to the Covid-19 pandemic control measures; as well the renovation of aging commercial properties to raise their asset values.
FINANCIAL REVIEW
The Group's revenue decreased by 5.3% from $180.0 million in FY2021 to $170.5 million in FY2022. All segments of the Group's business showed a decline in revenue except for the Property Development segment. Specialised Engineering declined by 12.4% from $102.1 million in FY2021 to $89.4 million in FY2022. The General Construction segment fell from $67.8 million to $33.0 million, a drop of 51.3% and Green Technology revenue decreased by 17.4% from $4.1 million in FY2021 to $3.4 million in FY2022. As construction work of The LINQ progresses, revenue from Property Development increased significantly from $5.9 million in FY2021 to $44.6 million in FY2022 as revenue was recognised on a percentage of completion ("POC") basis.
During the financial year, some construction project losses previously recognised were reduced and reversed upon substantial completion of these projects as well as some provisions for project rectification costs which were not spent were reversed. With these cost savings and the contribution from the Property Development segment, the Group recorded a net profit attributable to equity holders of $5.7 million for FY2022 as compared to $1.6 million for FY2021, which is an earnings growth rate of 255.9%. Earnings per share increased from 0.5 cents to 1.76 cents.
Gross profit margin increased from 11.7% in FY2021 to 15.8% in FY2022. Net profit margin increased from 0.9% in FY2021 to 3.3% in FY2022. Net asset value per share as at 31 December 2022 was 31.14 cents. Cash and bank balances as at 31 December 2022 was $51.0 million.
PROJECTS
The Group's order book as at 31 December 2022 stands at a healthy $407 million as compared with $187 million on 31 December 2021. We have selected some noteworthy projects both completed and ongoing for mention.
Property Development is expected to continue its substantial contribution to Group revenue. The residential units at The LINQ are fully sold out whereas we are still holding on to the commercial units. Temporary Occupancy Permit ("TOP") is expected to be obtained no later than July 2025 and the project is ahead of schedule. Additionally, The LINQ will also generate inter-segmental revenue for the General Construction segment.
In February this year, the Group's 50% owned joint venture, Sinohydro-Singapore Engineering & Construction Joint Venture ("SHSECJV") was awarded a new civil contract of $363 million for the design and construction of Pasir Ris East station under the first phase of the Cross Island Line by the Land Transport Authority ("Contract CR107"). As the project is in its initial stages, its contribution to revenue in FY2022 is not significant. The project timeline spans 8 years and is expected to contribute substantially to the Group's revenue in the years ahead.
The Specialised Engineering segment embodies the Group's technologies in piling, post-tensioning, prefabricated pre-finished volumetric construction ("PPVC"). The post-tensioning division project works are on residential, institution, commercial and industrial buildings. In addition, it also has several civil projects related to Mass Rapid Transit Jurong Region Lines and Rapid Transit Link. The piling division completed several bored pile projects during the financial year and these are mainly piling works for factory buildings. PPVC was used for the conversion of Connect@Changi exhibition and convention centre into a Covid-19 Community Care Facility. It enabled the project to be completed within the short timeline given by the client.
Two infrastructure projects in Malaysia and Thailand showcase the Group's expertise and established track record for infrastructure works. In Sarawak, the Group is building the Pan-Borneo Highway and the Sungai Bintangor Bridge. In Thailand we are doing posttensioning for various civil projects involving monorail, Light Rail Transit, expressway and overpass.
For the General Construction segment, we completed our projects for the Singapore Management University campus and a social community facility for the Ministry of Social and Family Development. Our latest project is the construction of a private residential development comprising 6 blocks of 5-storey residential flat at Jervois Road.
CHANGES TO THE BOARD
On 1 August 2022, the Company appointed Mr. Seow Chin Heng Adrian as an Independent Non-Executive Director of the Company. We welcome Mr. Seow to the Board. His vast experience and expertise in the areas of real estate management and investment will stand the Company in good stead as we advance and respond to the fastchanging business landscape of the Construction Industry.
Ms. Luk Ka Lai Carrie who has served as our Independent Director since 1997 will be stepping down from the Board. We wish to record our thanks to her for her many valuable and significant contributions over the last 25 years and in building and growing the Group to what it is today.
OUR CORPORATE SOCIAL RESPONSIBILITY ("CSR") AND ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG") INITIATIVES: BBR CARE
BBR Care, launched in early 2014, emphasizes BBR's commitment as a socially and environmentally responsible corporate citizen to invest in the social development of the communities we operate in. BBR Care prioritizes employee welfare, community involvement, and environmental sustainability. BBR Care will explore opportunities for new CSR and ESG initiatives in the year ahead.
OUTLOOK
In the medium term, BCA estimates total construction demand to be between S$25 billion and S$32 billion per year from 2024 to 2027, with the public sector continuing to lead demand with S$14 billion to S$18 billion per annum. This is supported by a strong pipeline of public housing projects amid the Housing Development Board's ("HDB") programme to increase the supply of Build-To-Order ("BTO") flats. On 3 March 2023 the Minister for National Development announced that by 2025 there will be 100,000 new HDB flats and that there are 100 ongoing BTO projects island-wide and that this will increase to more than 150 concurrent projects by 2025.
Industrial and institutional building construction is expected to contribute strongly to public sector demand, with more projects for the construction of water treatment plants, healthcare facilities and hospitals, educational buildings, and community clubs. Civil engineering construction demand is anticipated to stay firm with continued support from MRT line construction and other infrastructure work. Megaprojects such as the coming revived construction of Changi Airport Terminal 5 and the proposed expansion of Marina Bay Sands and Resorts World Sentosa are not included in this list.
The Construction Industry has bounced back significantly from its worst days during the Covid-19 pandemic. But it is also a highly competitive industry and to retain our competitive edge we must constantly strive to increase our productivity through innovative engineering and prudent financial management. We will also continue to explore opportunities for strategic partnerships and joint bidding of large projects.
DIVIDENDS
In appreciation of the support from shareholders, the Board of Directors recommended a tax exempt one-tier first and final cash dividend of 0.3 cents per share in respect of the financial year ended 31 December 2022 for approval by shareholders at the forthcoming Annual General Meeting.
ACKNOWLEDGEMENTS
Notwithstanding the challenges we faced, the Group's financial performance in FY2022 is creditable. However, our success could not have been achieved without the contribution from many people. We thank the Board of Directors for their leadership in guiding the Group through a difficult year. On behalf of the Board, we express our appreciation to clients and business partners for their support. To our shareholders, we are grateful for your trust and confidence in the Company which inspire us to put maximum effort into creating shareholder value. Finally, we want to express our gratitude to the entire Management team and staff for their efforts, sacrifices, and hard work during the year.
Prof. Yong Kwet Yew
Non-Executive Chairman
Tan Kheng Hwee Andrew
Chief Executive Officer
(1) Ministry of Trade and Industry press release 13 February 2023 "Singapore economy expanded by 3.6 per cent in 2022. MTI has maintained the GDP growth forecast for 2023 at "0.5 to 2.5 per cent".
(2) Ministry of Trade and Industry press release 13 February 2023 "The Singapore economy grew by 2.1 per cent on a year-on-year basis in the fourth quarter of 2022, moderating from the 4.0 per cent expansion in the previous quarter. On a quarter-onquarter seasonally-adjusted basis, the economy expanded marginally by 0.1 per cent, easing from the 0.8 per cent growth in the third quarter."
(3) BCA press release 12 January 2023 "Total construction demand in 2023 is projected to range between S$27 billion and S$32 billion, similar to last year’s projection".
(4) BCA press release 12 January 2023 "Over the medium-term, BCA expects the total construction demand to reach between $25 billion and $32 billion per year from 2024 to 2027".
(5) BCA press release 12 January 2023 "The projection excludes Changi Airport Terminal 5 development and its associated infrastructure projects as well as the two Integrated Resorts".
(6) The Straits Times 3 March 2023 "We Will Turn the Corner Soon: Desmond Lee says nearly 100,000 homes slated to be ready by 2025" "There are now 100 BTO projects ongoing islandwide, and this will increase to more than 150 concurrent projects by 2025".