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Chairman's Statement
CHAIRMAN'S AND CEO'S MESSAGE
Extract from Annual Report 2023
Dear Shareholders,
We are pleased to present the Annual Report of BBR Holdings (S) Limited ("BBR", the "Company" or with its subsidiaries, the "Group") for the financial year ended 31 December 2023 ("FY2023").
Group revenue was up by 39.2% from $170.5 million in FY2022 to $237.3 million in FY2023. Profit attributable to equity holders increased by 12.1% from $5.7 million in FY2022 to $6.4 million in FY2023. As a result, the Earnings Per Share rose from 1.76 cents per share in FY2022 to 1.98 cents per share.
The gross profit margin remained stable at 15.4%, largely unchanged from 15.8% in FY2022; offsetting the impact of higher financing, manpower, materials, and transportation costs.
The Group's financial position was healthy. As at 31 December 2023, NAV Per Share was 32.62 cents and Net Debt to Equity was 0.41. Net Cash generated from Operating activities was positive at $4.5 million. Short term liquidity was healthy with cash holdings of $56.9 million as at 31 December 2023.
Business and Geographical Segments
The General Construction segment accounted for 21.6% of revenue as compared with its 19.4% contribution to revenue in FY2022. The increase was mainly due to new projects awarded during the year. The continuing income stream from the Group's 50% owned joint venture, Sinohydro-Singapore Engineering & Construction Joint Venture ("SHSECJV") for the construction of Pasir Ris East Station on the Cross Island Line also contributed to the Group's top line.
However, revenue from the Specialised Engineering segment of the Group's business saw a 22.7% fall from $89.4 million in FY2022 to $69.1 million in FY2023 as construction activities for the infrastructure and piling projects decreased.
The Property Development business segment recorded a revenue of $112.3 million, a marked increase from $44.6 million in FY2022. Construction of the 20-storey mixed development comprising a 15-storey residential apartment tower of 120 units and a commercial podium at The LINQ is ongoing and the construction progress is on schedule.
The Green Technology business segment revenue increased from $3.4 million in FY2022 to $4.6 million in FY2023 due to projects awarded in FY2023 for the design, construction, and installation of photovoltaic systems as well as the sale of renewable energy certificates.
Singapore retained its position as the dominant market for the Group's business accounting for 87.3% of Group revenue, followed by Malaysia with 7.7% and Thailand with 5.0%.
Projects
The Group's projects showcase its established reputation and proven track record as a construction company with innovative design and engineering capabilities and a boutique developer of premium properties. Besides the ongoing development at the Group's LINQ property development, the Group has secured a project for construction of 6 blocks of 5-storey residential development with basement car park at Jervois Road in the prime Tanglin area, and a project for the additions and alterations of facilities at Resorts World Sentosa integrated resort, one of Singapore's prime tourist attractions.
In Specialised Engineering the Group's bored piling, post- tensioning and infrastructural works requiring innovative engineering has enabled it to secure several projects from main contractors for the Land Transport Authority's several upcoming lines and stations. Additionally, works on bridges, expressways, overpasses, and LRT monorails are ongoing in Malaysia and Thailand.
The Singapore Economy and the Construction Industry
The Ministry of Trade and Industry ("MTI") announced that the Singapore economy grew by 1.1% in 2023 moderating from the 3.8% post-Covid bounce in 2022. MTI has maintained the 2024 growth forecast for the Singapore economy at between 1% to 3%.
The construction sector grew by 5.2% in 2023 as compared with 4.6% in 2022, supported by growth in construction activities in both the public and private sectors. The Building and Construction Authority ("BCA") in a press release on 15 January 2024, has projected total construction demand in 2024 to be between $32 billion and $38 billion, with the public sector contributing to 55% of total construction demand.
Construction demand is projected to range between S$31 billion and S$38 billion per year from 2025 to 2028. The public sector will continue to lead demand and is expected to contribute S$19 billion to $23 billion per year from 2025 to 2028, with building projects and civil engineering works constituting about 70 percent and 30 percent respectively. Besides public housing developments, public sector construction demand over the medium term will be supported by various major developments, such as Phase 3 of the MRT Cross Island Line, the MRT Downtown Line Extension to Sungei Kadut, Alexandra Hospital redevelopment, a new integrated hospital at Bedok, Toa Payoh Integrated Development, Siglap South Integrated Development, and redevelopment of various Junior Colleges.
BCA expects private sector construction demand to remain stable in the medium term at between $12 billion and $15 billion per year from 2025 to 2028. The moderation in the private sector is reflected in Urban Redevelopment Authority ("URA") private residential property price index increasing at a slower pace of 6.8% in 2023 compared to the increase of 8.6% and 10.6% in 2022 and 2021 respectively.
Transformation of the Construction Industry
The Group will ensure that its operational and business strategy is aligned with the transformation of the construction industry as set out in the BCA's Built Environment Industry Transformation Map ("BEITM").
The BEITM aims to transform the built environment sector through the three key stages of a building's life cycle - planning and design, construction, operations and maintenance. Its key tenet is the raising of industry's productivity by fostering collaboration between all parties participating in the life cycle of a building from developers to building owners, architects, consultants, construction contractors, procurement specialists, and facility management providers. The resulting integration of planning, design, construction, operations, and maintenance will be enabled through digital platforms, Building Information Modelling ("BIM"), digital twins, and a common data environment.
Outlook for the Year Ahead
The Group is supported by a healthy order book of $439 million. However, the war in Ukraine, the Israel-Gaza crisis in the Middle East, a rise in trade protectionism trends, and tensions in the South China Sea cast a shadow of uncertainties over the economic horizon.
While inflationary pressures may have peaked, the construction industry in Singapore still faces many challenges. The cost of financing and the prices of construction materials remain high. Additionally, there are manpower supply constraints and shortage of skills while the cost of bedspace rental in dormitories has escalated.
The Group will continue to manage its project costs and exercise financial discipline in its operating expenditure. It will leverage its track record in building construction and specialised engineering to secure more projects by tender as well as in partnership with strategic partners. The Group will also explore investment opportunities to diversify its business.
In property development, the Group will step up its marketing for the sale of the two-storey retail podium with 53 strata-titled units at The LINQ. However, the Group will exercise financial prudence when bidding for the replenishment of its land bank.
Changes to the Board
In line with our Board Diversity policy, we have taken significant steps to strengthen the capabilities of our Board. We would like to welcome our newly appointed Independent Non-Executive Directors, Mr. Chan Mun Wei who was appointed on 9 May 2023, and Ms. Karen Lee Kiah Ling who was appointed on 2 January 2024.
Mr. Chan holds a Master of Arts in Education and a Bachelor of Arts (Distinction) from Stanford University and Master of Business Administration from the National University of Singapore. His multi-sectoral experience in sustainability, corporate strategy and risk management will be an asset to the Board in steering the Group towards its vision of sustainable and innovative construction engineering.
Ms. Lee holds a Master of Science in Real Estate and a Bachelor of Science (Economics) from the National University of Singapore and her more than 20 years of experience in real estate funding, investor relations, investment, asset management and business development will be a plus for the Group's property development business.
We would also like to acknowledge Mr. Adrian Seow who resigned from the Board on 16 October 2023. We thank him for his invaluable contribution throughout his tenure.
Our Chairman, Prof. Yong Kwet Yew, was first appointed to the Board in 1997. He will be stepping down this year after the conclusion of the forthcoming Annual General Meeting, having served on the Board for 27 years. The Board, Management and staff wish to record a note of deep appreciation to Prof. Yong for his many significant and valuable contributions and dedicated service over the last three decades. Under his insightful and steady leadership, the Group has ridden through many difficult times, especially during the COVID-19 pandemic. We wish him all the best in his future endeavours.
Corporate Sustainability
The objectives of corporate sustainability are to enhance organisational resilience, ensure compliance with relevant Environment, Social and Governance ("ESG") regulations, and create long-term value for all stakeholders. We have streamlined the material ESG factors and continued the journey in assessing climate-related risks and opportunities. The Corporate Sustainability Committee ("CSC") will formulate and implement good ESG practices, which includes seeking out new opportunities for BBR Care, our community giving initiative initiated in 2014.
Dividend
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 2023 for approval by shareholders at the forthcoming Annual General Meeting.
Acknowledgements
The Group's creditable financial performance in FY2023 in the face of numerous challenges in the business environment would not have been possible without the collective efforts of many parties. We extend our heartfelt gratitude to the Board of Directors for their steadfast leadership in guiding the Company through a demanding year. On behalf of the Board, we convey our appreciation to our valued clients and business partners for their unwavering support. To our shareholders, we express sincere thanks for your trust and confidence, which inspired us to strive for excellence in all that we do. Finally, we thank the entire Management team and staff for their dedication and hard work throughout the year.
Message from The Chairman
It has been a tremendous privilege and honour for me to have served on the Board of BBR for the past 27 years. It has been a good time working with my fellow Board members, past and present, and I thank them for the meaningful collaboration and shared commitment to the Group's success. I also wish to commend and thank the management and staff for their commitment, dedication and hard work. Together we have accomplished and built BBR to what it is today.
I am confident that the Group is well-positioned to face challenges and succeed in new opportunities. I wish the Group every success in its next phase of growth.
Prof. Yong Kwet Yew
Non-Executive Chairman
Tan Kheng Hwee Andrew
Chief Executive Officer
References:
• BCA Built Environment Industry Transformation Map
• Ministry of Trade and Industry Singapore Press Release "MTI Maintains 2024 GDP Growth Forecast at 1.0 to 3.0 Per Cent", 15 February 2024
• BCA Media Release "Steady Demand for the Construction Sector Projected for 2024", 15 January 2024
• URA Media Release "Release of 4th Quarter 2023 Real Estate Statistics", 26 January 2024