Overall, the construction industry saw a general increase in the level of construction activity arising from higher demand from both the public and private sectors. The improvement was partly boosted by the Singapore government’s decision to bring forward about $1.4 billion worth of projects to commence between 2017 and early 2019. While competition remained stiff, the higher construction demand relieved pressures on contract margins.
Stable tender prices, along with strict operational discipline on our part, enabled us to build a healthy order book in the financial year ended 31 March 2019 (“FY19”). However, due to issues not within our control arising from a sizeable project, our yield was eroded. Extended delays to the completion of the project meant that resources deployed could not be freed sooner, and this affected our capacity to take on more viable contracts. We thus recorded revenue of $323.1 million in FY19, compared to $338.8 million in the prior financial year (“FY18”). On the back of the lower revenue and the impact of the abovementioned project, we recorded a net loss of $18.0 million, compared to a loss of $13.5 million in FY18.
Year In Review
We were able to leverage on our track record and capabilities to secure a fair number of sizable contracts in Singapore and the region. These Singapore projects include public works such as part of the Deep Tunnel Sewerage System Phase 2 – Contract T11 and a portion of the National Cancer Centre project at the Outram Medical Campus, as well as private projects such as foundation works for Neste Biofuel’s new plant and a portion of the Micron Semiconductor’s wafer fabrication facility. Riding the enbloc sales momentum in the private residential market, we also managed to add several foundation contracts for private condominium development in Singapore. In Malaysia, revenue contribution was mainly derived from construction services rendered in the private residential sector.
Competition in the last few years has resulted in consolidation in the industry. We are thankful that our longstanding emphasis on financial discipline, particularly with regard to cash flow management, has helped us to remain resilient amid the difficult seasons. Operationally, our staff are constantly encouraged to explore new and more efficient work processes. This has enabled us to build our resilience against the brunt of the challenging industry conditions in the past few years.
We remain cautiously optimistic about the outlook of the construction industry in the years ahead.
There are opportunities arising from the pipeline of public projects in the medium term, including some notable ones such as the Cross Island Line, developments at the Jurong Lake District and at Changi Airport Terminal 5. Private sector demand will be supported by new industrial developments and the redevelopment momentum from en-bloc transactions in the past two years. The exit of the certain large players from the industry could lessen the competitive pressure, while our expertise and established track record will strengthen our ability to bid for future projects.
We are also mindful that the year ahead could bring new challenges. While the outlook of Singapore’s construction sector looks to be positive, prevailing geopolitical headwinds, such as the USChina trade dispute, could have a detrimental effect on Singapore’s economic growth and weigh on the construction sector’s recovery.
In the year ahead, we will continue to keep a tight rein on our costs to ensure our price-competitiveness in the market. We will also continue to ensure the optimisation of our cost and operational efficiencies as we strengthen ourselves for the journey ahead.
Together with my fellow Directors, I would like to express my appreciation of the diligence and dedication of CSC’s management and staff, for weathering through the past severe challenges. Looking ahead, the management team is ready to capitalise on any and all of the opportunities that may arise.
My fellow directors and I would also like to record our deepest appreciation for Mr Patrick Chee Teck Kwong, the former independent non-executive chairman, and Mr Tan Ee Ping, the former independent director, who retired at the last Annual General Meeting on 27 July 2018. We are indeed immensely grateful to Mr Chee and Mr Tan who have devoted selfless effort and provided invaluable guidance to CSC for 20 and 15 years respectively.
As the new Chairman in my first year of service, I wish to express my deep gratitude to my fellow directors and the senior management for their invaluable support, advice and counsel.
We also wish to thank our shareholders, customers, partners and associates for their continued unstinting support.
As we continue to chart our course of growth and sustainability, I am confident we will be able to build on our strengths and navigate through the challenges ahead.