By all accounts, financial year ended 31 March 2021 (“FY21”) was a challenging year, as the Covid-19 pandemic upended the operations of nearly all industries across the globe. Its impact on the construction industry was also unprecedented, with mandatory temporary work stoppage, disruptions in supply chains for raw materials, manpower shortage and the need to implement safe distancing measures to protect our workers, which led to increases in costs and impeded work progress.
Our operations were greatly affected in the first half of FY21 ended 30 September 2020 (“1HFY21”), when circuit breaker measures (CB) in Singapore from 6 April to 1 June 2020 and movement control order (MCO) in Malaysia from 18 March to 3 May 2020 brought all activity at our sites to a standstill. When work resumed in the second half of FY21 ended 31 March 2021 (“2HFY21”), the pace was slow and gradual, as the Group dealt with a shortage of workers and the requisite compliance with safe management measures. A second round of MCO in Malaysia (MCO 2.0) implemented in January 2021 also affected productivity.
In light of the above, our Group revenue declined 48.0% to $178.3 million in FY21, compared to $342.8 million in the financial year ended 31 March 2020 (“FY20”). As a result, gross profit fell 75.4% to $10.9 million, from $44.2 million in FY20. The decrease was partially mitigated by an improvement in 2HFY21 performance, which took into account the increased work activity, our successful negotiations with our suppliers for lower equipment rental charges and to lock in prices for key construction materials, and Covid-19-related grants and rebates from the government. As a result, we recorded a gross profit of $17.3 million in 2HFY21, compared to a gross loss of $6.5 million in 1HFY21.
Other income rose 73.8% to $3.9 million in FY21, taking into account a gain of $2.8 million from the disposal in 1HFY21 of the leasehold property at 2 Tanjong Penjuru Crescent, which was formerly also the site of our headquarters, to a joint venture company that is jointly owned by CSC and Australia-headquartered logistics property developer, LOGOS Group.
Operating expenses declined 17.8% to $28.1 million, from $34.2 million a year ago, following a series of cost containment measures, including salary reduction for middle-level and senior-level employees and a voluntary reduction in directors’ fees by our Board members. The decline also took into account a lower year-on-year impairment losses recognised on trade and other receivables and contract assets, as well as $2.5 million in support grants received from the Singapore government for corporate and administrative staff.
Net finance expenses declined 67.1% to $1.2 million in FY21, mainly due to decrease in overall borrowings following the net repayment of debt during the year, as well as lower interest rates imposed on these borrowings.
Given the industry headwinds and taking into account the factors mentioned above, we posted net loss attributable to shareholders of $11.0 million in FY21, compared to a net profit attributable to shareholders of $5.6 million in FY20. Group earnings before interest, tax, depreciation and amortisation remained positive at $15.1 million for FY21, versus $40.8 million a year ago.
As at the close of March 2021, our cash and cash equivalents stood at $34.6 million, compared to $19.2 million a year ago. The increase takes into account the receipt of $9.7 million in proceeds from shareholders’ exercise of warrants during the year, which expired on 29 December 2020. A total of 96.96% of the warrants were exercised into ordinary shares upon its expiry.
Many public sector projects were postponed to allow more time to assess the pandemic’s impact on resource management and project schedules. Private sector construction demand was also tempered by market uncertainties arising from the pandemic-induced recession.
Nevertheless, our track record of working on projects of all scale and requirements served us well. Infrastructure and industrial projects formed the bulk of projects secured in FY21 by project value, while we also secured several projects from the commercial and residential sectors. Some of these notable projects include:
- MRT Stations of Choa Chu Kang, Choa Chu Kang West, Tengah and Viaduct for Jurong Region Line
- Multi-storey Gali Batu bus depot
- North-South Corridor between Novena and Toa Payoh Rise
- Lift shafts for existing pedestrian overhead bridges for island wide
- Multi-user factory with temporary industrial canteen at 29 New Industrial Road
- Sabic Saffron B Feed at Benoi Road
- Ramp-up warehouse building at 2 Tanjong Penjuru Crescent
- Pfizer API expansion project, including wet production building and external storage, at 31 Tuas South Avenue 6
- Condominium Developments at Clementi Avenue 1 (CLAVON), Kampong Java Road, Holland Road, Canberra Link, Fernvale Lane and Irwell Bank Road
- Public Housing Developments at Tengah Plantation Contract 4, Tengah Garden C1 & Common Green, Woodland N1C25, Geylang C14, Tengah Drive & Tengah Park Ave/Tengah Park C8
- Mixed developments in Selangor, Malaysia, including Equine Residence (Phase 2) at Seri Kembangan, and Emerald Hills (Phase 3 & 4), at Alam Damai
- 14 storey hotel development at 89 Short Street
- Mandai Resort at Mandai Lake Road
- HomeTeamNS clubhouse and chalets at Bedok North Road
- Data centres at 51 Defu Lane 10, Loyang Drive and Sunview Drive
- Chinese Temple Development at Northshore Drive
- Sports and recreation development at Coney Island
- Home Team Tactical Centre (Phase 2A) at Mandai Road
- Additions and alterations to existing conserved building, The Octagon at Havelock Square for the Family Justice Courts
Our equipment and leasing business segment recorded lower revenue in FY21, in line with the decline in construction activity overall. On a brighter note, we secured exclusive rights from China-based Xuzhou Construction Machinery Group Co., Ltd to distribute its piling equipment in Southeast and South Asia. This will add to the business segment’s income stream going forward, with the recovery of and growth in construction activity and demand.
In the United Kingdom, the residential development project in Cambridge, in which we have an effective 23.75% stake, has sold 100% of the 13 landed units. In Malaysia, our 5%-owned, mixed-used development project in Iskandar continues to yield a steady return.
Inventions And Innovation
Operating in an environment where margin and manpower challenges are prevalent has made us realise the importance of building resilience through innovation. We are thankful to have pushed through with several productivity and safety solutions over the past few years, as these have become even more crucial to us today.
In September 2020, we were granted patents for two of our inventions, namely, the RC Pile Handler and the Mobile Site Reporting (MSR) System, which were developed with $370,000 in funding support from the Building Construction Authority’s (BCA) Production Innovation Projects (PIP) scheme and the now-defunct Mechanisation Credit.
The MSR System is a real-time, on-site production reporting and data processing application. Traditionally, there were significant unproductive duplication of work due to manual recording of data – the handwritten data and manual calculations were also subject to human error and misplacements. The ease of access of the MSR System, its one-time data entry and swift generation of reports ensure timeliness and data integrity, which in turn enables the Company to make informed decisions quickly. We have achieved 25% savings on manpower and 150% improvement in site-recording efficiency since the application’s implementation.
The RC Pile Handler is an innovative method that allows for the safe and efficient transfer of heavy and elongated objects, such as reinforced concrete (RC) piles, through its grip mechanism. The conventional way was labour intensive with extensive communication needed, less productive and had a higher risk of accident. Our method requires only 2 men, and has led to significant productivity gains, including a 71% savings on manpower, a 50% increase in number of piles handled per day and cost savings of 73% per pile installed. Notably, the invention was awarded the Silver prize for Productivity and Innovation Award by the Singapore Contractors Association Limited. The RC Pile Handler has been granted patents in Singapore, Brunei, Cambodia, Indonesia, the Philippines, Thailand and Vietnam and is awaiting patent approvals in Laos and Malaysia. We are currently working on several projects that aim to reduce costs and increase productivity.
Barring a Covid-19 resurgence in Singapore, we are cautiously optimistic about the outlook of the local construction industry in the year ahead. With the outbreak under control, the backlog of projects that were postponed in 2020 and 2021 should be re-introduced. In particular, the infrastructure and public housing sectors are expected to remain healthy. Nevertheless, we remain mindful of intense competition, as industry players look to fill their order books.
In view of rising construction material and manpower costs, margins will remain under pressure. The tightening of border restrictions in Singapore and the MCO imposed from May to June have also aggravated the labour crunch and hampered the import of construction materials to Singapore. Our operations in Malaysia were also suspended during the MCO. Maintaining a healthy financial position, with strict capital and cash flow management, continue to be our key priority as we navigate this delicate situation. The conversion of warrants into shares by our shareholders upon the warrants’ expiry in December 2020 has helped to strengthen our cash on hand.
Our joint effort with LOGOS Group to redevelop our headquarters at Tanjong Penjuru Crescent is currently underway. We are looking forward to the building’s completion by the first calendar quarter of 2022.
The new complex will consist of a 45,662-square-metre modern six-storey ramp-up logistics facility, along with office space, cafeteria and rooftop parking. It will also include a built-to-suit high-specification workshop for our ground engineering equipment fleet. Apart from having a new office and workshop, we also expect to gain rental revenue from the leasing of the rest of the space not utilised by us.
I wish to express my heartful gratitude to my fellow colleagues, who have been tenacious and determined in overcoming the challenges and adapting to the unprecedented circumstances of the past year. I am also thankful for our Board members, who have given valuable counsel, as well as to our business partners, customers and shareholders for standing by us.
With your support, I am confident that we can build a stronger business for all our stakeholders.