Chairman's Statement


Dear Shareholders,

The financial year ended 31 December 2013 (“FY 2013”) is the third year in operation for the Group since the Company’s listing on the Mainboard of the Singapore Exchange Securities Trading Limited (“SGX-ST”) in February 2011. Underpinned by sound management and the strong construction demand in Singapore and the region, the Group has been growing steadily in the last few years.

Steady growth momentum

In FY 2013, the Group’s revenue increased slightly to $400.2 million from $387.5 million in the previous year. This was mainly due to higher contributions from the M&E engineering segment, although they were offset by lower revenue from the construction segment. Gross profit increased to $94.3 million as compared with $81.9 million in the previous year due to the increased revenue and higher margin contribution from Austville Residences, as well as cost savings arising mainly from the write back of provisions upon the finalisation of accounts for completed projects. As a result, gross profit margin increased to 23.6% as compared with 21.1% in the previous year. The Group’s attributable profit increased by 25.5% to $60.2 million.

Reflective of the Company’s growth during the year, its share price rose 60% to close at $1.04 on 31 December. Based on the initial public offering price of $0.48, the Company’s share price had risen 97% since its listing in February 2011.

Strategic joint ventures and expansion of core services

The Group continues to participate in joint property development on the condition that it also undertakes the role of main contractor for such development projects. This is a business development strategy as well as a form of risk diversification for the Group. In January, the Group formed a joint venture company with Sing Holdings Limited to complete the acquisition of a land parcel at Punggol Field Walk/Punggol East for the development of a 373-unit executive condominium (EC) named Waterwoods. One of the Group’s principal construction subsidiaries, Greatearth Corporation Pte Ltd (“Greatearth Corporation”), was appointed as the main contractor for Waterwoods.

The Group also incorporated a 95%-owned subsidiary, PT. UE Prima Nusantara, in September to expand its power solutions business in Indonesia through the provision of engineering, trading and rental services in power-related equipment.

Strong order books

In FY 2013, the Group won contracts on several fronts to sustain the growth momentum. In February, the Group’s principal M&E engineering subsidiary, United Engineers (Singapore) Private Limited (“UES”), secured a contract for electrical installation works to the proposed residential/commercial development for Waterway Point and Watertown at Punggol Central/Punggol Walk. The $35.2 million project is expected to be completed in two phases by July 2015 and July 2016 respectively. In April, UES was also awarded a $20.7 million contract for the supply and installation of ACMV, building management, fire protection, electrical and engineering smoke control services in The Seletar Mall at Sengkang West Avenue/Fernvale Road which is expected to be completed by November 2014. In June, UES won the tender for the installation of electrical, extra-low voltage, sanitary, plumbing and gas services in Eight Riversuites at Whampoa East for $21.0 million which is expected to be completed by September 2015.

In February 2014, another of the Group’s principal construction subsidiary, Greatearth Construction Pte Ltd (“Greatearth Construction”) was appointed as the main contractor for the proposed erection of one block of 19-storey educational institution with one basement for the Lee Kong Chian School of Medicine, Nanyang Technological University (NTU) at Mandalay Road (Novena Campus) and one block of 7-storey School of Medicine at Nanyang Drive (NTU’s Yunnan Garden Campus) for approximately $243.5 million. This is one of the largest contracts that the Group has won in recent times.

The Group’s construction subsidiary in Brunei, United Engineers (B) Sdn Bhd (“UEB”), won a tender for the proposed renovation of the Arts and Crafts Centre at Jalan Residency for a contract sum of BND23.2 million. It is expected to complete in the middle of 2014.

Dividends

Based on the financial performance for the year, the Company’s Directors are pleased to propose a first and final dividend of 5 cents per ordinary share and a special dividend of 2 cents per ordinary share, amounting to $18.9 million. The proposed dividends, if approved by members at the forthcoming Annual General Meeting (AGM), will be paid on 12 May 2014.

Improved economic outlook

The global economic environment is showing signs of strengthening and the Group believes that this improved outlook bodes well for all businesses. In particular, the Group remains optimistic about its engineering and construction businesses as the construction demand in Singapore for 2014 is projected to be between $31 billion and $38 billion based on forecast by the Building and Construction Authority of Singapore (“BCA”). This high demand is likely to be driven by public housing, institutional developments and major infrastructure projects.

However, with this high level of construction activities, we expect continued pressures from rising labour costs due to the current tight labour market. For this, the Group will continue to strive for productivity enhancement and strategic labour deployment.

The demand for private residential properties and ECs will continue to be affected by the Total Debt Servicing Ratio framework for property loans implemented by the Monetary Authority of Singapore in June. As such, the Group will continue to take a cautious approach in property development.

Acknowledgements

On behalf of the Board of Directors and management, we would like to express our gratitude to Independent Director Mr Kwan Chiew Choi, who resigned in February 2014, for his dedication and contributions to the Group since the Company’s listing in February 2011. Mr Kwan had served in all the Board committees. We wish him the best in all his future endeavours.

We would also like to thank all our shareholders, customers, business associates, sub-contractors, suppliers and bankers for their continued support of the Group. Last but not least, we extend our appreciation to the Board of Directors, management and staff for their efforts and dedication throughout the year.

Chua Hock Tong
Chief Executive Officer (CEO)
Dr Tan Eng Liang
Chairman