Extracted from Annual Report 2018
On behalf of the Board of Directors, I am pleased to present the financial report of Lum Chang for the financial year ended 30 June 2018.
While Singapore's economy grew by 3.6% in 2017, it remained a challenging year for the construction industry, which continued to grapple with manpower shortage and rising operational costs. The industry shrank by 8.4% last year, a reversal of 1.9% growth in the previous year, due to weak private sector activities and the rescheduling of a few major public sector infrastructure projects, including the North-South Corridor.
Despite the challenging operating environment, the Group managed to achieve profitability through strict capital discipline and concerted efforts to build competitiveness. For FY2018, the Group managed to turn in a revenue of $260.7 million, down 29% from $369.0 million. Net profit attributable to shareholders increased 33% to $24.9 million compared to $18.7 million from the previous financial year. The successful year can be attributed to higher profits achieved from both the Construction and Property Divisions.
To express our appreciation to shareholders for their continued support given to the Group over the years, I am pleased to announce that the Board has recommended a final dividend payout of 1.5 cents per share to be approved by Shareholders in the forthcoming Annual General Meeting. Taking into account the 0.3 cents per share paid out in March 2018, the total dividend paid out for the financial year is 1.8 cents per share.
Construction for the Group's joint venture redevelopment project at Serangoon Road, Tekka Place, is well underway and progressing according to schedule. The integrated development comprises 320 serviced residences and a retail mall with approximately 70,000 square feet of net lettable area. Leasing activities for the retail mall has commenced and the integrated development is expected to be completed in the second half of 2019.
The Group has recently started construction for its prestigious residential project - One Tree Hill Collection. Comprising 12 semi-detached and two bungalows, the development is located at the junction of One Tree Hill and Jalan Arnap. To date, two units have been sold and the landed homes are scheduled to be completed in the first half of 2020.
In Malaysia, affordability and oversupply issues continue to hinder recovery and the market is expected to remain lacklustre. During the year under review, 22 units at Twin Palms, Sungai Long were sold. To date, 404 out of 573 units at Twin Palms, Sungai Long have been launched, with a total of 97% units sold.
Meanwhile, the development components for the mixed-use development at Petaling Jaya are being fine-tuned and will be adjusted to meet market requirements. It will offer residential apartments for sale, serviced residences to let and a two-level commercial podium that will offer F&B and conveniences for the residents of the property and its surrounding areas.
The Group just recently entered into a sale and purchase agreement to dispose part of the land of Kelaty House, intended to accomodate the student hostel component of the development. Upon completion, the transaction will yield a gain of approximately $8.2 million in the current financial year. The Group will continue its plan to develop the serviced residences component at the same site and construction is targeted to begin in early 2019. Kelaty House is located in London's Wembley Regeneration Area.
Our Malaysian developments continue to garner industry recognition by winning yet another two awards for Excellence in Construction Quality from the Construction Industry Development Board (CIDB). The agency conferred the awards on Twin Palms, Sungai Long's Westiara Bungalows Phase 3A(1) and Twin Palms, Kemensah's Calypso Bungalows Phase 2.
On the investment front, the Group acquired a stake in Daehan Rehabilitation Services, a provider of integrated healthcare services in Malaysia, as part of our strategy to venture into new businesses for recurring income. The company has plans to run a private rehabilitation hospital in IOI Resort City in Putrajaya, which will commence operations in the first quarter of 2019. Capitalising on an opportunity to invest in our first European property outside the United Kingdom, we also took on a minority stake in CapitaLand's acquisition of Main Airport Centre, a freehold multi-tenanted office building in Frankfurt.
The Construction Division continued to be our largest revenue contributor, reporting revenue of $243.3 million, a decrease of 31% from the previous financial year.
During the year under review, our construction order book was boosted by the building work contract for the Group's Serangoon integrated development, the construction of PSA's Singapore corporate headquarters contract, and a contract from JTC for the building of its new industrial development at Woodlands North Coast. With these new awards, the Group's outstanding order book was $648.3 million as at 30 June 2018.
Construction for ongoing projects including Tanah Merah Station (Contract T315), are progressing according to schedule. Phase 1A of Northpoint City and its retail complex were completed during the year under review, while Mapletree Industrial Trust's industrial building at Kallang Place received its TOP.
In February this year, we set up a new division, Lum Chang Interior (LCI), to capitalise on new business opportunities and take on specialised projects. LCI specialises in interior-retrofitting, conservation, additions and alterations projects, and has already started contributing to the revenue of the Group.
To cap off an exciting year, LCBC also brought home several of BCA's Building Information Modelling (BIM) Awards, namely for Northpoint City (GoldPlus) and a Gold award each for Kampung Admiralty and The Glades. Kampung Admiralty also bagged the Outstanding and Excellence Awards for a communal facility, at the Skyrise Greenery Awards 2017.
Our efforts to promote workplace safety were also recognised both internationally and locally. The international Royal Society for the Prevention of Accidents (RoSPA) awarded LCBC with yet another Gold Award in the Occupational Health & Safety Awards 2018, while in Singapore they also took home the Silver Award at the Workplace Safety and Health (WSH) Awards 2018.
The Company did not purchase any of its own shares during the financial year ended 30 June 2018. In addition, no further share options were granted to employees as the scheme had expired last October after being in place for a decade. To date, 950,000 share options out of a total of 36,632,000 share options granted since 2007 remain outstanding and will lapse by 20 September 2018 if not exercised by then.
The Board members and I are pleased to welcome our new Independent Non-Executive Director, Mr Clement Leow, who was appointed to the Board in May 2018. He brings with him a wealth of experience in the finance industry and we look forward to his contribution to the Board.
We also welcome Mr Lim Thiam Hooi, who is Managing Director of our new division, LCI. Mr Lim has more than three decades of experience in the building industry, with nearly 20 years managing projects in this specialised field.
In affirmation of our commitment to sustainability, I am proud to introduce our maiden sustainability report guided by the Global Reporting Initiative (GRI) standards. The report documents our consideration of and approach towards sustainability issues including our environmental footprint, social and governance efforts.
Singapore's economic outlook for 2018 remains positive for the rest of the year, despite global trade risks. Initial expectations for an improvement in the private sector's construction demand, boosted by the redevelopment of en-bloc sale sites, was however dampened, due to the latest round of property cooling measures in July 2018. And the Ministry of Trade and Industry, in a report dated 13 August 2018, anticipates that the construction sector is likely to stay lacklustre for the rest of the year.
That said, we are nonetheless encouraged by the Government's continued investment in infrastructure projects like the Jurong Region and Cross Island Lines, Rapid Transit System and various developments for Changi Airport Terminal 5. We are acutely aware that we operate within a highly competitive market. The depth of our capability to deliver complex contracts and proven track record, puts LCBC in a strong position to pursue viable projects and we will continue to tender for these selectively.
We will also continue to monitor the market, exercising financial prudence together with strong business acumen to ensure our operational and investment strategies further our aim of growth and returns for the Group.
On behalf of the Board, my heartfelt appreciation goes out to our shareholders, clients, business associates and suppliers for the unwavering support they have shown our company over the years. A big thank you also to my fellow Board colleagues for their invaluable counsel and also to our Management team and all employees for their continued dedication and commitment over the past year.
Raymond Lum Kwan Sung
14 September 2018