Chairman's Statement

Extracted from Annual Report 2017

Dear Shareholders

Review Of Business Operations

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 2017.

Political news pertaining to Brexit and last year's US presidential elections dominated the financial year, both of which will no doubt continue to have global implications and cast uncertainties for some time to come. In terms of economic growth, the US experienced some improvement, and while its GDP is expected to rise moderately, there is still an element of uncertainty in terms of trade policies. Economic growth in Europe was stable, likewise in the Asian and Pacific regions, with China and India both posting positive growth.

In Singapore, the somewhat challenging business environment experienced in FY2016 ran into FY2017. And while overall growth was positive, performance across sectors was uneven. Manufacturing and trade-related segments did well, although the construction sector contracted due to weakness in both private and public sector building activities. To regularise this, the Government intends to roll out some major infrastructure projects in the next few years including Tengah HDB Town, LTA's Cross Island Line and Changi Airport Terminal 5. It has also announced plans to bring forward $700 million worth of public sector infrastructure projects to start construction in 2017 and 2018.

The Group reported a net profit attributable to shareholders of $18.7 million compared to $29.5 million, down 37% from the previous financial year. In comparison, the results in FY2016 included the Group's share of its profits amounting to $13.2 million, from an associated company that completed the development of an executive condominium in Singapore. In addition, the previous year's profits also included profits from our Malaysian developments where revenues were recognised from sold landed homes of three phases that were completed in FY2016. Accordingly, Group revenue was also lower at $369.0 million compared to $426.1 million in the previous year.


We continue to be prudent in our cash and working capital management, and management of investment risks. This approach has enabled us to generate positive cash flow and reward our shareholders with dividends consistently for over a decade. I am pleased to announce that the Board has recommended a final dividend payout of 1.2 cents per share to be approved by Shareholders in the forthcoming Annual General Meeting. Taking into account the interim dividend of 0.3 cents per share paid out in March 2017, the total dividend paid out for the financial year is 1.5 cents per share.


During the year, our property division focused on development projects – both existing and newly-acquired properties. In September 2016, the Group entered a strategic partnership with LaSalle Investment Management to acquire The Verge, a commercial property located along Serangoon Road, for redevelopment into a mixed-use property, comprising 320 serviced residences and approximately 114,000 square feet of gross floor area of retail space. Construction has commenced and is expected to be completed in the second half of 2019.

In addition, the Group also exercised an Option for the collective purchase of all 13 freehold strata units and common areas of One Tree Hill Gardens earlier in May this year. Situated within the Orchard Road area, the three-storey residential development is located at the junction of One Tree Hill and Jalan Arnap, and is within walking distance to the upcoming Orchard Boulevard MRT Station, along the new Thomson-East Coast Line. The Group plans to redevelop the site into landed homes for sale, comprising a mix of semi-detached and detached houses.

The Group took the opportunity to dispose of Pembridge Palace Hotel, a freehold property located in Prince's Square, London for a reported gain on disposal of $4.7 million.

The large market supply, tight lending standards and rising cost of living continued to put a strain on the property market in Malaysia.

In FY2017, only 12 units were sold from the Group's development at Twin Palms Sungai Long. To date, 388 units out of a total of 573 units at Sungai Long have been launched, with 95% of units launched sold. Despite subdued conditions, there were still buyers looking for homes and we managed to sell the remaining six bungalows at the 127-unit Twin Palms Kemensah. Although the market is expected to remain lacklustre for the coming years, we will continue to monitor market conditions for suitability of future launches.

Meanwhile, plans are being finalised for the mixed-use development at Petaling Jaya. 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.

Likewise, the redevelopment of Kelaty House in London's Wembley Regeneration Area is underway. When completed, the mixed development will house serviced residences to let and a student hostel.

To cap off an exciting year, our Malaysian developments scored yet another award this year, this time for Twin Palms Sungai Long. As testament to our commitment to build quality homes, the development was accorded the Honour Award for Best Landscape Development under the Development and GLC category by the Institute of Landscape Architects Malaysia.


The Construction Division reported revenue of $350.1 million, only a slight dip of 1% from the previous year.

Despite intense competition, the Group managed to win a sizeable infrastructure project during FY2017. Riding on our proven expertise and track record in civil infrastructure works, we secured a $325.0 million project from the LTA, for the addition and alteration works to the existing Tanah Merah Station and viaducts. The scope of work for the project includes the construction of an additional platform and concourse in the station, and two new station entrances linked by an underpass near the Tanah Merah Kechil Avenue intersection. The contract also calls for the addition of tracks and viaducts to run parallel to and form junctions with the existing East-West Line, and connect with the new four-in-one East Coast Integrated Depot at Changi. Works for the project has commenced and is expected to complete in 2024. With this new award, the Group's outstanding order book for the Construction Division was $514.3 million as at 30 June 2017.

Construction for Northpoint City, a mixed development comprising North Park Residences, retail plaza, community club and bus interchange, is progressing according to schedule. Located in Yishun, the development is expected to be completed in the second half of 2018.

The Glades, a residential condominium development at Bedok Rise was completed in December 2016, while the Housing & Development Board's Kampung Admiralty was substantially completed in May 2017.

Even though our Bukit Panjang MRT project (C912) was completed in 2015, it continues to be highly lauded. During the financial year under review, the project garnered three of the most distinguished awards given out by the LTA and the BCA. The LTA named Lum Chang Building Contractors, the Project Partner for the Best Managed Rail/Road Infrastructure at the Authority's Land Transport Excellence Awards 2016. The award honours the most outstanding organisation that has excelled in the development of rail or road infrastructure. In addition, the project was also bestowed with the BCA's Construction Excellence (Civil Engineering Project Category), and Construction Productivity Platinum Awards.

Our efforts to promote workplace safety were also recognised by the international Royal Society for the Prevention of Accidents (RoSPA) and we won the Gold Award in the century-old society's RoSPA Occupational Health & Safety Awards 2017. Locally, the Kampung Admiralty project earned a place on the winner's list in the Workplace Safety and Health Council's 2017 Awards, in the Safety and Health Award Recognition for Projects (SHARP) category.

Share Buy-Back And Employee Share Option Scheme

The Company did not purchase any of its own shares during the financial year ended 30 June 2017. In addition, no further share options were granted to employees. To date, 2,235,000 share options out of a total of 36,632,000 share options granted since 2008 remain outstanding. The scheme will be expiring on 26 October 2017 after 10 years. During the term, 25,264,000 options had been exercised by employees of the Group. The Company will review its effectiveness before proposing any new schemes in the future.

Senior Management Changes

The Board members and I are pleased to welcome our new Non-Independent Non-Executive Director, Mr Kelvin Lum, who was appointed to the Board in November 2016. He brings with him executive and strategic leadership skills, and we look forward to his contribution to the Board.


Singapore is expected to see some economic growth in 2017, supported by trade-related sectors such as manufacturing, transportation and storage. The construction sector however, is likely to remain muted and the Group expects its business conditions to remain highly challenging.

The Group's property development projects on hand are currently at development stages, with revenue contribution expected only a few years down the road. These include the redevelopment of the Verge, the residential project at One Tree Hill, the mixed development in Kuala Lumpur's Petaling Jaya and Kelaty House in London.

That said, we are encouraged by the Government's continued investment in transport infrastructure like the Kuala Lumpur-Singapore High Speed Rail, and enhancing the public transportation network with the Jurong Region and Cross Island Lines. With recognised expertise, a proven track record and experience collaborating with Government agencies, our construction arm is in a strong position to pursue viable projects.

We will continue to evolve to stay responsive, renew our overall cost structure, and reinforce our operational and investment strategies for systematic long-term sustainable growth.

On behalf of the Board, my thanks go out to our shareholders, clients, business associates and suppliers for the confidence and support they have again shown our company throughout the year. I also thank my fellow Board colleagues for their invaluable counsel and also extend my appreciation to our Management team and all employees for their continued and consistent passion, dedication and commitment.

Raymond Lum Kwan Sung
Executive Chairman
14 September 2017