We are pleased to share the performance of the Group for the financial year ended 31 March 2018 (“FY2018”). During the financial year, the Group continued to improve its operational efficiency, paving the way to capitalize on the eventual upturn of the markets where we operate. While the slowdown of the oil and gas industry continues to be felt, we have persevered and delivered stable results and remain profitable.
BUSINESS AND FINANCIAL REVIEW
Our regions of operations continue to be promising with developing Asia growing by 6.1% in 2017. Cambodia, which houses three of our fossil fuel power plants, had a GDP growth of 7.0% in 2017 and is expected to maintain this rate for next two years, on the back of robust exports, buoyant tourism, and strong foreign direct investment. Malaysia, home to our first biomass power plant, saw GDP grow by 4.2% in 2016 to 5.9% in 2017. The growth was driven by a revival in exports and strong domestic demand and Malaysia is expected to grow at above 5% for 2018 and 2019. Similarly, Singapore saw its growth rate enhance from 2.4% in 2016 to 3.6% in 2017 and is expected to average about 3% growth for the next two years.
Against this backdrop of improving economic performance, Group revenue remained largely stable at S$38.1 million, a 0.1% increase from the S$38.0 million in FY2017. The Group’s profit from operations was higher in FY2018 at S$2.7 million, a 46.4% or S$0.9 million increase from the S$1.8 million reported in FY2017.
We continue to maintain profitable operations in FY2018 with the Group’s profit after tax more than doubling, rising by approximately S$0.8 million to S$1.4 million in FY2018 from S$0.6 million in FY2017.
A decade ago, the Group expanded into the energy business as our assessments projected limited expansion opportunities locally for our fire protection solutions business. After much deliberation, we set our sights on diversifying into the energy business in frontier countries. Despite being capital intensive, we perceived it to be a suitable course to benefit shareholders in the long term. Although the energy business has seen its fair share of challenges due to the demanding operating environment and challenging global climate, we have weathered them and gained invaluable experience and expertise which are critical for long-term sustainability in the energy business.
Fast forward till today, we have several projects under our belt and are constantly exploring new avenues to grow our portfolio and capabilities. To illustrate, we had successfully increased the capacity of our Maju Intan Power Plant since starting operations in 2015 due to alterations and additional upgrading work undertaken during FY2018. Each project and upgrade strengthens our expertise in building better energy solutions and thus greater returns for our stakeholders.
At the same time, we have always engaged in cost management strategies like the wage freezes to Executive Directors for last couple of years to ensure our competitiveness in a challenging operating environment. The Company will moving forward hire a professional HR firm to review our executives’ compensation to ensure that it is in line with industry standards. While the professional HR firm will make their recommendations to the Board, the Executive Directors and key management have collectively taken a step further by voluntarily reducing their salaries for FY2019 by 10 – 15% so as to enhance operating cash flow and help the Group’s improve its overall financial performance.
Prospects for Asia are vibrant with a projected GDP growth of 6.0% in 2018 and 5.9% in 2019. Excluding Asia’s high income newly industrialized economies, the prospects for growth in Asia should reach 6.5% in 2018 and 6.4% in 2019. Traction for economic expansion is expected to come from strong external demand, supported by a further pickup in the major industrial economies, and robust domestic demand
For Cambodia, the aforementioned growth momentum is likely to be sustained with inflation edging up and the current account deficit may widen before narrowing in 2019.3 This translates to a steady if not growing demand for energy which should auger well for our three power plants in the country. We have also received a letter of extension for the power purchase agreement from Electricite DuCambodge, a state-owned electricity company in Cambodia.This would entail two power plants providing power for the country till April 2019 and may be potentially extend further as the country is still expected to be short of power, especially during the dry season.
In Malaysia, GDP growth has been projected at 5.3% in 2018 and 5.0% in 2019. While some of the strong external demand in 2017 has carried over to 2018, the momentum is expected to slow down further into the year.4 We will continue to monitor the developments of the market carefully and take into account the impact of possible changes in policies arising from the historic change in government.
Lastly at our base of operations in Singapore, GDP growth is expected to slow slightly in 2018 and 2019, supported by strong but moderating exports of manufacturers.5 Though the marine and oil and gas sector show signs of recovery, we anticipate that there may be a gestation period which would mean that the outlook for our fire fighting and protection segment may remain challenging.
Demand for energy in Southeast Asia is expected to climb as the developing nations continue to strengthen their infrastructure. Strong economic growth in ASEAN has fueled a 70% increase in energy demand since the year 2000, and the region now accounts for 5% of total global demand.6 The Group has come a long way since its first foray into the energy business and amassed the experience and expertise which allows the Group to be well positioned to undertake future projects. We will continue to conscientiously explore new energy-related opportunities in the region, leveraging on the foundations we have built to deliver long-term value to our stakeholders.
As part of the good corporate governance practice of Board renewal, two of our Directors, Mr Tan Boon Yew and Mr Seah Hai Yang, have decided not to put themselves up for re-election to the Board of the Company. This will give the Company the opportunity to rejuvenate its Board with the introduction of new directors that have the requisite experience and expertise to guide the Company on its long term growth path as a regional energy player. The Board wishes to express its deepest appreciation to Mr Tan Boon Yew and Mr Seah Hai Yang for their years of dedicated service to the Company.
On the behalf of the board, we would like to once again thank our business partners, management, staff and shareholders for their invaluable support and faith. We look forward to continuing our journey with you as we continue building the Group as a key player in the energy business within the region.
Tay Kah Chye