MANAGEMENT DISCUSSION & ANALYSIS

Transcription

1 MANAGEMENT DISCUSSION & ANALYSIS Dear valued shareholders, I am heartened to report that GDB has set a new milestone in our corporate history with our successful listing on the ACE Market of Bursa Malaysia Securities Berhad ( Bursa Securities ) on 27 March The Group s swift ascension through the ranks to join other major companies in Corporate Malaysia represents significant growth by leaps and bounds since our incorporation in 2013.

2 Management Discussion & Analysis (cont d) Business Overview GDB is a construction services provider in Malaysia, with a focus on high-rise residential, commercial and mixed development buildings. As a main or principal works contractor, the Group is involved in the implementation of construction projects, including daily management of all the works required for timely completion of projects and engaging the necessary subcontractors. GDB is registered with the Construction Industry Development Board of Malaysia ( CIDB ) as a Grade G7 contractor, which allows GDB to tender for projects with unlimited value in the categories of general building, general civil engineering, and mechanical works. In line with our ambitions to enter the civil engineering space, the Group also obtained the Sijil Perolehan Kerja Kerajaan as a Grade G7 contractor in the financial year ended 31 December 2017 ( FYE 2017 ), allowing us to participate in tenders for Government jobs with contract value above RM10.0 million. The Group is equipped with multiple certifications such as ISO 9001:2015 Quality Management System, ISO 14001:2015 Environmental Management System, and OHSAS 18001:2007 Occupational Health and Safety Management System. GDB has also obtained the Quality Assessment System in Construction ( QLASSIC ), Safety and Health Assessment System in Construction ( SHASSIC ), Building Quality Assessment System ( BQUAS ), Construction Quality Assessment System ( CONQUAS ) and the 5-S certifications for our projects. GDB has built a track record for completing large-scale high-rise construction projects ahead of schedule through the use of technology and efficient practices to provide value engineering. Amongst the technologies and practices adopted are: Building Information Modelling, which provides virtual reality insight throughout the building construction stages and allows for early clash detection and analysis, thereby enhancing efficiency in the implementation of large-scale projects. Industrialised Building System, which is a construction process that speeds up project completion by utilising prefabricated components and onsite installation. The 5-S Standards which are aimed at cultivating the practices of structurise, systematise, sanitise, standardise and self-discipline. Adherence to the 5-S Standards improves the safety, quality and environmental aspects of our projects. 21

3 Management Discussion & Analysis (cont d) 22 Operations Review GDB made steady progress in ongoing projects in the year under review, on top of securing new projects to sustain our performance going forward. In FYE 2017, the Group completed construction of several sections under Parcel B of KL Eco City where the piling, basement, and podium contracts were delivered between 40 to 132 days ahead of schedule, while the office tower was completed 67 days ahead of the contractual completion date. The Group had secured RM744.9 million in new contract wins in FYE This includes our largest-ever contract to date, to build AIRA Residence in Damansara Heights for RM432.0 million. This contract from Selangor Properties Berhad entails GDB undertaking main building works for the condominium development. The Group was also awarded a RM312.9 million contract from Hap Seng Land Development (Puchong) Sdn Bhd for the construction of Menara Hap Seng 3, a 26-storey commercial building within the Kuala Lumpur city center. The contracts secured in FYE 2017, coupled with current works on the Westside III condominium block in Desa ParkCity and the Etiqa Office Tower along Jalan Bangsar, propelled GDB s order book to exceed RM800.0 million as at 31 March 2018, which will provide visibility to the Group over the next two years. Furthermore, GDB is committed to maintaining high quality and safety standards. I am proud to state that the Group was awarded first place for Anugerah COMBI Tapak Binaan 2017 from the Health Department Wilayah Persekutuan Kuala Lumpur and Putrajaya, Kuala Lumpur City Hall and CIDB for its Westside III Project.

4 Management Discussion & Analysis (cont d) Financial Overview GDB s works for ongoing projects as well as newly-secured projects of AIRA Residence and Menara Hap Seng 3 led to the Group s 7.2% increase in revenue to RM296.8 million in FYE 2017 from RM276.9 million previously. The Group completed One Central Park and the KL Eco City 1 & 2 projects ahead of schedule, which resulted in lower amounts incurred for preliminaries such as site management cost, utilities, rental expense of machinery and equipment and other related project maintenance and overhead expenses. Simultaneously, the Group also noted lower material costs for its completed projects as compared to the budgeted material costs. These factors enabled GDB to report 42.4% higher profit before tax of RM30.5 million in FYE 2017 compared to RM21.4 million in the past year, partially offset by higher administrative expenses as well as a portion of listing expenses. I am pleased to report that the Group reached a high note in FYE 2017, recording 39.9% jump in net profit to RM22.5 million compared to RM16.1 million previously. GDB s total assets grew by 37.8% to RM152.2 million as at 31 December 2017 from RM110.4 million as at 31 December 2016 ( FYE 2016 ), mainly due to increased trade receivables in tandem with certified progress billings. 23 The Group s cash and cash equivalents, including short-term investments, stood at RM31.5 million as at 31 December 2017, largely unchanged from RM32.0 million as at 31 December Of the total cash and cash equivalents, fixed deposits pledged with licensed banks stood at RM5.5 million and RM1.9 million at the end of FYE 2017 and FYE 2016 respectively. Notably, GDB had no borrowings as at 31 December 2017 compared to RM4.0 million in hire purchase payables as at 31 December GDB had a net cash position as at 31 December Group total liabilities rose 34.9% to RM112.3 million as at 31 December 2017 from RM83.2 million as at 31 December This was mainly due to higher trade payables as well as other payables and accruals in line with longer credit terms from certain subcontractors and higher accrued costs of construction for projects respectively. Total equity stood at RM39.9 million as at 31 December 2017, 46.8% higher compared to RM27.2 million as at 31 December 2016 attributed to higher retained earnings, and enlarged issued share capital following a bonus issue through the capitalisation of retained profits.

5 Management Discussion & Analysis (cont d) Capital Expenditure GDB incurred RM5.4 million for the purchase of plant and equipment in FYE 2017, comprising a passenger hoist, concrete placing boom, mortar and sand pump, two tower cranes, site equipment such as scaffolding accessories and safety screen, and a sedan car for our operations. Our capital expenditure requirements are dependent on the scale and number of projects that we are undertaking in any given period. Dividend Policy We aim to strike a balance between allowing our shareholders to participate in the profits of the Group as well as allocating adequate reserves for the future growth of the Group. 24 Our Directors intend to adopt the policy of recommending up to 30.0% of annual net profit attributable to owners of the company to be distributed as dividends. Corporate Developments GDB successfully completed its Initial Public Offering ( IPO ) exercise, culminating in the listing of our stock on the ACE Market of Bursa Securities on 27 March The Group s IPO entailed the issuance of million new shares, representing 20.0% of the Group s enlarged share capital. Hence, the IPO increased the Group s share capital to million shares. At an issue price of RM0.35 per share, the IPO raised RM43.8 million in proceeds for the Group, of which RM8.7 million would be utilised for the purchase of new construction machinery and equipment, and RM15.6 million would be for working capital. Additionally, RM8.0 million would be allocated for land purchase for storage of equipment and machinery, while another RM8.0 million would be slated for the purchase of a new office building to serve as the Group s head office. The remaining RM3.5 million will be applied towards defraying of listing expenses. Growth Strategies GDB is ready to embark on its next chapter of growth, equipped with its strong reputation, technical expertise and knowledge of the construction industry, in addition to the elevated profile and proceeds resulting from the IPO. Extending Footprint in High-Rise Construction Segment GDB aims to secure new high-rise residential, commercial, and mixed development projects, specifically in the high-end segment where the Group s track record of early completion and adherence to quality and safety lies. We seek to establish strategic alliances to undertake large-scale construction projects, which will allow us to gain greater insight and experience as well as enhance our profile in the construction industry. GDB s tender book as at end-march 2018 exceeds RM1.0 billion, consisting of construction works for high-rise serviced apartments, a hotel, and other commercial buildings in the Klang Valley. We are hopeful of the optimistic outcome from this to sustain our growth story.

6 Management Discussion & Analysis (cont d) Expanding Our Expertise to Other Building Segments The Group aims to leverage on its construction knowledge and technical expertise to branch off into other building segments such as hospitals, schools, universities, hotels, convention centers and shopping malls. We are confident that our focus on timely completion, quality and safety will allow us to build a meaningful presence in other building segments. Entering into Civil and Infrastructure Construction Segment GDB plans to enter the faster growing civil engineering and infrastructure construction space encompassing the construction of roads, highways, bridges and transportation infrastructure. This would allow the Group to capture the exciting opportunities through major government infrastructure projects that are expected to be rolled out over the coming years. We believe that we will be able to transition smoothly into civil and infrastructure construction due to our management team s previous experience from past employments in managing civil and infrastructure projects. Furthermore, we are sourcing personnel to form a project team for civil engineering projects within 12 months from our listing. We have obtained the Sijil Perolehan Kerja Kerajaan as a Grade G7 contractor, which allows us to participate in tenders for Government jobs with contract value above RM10.0 million. We are buoyant of our Group s prospects in this segment. Investing in Greater Capacity and Capabilities Of the Group s total IPO proceeds, RM8.7 million would be utilised for the purchase of new machinery and equipment, consisting of four tower cranes, four passenger hoists, and two concrete placing booms. The additional machinery and equipment will enhance our capacity to take on more projects simultaneously and achieve better time management in our projects. To accommodate our larger fleet of machinery and equipment, we will allocate RM8.0 million to acquire land with approximate size of six acres to enable relocation from our current rented storage area. The Group would also allocate RM8.0 million for a new office building to serve as the Group s head office. The new head office will house a larger workforce in line with our planned expansion, as well as enhance our corporate image. 25 Appreciation I would like to express my deepest appreciation to GDB s highly dedicated management team and employees for being the driving force of the Group s success. I would also like to acknowledge our business partners, associates, suppliers and customers for their support throughout the years, and I look forward to our continued partnership. To our valued shareholders, thank you for your vote of confidence. We at GDB are steadfast in committing our full efforts to deliver strong performance and create shareholder value in the future. Sincerely, Cheah Ham Cheia Managing Director

7 MEDIA HIGHLIGHTS 26

8 Media Highlights (cont d) 27

9 SUSTAINABILITY STATEMENT GDB Holdings Berhad understands the importance of sustainability as a core value and actively integrates its components into its operations. I. Health, Safety and Well-Being of Employees We recognise that our employees are our most valuable assets, and their health, safety and well-being are a top priority for GDB. Our project teams work closely with subcontractors to identify measures to reduce or eliminate safety hazards at all construction sites. The Group also complies with the OHSAS 18001:2007 Occupational Health and Safety Management System international standard, in line with our commitment to consistently prioritise the occupational health and safety of our employees as well as other personnel at all construction sites. Additionally, GDB takes a keen interest in the professional growth of its employees, and provides them with ample training and career advancement opportunities. We prioritise the dignity of our employees, and do not engage in any form of discrimination. Additionally, decisions regarding promotion and compensation are made based on merit. 28 GDB also fosters greater teamwork and employee camaraderie by organising events such as regular gatherings to celebrate the achievement of key project milestones. GDB will continue its efforts in creating a conducive and inclusive working environment that encourages our employees to aim for greater achievements in their work. The Group s planned acquisition of a new office building will also provide our employees with a head office with more comfortable workspace, befitting our larger profile. II. Environment GDB aims to mitigate its impact on the environment, and will continue to drive efforts to reuse, reduce and recycle construction materials to minimise wastage. We also ensure that waste at our construction sites is disposed in a responsible manner. We constantly identify ways to increase the use of eco-friendly materials and reduce our carbon footprint in the construction process. We have also implemented waste water treatment systems at our construction sites, which minimises incidents of pollution and enables the recycling of treated waste water for general use.

10 Sustainability Statement (cont d) approximately RM23,500 to industry related events and activities. The Group also contributed by way of upgrading the facilities of several police stations, and initiating numerous gotong royong activities in neighbourhoods near our project sites. As at 31 December 2017, we employ 171 people directly, providing them with meaningful employment and competitive remuneration. GDB also supports local businesses by fostering long-term relationships with our subcontractors and suppliers, which provides them with the stability to grow and create more jobs for the community. Health, Safety and Quality are our top priorities when undertaking construction works for our clients, as we want to ensure that the future owners and/or tenants of our clients buildings will have a safe and conducive environment to live, work, and play. In recognition of our efforts in safeguarding the well-being of the community, we received first place award for our Westwide III Project in the Anugerah COMBI Tapak Binaan 2017 from the Health Department Wilayah Persekutuan Kuala Lumpur and Putrajaya, Kuala Lumpur City Hall and CIDB. The recognition is to promote increased vigilance in ensuring construction sites are free of breeding ground for the Aedes mosquito. GDB is also certified with the ISO 9001:2015 Quality Management System international standard, as we strive to ensure that the quality of our works meet regulatory requirements and the standards of our customers. IV. Marketplace 29 GDB understands that noise, vibration and dust pollution are important concerns, and has taken mitigation measures such as the deployment of effective monitoring systems, reviewing construction methodology to reduce the sources of pollution, and setting up of noise barriers at identified areas of our construction sites. We are committed to adhering to the ISO 14001:2015 Environmental Management System international standard to enhance our environmental performance. III. Community The Group is dedicated to making a positive impact on the communities where we operate. In the year under review, we contributed approximately RM17,600 to charitable activities and worthy causes, including for the construction of a school canteen and hall, as well as GDB strives to uphold high standards of corporate governance in all facets of its operations including dealings with external organisations, in addition to its commitment to safeguarding shareholders interests and the creation of greater shareholder value. We have comprehensive processes to ensure that our panel of qualified suppliers and subcontractors consistently meet our high standards, including assessment of their technical capabilities as well as safety and quality standards. We are also committed to promote transparency and provide information on material activities and financial performance on a timely basis.