The financial year ended 31 March 2019 (“FY2019”) was a period marked by the rigours of a more challenging operating environment. Amidst this difficult period, the Group has remained undeterred and has been reviewing, refining and reforming to adapt to challenging conditions.
BUSINESS AND FINANCIAL REVIEW
The Group’s revenue saw a slight year-on-year dip of 1.0%, largely due to a muted marine, oil and gas sector which dampened sales at our fire-fighting and protection division. Meanwhile, revenue registered at our power related division, which comprises the larger portion of our operations, remained relatively level. Led by a rapidly booming construction sector, the Cambodian economy grew a robust 7.3%(1) in 2018, providing a much-welcomed uplift to electricity demand in the nation, where three of our power plants are sited.
While the Group’s revenue remained fairly stable, the Group’s profitability was more adversely affected. Setbacks arising from an earlier-than-scheduled overhaul of a power plant turbine, as well as a write-off of construction in progress and accrued deemed interest on payables relating to the Maju Intan Biomass power plant project (MJE) hampered the share of results of associates. Furthermore, adoption of Singapore Financial Reporting Standards (International) 9 (“SFRS(I) 9”) on the Group’s financial instruments also resulted in a fair value loss of S$3.1 million on convertible bonds. A further impairment of S$9.8 million was also recorded in relation to trade receivables and advances due from associates. Additionally, an impairment of cost of investment in MJE amounting to S$2.6 million and a further S$1.1 million from provision of withholding tax in Cambodia also raised our other operating expenses.
Due to a combination of the above factors, a loss after tax of S$20.0 million was recorded in FY2019, as compared to a profit after tax of S$1.4 million in FY2018.
STRIVING TOWARDS BETTER VALUE
In spite of these developments, the Board maintains its firm stance in taking the necessary measures to unlock our ability to deliver long-term value.
Following extensive evaluation, the Group proceeded with the difficult but imperative decision to dispose of its 30% stake in Kemaman Biomass Power (M) Sdn. Bhd. in March 2019. While the investment was previously in line with the Group’s objectives and approach, this proposed business to develop a biomass power plant in Terengganu has not come to fruition since the start of the Group’s investment into the Associate Company in 2010. The disposal has since freed up more resources to be reallocated for the Group to better tackle its present challenges.
Over in Cambodia, we have also secured an amendment agreement to our power purchase agreement (“PPA”) with state-owned company Electricite Du Cambodge (“EDC”), for our two 10-megawatt (MW) power plants in Cambodia. While extending the PPA period for the sale of electricity to April 2022, the minimum amount of electricity purchased by EDC will be reduced from 65% to 60% of the contracted capacity. Meanwhile, MJE is also in negotiations with the Malaysian authorities to extend the tenure of MJE through the Renewable Energy Power Purchase agreement, as well as more favourable tariffs.
ON THE HORIZON
Demand for electricity in Cambodia is slated to continue to rise steadily in the long term, with government projections forecasting power consumption of up to 18,000 GWh(2) in 2030, a more than threefold increase compared to demand in 2015(3). While this bodes well for our three Cambodian fossil fuel power plants, the Cambodian authorities have also placed emphasis on the diversification of electricity supply to include local renewable options such as solar. The Group is closely monitoring for new risks and opportunities as the industry continues to develop and expand past its relatively nascent stages.
Meanwhile, in spite of the upcoming launches of the Jurong Port tank terminals and Tuas Mega Port further on the horizon, the outlook for the Singapore marine, oil and gas sector appears afflicted with uncertainties, following volatile oil prices and intense competition. In light of this, we anticipate that the performance of the fire-fighting and protection division will still be subjected to protracted challenges in the period ahead.
CHANGES TO THE BOARD
I would like to extend a warm welcome to Mr Chia Soon Hin William, who joins us as a Non-Executive and Independent Director. We look forward to working closely with him in steering the Group.
As part of the good corporate governance practice of Board renewal, Mr Lee Fang Wen has decided not to put up for reelection to the Board of the Company. The Board wishes to express its deepest appreciation to Mr Lee Fang Wen for his years of dedicated service to the Company.
On behalf of the board, we would like to express our sincere appreciation for our business partners, management, staff and shareholders for their unwavering support and immense contributions over the years. We look forward to working together with you for a productive year ahead.
Tay Kah Chye