Review of Performances
The revenue for the property development division decreased by 8% to RM247.1 million in FY11 from RM268.1 million recorded in FY10 primarily due to lower progressive billings from the Surian Industrial Park project, as it was completed in June, FY11. The lower progressive billings from Surian Industrial Park were, however, mitigated by higher percentage of work done on the Bandar Laguna Merbok and Kemuning Utama developments. PBT for property development increased by 9% to RM83.1 million from RM76.2 million recorded in FY10 driven by higher profit margins achieved on the Bandar Laguna Merbok and Kemuning Utama development on the back of an increase in selling price, sale of higher value products, a non-recurring gain of RM1.3 million from the sale of a vacant land for the development of a private hospital in Bandar Laguna Merbok and project cost savings.
Revenue for construction increased by 25% to RM230.2 million in FY11 from RM184.6 million recorded in FY10 as a result of new external contracts secured during the year under review. PBT for the division decreased by 48% to RM4.7 million from RM9.1 million recorded in FY10. The higher PBT in FY10 was primarily due to a share of profits of RM1.5 million from an associated company and a RM2.5 million compensation for raw material price escalation from an external developer.
Revenue for educational services division increased marginally by 2% to RM99.8 million from RM97.6 million recorded in FY10, boosted by a new income stream - a new international school. PBT increased by 4% to RM24.1 million from RM23.2 million recorded in FY10.
Prospects
The Group’s lock-in sales brought forward, new launches from existing development projects and commencement of three new development projects will help underpin the Group’s property development sales for 2012. Bukit Banyan in the Northern Region was opened for registration in January, 2012 and it generated a lot of positive feedback while the Sejati Residences in Cyberjaya and Glenmarie in Shah Alam are scheduled to be launched in the second half of 2012. Q4’s PBT rose by 27% as compared with M23.0 million recorded in Q3 due to the generation of a new stream of revenue following the establishment of an international school in Q4, and savings in operating overheads.
These projects were scheduled to be launched in 2011 but due to delays in approvals, they were deferred to 2012. Although these deferments will inevitably have a negative impact on the performance of the property development sector in 2012, the Group, going forward, is confident that these projects will drive sales and be strong profit generators.
The Group remains optimistic with regard to its new development schemes despite head winds precipitated by the continued global economic uncertainty. In this respect, the property development division will seek to continuously add value to its products in ensuring total customer satisfaction.
As in the past, the construction sector continues to operate in an intensely competitive environment. Given the challenges of rising construction costs - escalating raw material prices and shortage of skilled labour – the sector is faced with the difficult task of maintaining good profit margins. Notwithstanding, we still remain highly selective on tendering for external projects and will actively pursue fee based construction projects. With our strong financial standing, competency and reputation in the construction industry as well as our ability to deliver quality products on time, we will actively pursue joint venture development activities with landowners
Despite the fact that the education industry is extremely competitive, which was further compounded by an increase in capacity and price-cutting that has resulted in lower margins, the performance of the educational services division is expected to remain stable. The upgrading of the Damansara Jaya campus to university college status and the development of proprietary programmes together with the significant investments in upgrading both the tertiary campus facilities as well as human and technological resources will enable us to remain competitive and grow. The primary and secondary school education has expanded to include an international school, and this has helped position us well to tap new opportunities in response to an increasing shift in customers’ preferences.
In summary, the Group’s results for 2012 are expected to be lower than those of 2011. The Group is, however, confident of leveraging on its strong fundamentals – strong management, proven experience and expertise, quality products, strong brand presence and healthy cash flow and strong balance sheet – in overcoming challenges and turning them into opportunities, going forward.
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