Strength in Diversity
On behalf of the Board of Directors (the “Board”) of Libra Group Limited (“Libra” or the “Group”), I am pleased to present our annual report for the financial year ended 31 December 2017 (“FY2017”). The significance of this letter to you, dear shareholders, is two-fold.
The first is that we have reported our fifth consecutive profitable year despite tighter market conditions in the building and construction industry. Our performance in the face of increased competition for public sector contracts and margin compression underscores our resilience.
The second is the strategic diversification that we have begun to enhance shareholder value. Having secured shareholder approval, we are in the final stages of completing the acquisition of a 51%-stake in YC Capital Consolidation Sdn. Bhd. (“YC Capital”) of Malaysia. I am excited by our expansion into the asset-light tourism and related services sector. We are charting a major new chapter of growth, one which will transform Libra for the better in the coming years.
Allow me first to elaborate on our financial scorecard for FY2017.
The Group recorded S$70.5 million in revenue for FY2017 compared to S$80.9 million in FY2018. Our top-line was impacted by market conditions and a lower amount of work available. In line with the lower revenue, we posted a gross profit of S$12.5 million compared to S$15.3 million over the comparative periods. As has been widely reported, labour, worker levies and operating costs have risen significantly over the years in Singapore. As with many industry players, we have had to adapt quickly – all in the face of increasing competition for limited jobs. In our fifth year of profitability, our net profit attributable to shareholders amounted to S$1.6 million in FY2017, marginally lower than the S$1.8 million in FY2016.
Notably, we generated S$3.0 million net cash from operating activities in FY2017. We ended the year with cash and cash equivalents of S$4.1 million.
Earnings per share for FY2017 amounted to 1.33 Singapore cents while net asset value per share came to 22.08 Singapore cents as at 31 December 2017.
Core Business Review
Although the construction sector in Singapore contracted by 8.4 per cent in 2017, a reversal from the 1.9 per cent growth in 2016, Libra secured several significant projects, demonstrating our ability to adapt to industry fluctuations and capitalise on opportunities the market presents..
Two of the notable contracts won by our Building and Construction services segment include the sub-contract work for the supply, installation, construction, completion and maintenance of architectural works at two upcoming Mass Rapid Transit stations along the Thomson-East Coast Line – Lentor and Steven Stations. Awarded by China Railway No.5 Engineering Group and Daewoo Engineering & Construction, respectively, these two projects have a cumulative value of approximately S$35.9 million and are expected to be completed in 2020.
As at 31 December 2017, our aggregate order book amounted to S$147 million, compared to S$108 million a year ago. We are proud that Libra has over the years, established a strong reputation for quality and professionalism, and we will continue to build on its track record to secure more contracts. At the same time, we will remain mindful of costs and will focus ensuring efficient management of on-going projects.
Next, allow me to outline reasons behind our strategic diversification.
As you will recall, in February 2018, shareholders unanimously approved the acquisition of a 51%-stake in YC Capital, which is involved in the tourism and related services sector. As an interested party, I had abstained from the voting on this transaction which nonetheless received unanimous support from all of you shareholders. Thank you for your faith and trust.
YC Capital’s wholly-owned subsidiaries in Malaysia retail products catering to tourists, mostly from China, Taiwan and Indonesia. Through four stores located in the Klang Valley, we retail local manufactured goods, luxury items, latex mattresses, food – such as coffee, chocolates, bird’s nest, and Tongkat Ali, a traditional Malaysian herbal cure.
The global tourism continues to grow rapidly. All over the world, people want to travel to and see, taste and experience life in different locations. Tourism spending is a major contributor to the economies of many countries, including Malaysia. Even from a few shops YC Capital has been able to build up a sizeable business focused on a few core products. It has immense potential as an asset-light business with a significantly higher margin than our original core business.
Following the completion of the transaction, which will be satisfied through the issue and allotment of 93.75 million new shares at S$0.128 each, Libra’s share capital will increase from 119.54 million shares to 213.29 million shares. The financial results of YC Capital will also be consolidated with Libra’s and will contribute to the Group’s financial performance in FY2018.
Our vision is to leverage the listed platform of Libra to expand our revenue streams through complementary avenues to the mainstay travel and tour business. In addition, our local consumer product range attracts both domestic and international tourists’ spending. Hence, YC Capital’s business provides a base from which we can scale up in scope, size and geographical reach over the next few years.
Our diversification into the tourism scene comes amidst a concerted push by the Malaysian government to boost Malaysia’s tourism industry through “Visit Malaysia Year 2020” (“VMY2020”). VMY2020 has been described as Malaysia’s national mission and a major catalyst to lift tourist arrivals in the country which saw 25.9 million tourists in 2017.
We believe these initiatives will have a positive impact not only on Malaysia’s tourism scene but also on our new tourism business – which includes the provision of travel and tour agency services. YC Capital will initially be proxy to Malaysia’s tourism play amidst a proliferation of regional low-cost carriers and growth in international travel. Later, we can expand to other geographies and value-added services.
The seeds of this strategy were first sown in 2015, even before the full impact of the slowdown in the building and construction industry, when we received shareholders’ approval to diversify into various industries. Libra is at the cusp of an important transformation which I am confident will help enhance shareholder value.
Despite the challenging environment, the Group’s financial position continues to be healthy. Net assets stood at S$24.3 million as at 31 December 2016, as compared to S$23.4 million as at 31 December 2015. Net asset value per share stood at 20.71 Singapore cents, up from 19.88 Singapore cents as at 31 December 2015.
The Group’s cash and cash equivalents stood at S$3.4 million as at 31 December 2016. Our earning per share stood at 1.54 Singapore cents, as compared to 5.32 Singapore cents for the financial year ended 31 December 2015.
Market capitalisation was approximately S$19.5 million based on the closing share price of 0.166 Singapore cents as at 31 December 2016.
Board of Directors and Key Management
At this juncture, I would like to update shareholders on the several changes to our Board of Directors and key management in FY2017.
Mr Yuen Sou Wai and Mr Wong Quee Quee, Jeffrey relinquished their role as Lead Independent Director on 28 April 2017 and 12 December 2017, respectively. I would like to extend my appreciation to both of them for their strategic insights.
We record our appreciation Mr Lim Boon Ping, who resigned as Chief Financial Officer on 30 June 2017.
I would like to welcome the new directors who bring to the Board diverse experience and will be an invaluable asset to the Group. They are Lead Independent Director Mr Kong Chee Keong and Independent Director Ms Gwendolyn Gn Jong Yuh, both of whom were appointed on 12 December 2017.
I would also like to welcome Mr Ang Choon Cheng who was appointed as Executive Chairman of Cyber Builders Pte Ltd on 3 July 2017. Mr Ang is responsible for new business developments and investments and brings with him many years of experience.
Appreciation and Outlook
Libra has remained resilient through a challenging period by staying relevant, embracing diversity and drawing strength from it. Libra has a talent mix of cultures, nationalities, gender and age. This has provided us with the necessary skills and knowledge to remain strong and deliver yet another year of profits.
On behalf of the Board, I would like to extend my deepest appreciation to our Board of Directors and Sponsor for their wise counsel and guidance. To all our customers, business associates, management team, staff and shareholders, thank you for your unwavering faith in us. We would not be where we are today without your continued support.
Our work to transform Libra has just begun. While we recognise that there are challenges ahead, we are confident that the business pillars we have built up in construction and tourism will play an important role in bringing Libra to greater heights.
MR CHU SAU BEN