Extracted from Annual Report 2007
Dear Shareholders,
On behalf of the Board, I am pleased to report that
Yongnam has turned in sterling results for FY2007.
Group revenue increased by 15.8% from $150.4 million
to $174.1 million. Net profit for the year ended 31
December 2007 increased by 360.6%, from $5.3 million
to $24.6 million. The Group's gearing has also reduced
significantly to 0.7 as at 31 December 2007, compared
to 10.6 a year ago .
Structural Steelworks emerged as the key contributor
to this growth, registering a revenue increase of 94.7%
from $63.0 million to $122.6 million. While activities in
the MRT Circle Line projects are still on-going, revenue
from the Specialist Civil Engineering division has declined
by 25.7% from $69.3 million to $51.5 million as we have
completed the bulk of higher value work for the Circle
Line projects in FY2006. The decline was buffered by
increased revenue recognition from the Dubai Metro
project, which increased by 164% from $4.4 million in
FY2006 to $11.6 million in FY2007. With the Group's
decision to focus on its two core divisions of Structural
Steelworks and Specialist Civil Engineering, revenue for
Mechanical Engineering in FY2007 was negligible.
In FY2007, we placed out 120 million shares in January
2007 and another 123 million shares in May 2007. Of
the approximate $19 million proceeds from the first
placement, $2 million was used to repay an overdraft
facility from UOB, $8 million was used to purchase
strutting assets, $6.9 million for working capital and
$1.7 million was used for the construction of a sand
blasting and painting facility. The remaining $0.4 million
will be used toward the remaining construction of the
sand blasting and painting facility. The second placement
raised approximately $38.1 million, of which $23.1
million was used for working capital and $1.5 million for
the acquisition of land in Nusajaya, Johor, Malaysia and
the construction of a new factory on the said land. The
remaining proceeds of $13.5 million are to be used for
payment for the remaining purchase price of the land and
the construction of the new factory.
In December 2007, the Group issued 365 million warrants
via a rights issue in conjunction with a $100 million
Transferrable Term Loan ("TTL") and Floating Rate Notes
("FRN"). $5.5 million of the proceeds from the rights issue
is used for working capital and the remaining $5.5 million
is held in an escrow account and used for repayment
of interest of the TTL and FRN. To date, approximately
$0.45 million has been utilized to pay the interest expense.
As at 31 December 2007, the Group has drawn down
$80 million from the TTL and FRN towards repaying term
loans and for working capital.
Coupled with our return to profitability since FY2004,
Yongnam's financial position has strengthened.
Our gearing has been reduced from 10.6 as at 31
December 2006 to 0.7 as at 31 December 2007 and
our shareholders' equity as at the same date improved
dramatically to $108.6 million. This turnaround in our
financial position will help to spur the Group further in
negotiating and securing better and bigger projects in
future.
The Group's marketing efforts in the middle-east started
to bear fruits in late FY2006 when the Group was awarded
a $60 million contract for the Dubai Metro project. As
at 31 December 2007, total contract value from this
project has grown to $139.1 million. Having entrenched
our position and reputation in Dubai, the Group intends
to continue to deepen its penetration in the middle-east
market to seek out further projects.
Our regionalization efforts were given a further boost with
the award of a $70 million contract for the new Passenger
Terminal Building of the Delhi International Airport in India.
This contract signals Yongnam's entry into another market
which has huge potential in infrastructural projects.
We won this project on the basis of our track record,
particularly our successful erection of the roof structure
for the passenger terminal building of the Suvarnabhumi
Airport in Bangkok, Thailand, as well as the confidence
that the GMR Group, one of India's largest infrastructure
developers, has on Yongnam's ability to provide safe
innovative solutions, quality and on-schedule delivery.
This project is our beachhead into India and the Group
plans to continue to actively market itself to deepen its
market penetration.
Outlook for Yongnam looks positive. The Singapore
government has announced new land transport initiatives
with an investment plan of $50 billion over the next 10
to 12 years, of which $40 billion will be used to double
Singapore's rail network to 278km by 2020. Plans to
construct a 21km North-South Expressway costing
approximately $8 billion as well as a 5km long Marina
Coastal Expressway costing $2.5 billion have been
approved. Other infrastructure developments coming
on stream include the MRT Downtown Line, Singapore
Sports Hub and other commercial developments.
Middle-east and India are two regions that are seeing
more and more infrastructure development. We also
expect infrastructure development in Malaysia to increase
in two to three years' time.
The Group intends to continue to actively pursue
opportunities, locally as well as in the middle-east and
India. In preparation for the increased business activities,
we have purchased a piece of freehold industrial land
in the Southern Industrial Logistics Cluster at Nusajaya,
Johor, Malaysia. A new factory is currently being
constructed on this 109,103sqm of land and is expected
to be completed by June 2008. The new factory, with a
covered workshop of 28,900sqm, will have a fabrication
capacity of 3,500 tonnes of steel per month, hence
doubling the Group's annual output to 78,000 tonnes.
With our increased fabrication capacity, as well as the
Group's inventory of modular strutting system, the Group
is well positioned to benefit from the wave of infrastructure
developments expected over the next three to five years.
The Group's order book as at 31 December 2007
amounted to $162 million, up 14.1% from $142 million
at the end of FY2006. Notwithstanding the challenges
and unforeseen factors ahead, the Board is optimistic
that the strong operational performance will continue into
FY2008.
I would like to thank the Board for its invaluable
contributions in steering Yongnam's direction, as well as
the dedication shown by the employees of the Group
and the support given by our customers, bankers and
suppliers. I would also like to extend a warm welcome
to Mr. Dominic Tan Eng Kiat who was recently appointed
on 3 March 2008 as an Independent Director to our
Board. We look forward to benefit from Mr. Tan's wealth
of experiences and business acumen.
Chief Executive Officer
