Construction group Tiong Seng announced that it has made a loss of $44.0 million for the 1HFY2022 ended June period, compared to earnings of $1.4 million in the same period a year ago. The group has attributed its loss to rising labour, material and subcontracting costs.

 

Alongside the group' s loss in this period, its revenue has declined by 16.8% y-o-y to $148.7 million, mainly due to a decrease in construction work for the engineering solutions segment for finished products such as mass engineered timber and prefabricated prefinished volumetric construction (PPVC), as well as a reversal of over-recognised revenue from the engineering solutions segment of approximately $8.0 million in aggregate from the prior reporting periods.

 

The group noted that the flow of labour remained restrictive until the entry requirements were streamlined in June this year, this allowed it to access more workers in 2QFY2022 compared to the previous quarter.

 

The shortage of labour contributed to the slower progress of construction activities and lower revenue. The bright side is construction activities started to pick up in 2QFY2022, especially with the easing of labor shortages since June, the group' s construction revenue has increased by $37.8 million to $118.1 million, as compared to 2HFY2021.

 

With the fall in revenue, a net loss was recorded due to a higher cost of construction contracts and engineering solutions, coupled with provisions made during the period for $17.5 million. Cost of construction contracts and engineering solutions relative to revenue increased to 118.4% from 92.7% in 1HFY2021 due to higher labour, material and subcontracting costs.

 

Provisions were largely for onerous contracts secured pre-Covid, where costs had increased past the prices considered at contract dates These pre-Covid-19 projects were hence doubly affected as supply chains issues before 2022 were not fully resolved and disruptions from the geopolitical crisis early this year further increase the costs.

 

On the other hand, other expenses increased significantly to $10.5 million from $4.0 million a year ago, mainly due to provision of impairment on contract assets of $5.0 million as well as higher repair and maintenance and operating lease expenses.

 

Against this backdrop, the group reported a loss.

 

As at end-June, the group' s cash and cash equivalents stood at $67.4 million.

 

On the outlook, the group is concerned about current geopolitical issues, the slow recovery of the construction sector, the price in raw material prices, as well as inflation. While labour is still an issue, the group notes that productivity is increasing as workers acclimatise back to the pace of work and skill levels required.

 

Moving forward, the group will continue to bid for suitable contracts while monitoring prices of materials and labour.

 

TIONG Seng : BFI 0% has agreed to acquire 51 per cent of electrical and mechanical engineering works provider, AMP Systems, for a consideration of S$3.3 million.

 

While the acquisition will result in a S$140,000 net loss attributable to Tiong Seng, the construction group said its board believes the transaction will benefit the group by allowing it to capitalise upon AMP&rsquo s existing business.

 

The deal will also further augment Tiong Seng&rsquo s technical and technological competencies while opening its construction arm to new green and sustainability opportunities in the built environment, said the group in a bourse filing on Monday (Jul 4).

 

Tiong Seng&rsquo s acquisition of AMP will comprise a 20 per cent purchase of vendor shares from an existing AMP shareholder, and a capital injection to subscribe for new shares to be issued by AMP to complete the group&rsquo s 51 per cent stake in the company.

 

Had the acquisition taken place in FY2021, the group&rsquo s net tangible assets per share would have been 43.76 Singapore cents instead of 43.81 cents. Pro-forma earnings per share would remain unchanged at 11.37 cents.

 

Tiong Seng Holdings&rsquo wholly-owned subsidiary Tiong Seng Contractors has been awarded a contract by the Ministry of Culture, Community and Youth worth $192.3 million on Dec 10.

 

The contract is for the construction, completion and maintenance of the works for the development of an Outward Bound Singapore (OBS) Campus at Coney Island and Lorong Halus (Punggol Planning Area), Singapore.

 

The possession of the site is expected to take place in December 2020. The contract is not expected to have any material impact on the net tangible assets and earnings per share of the group for the financial year ending Dec 31.

 

TIONG Seng Holdings said on Friday evening that its chief executive officer as well as the director of Tiong Seng Contractors (Private) Limited (TSCPL), who are involved in a corruption case, will relinquish their executive roles from July 31. They intend to defend the charges brought against them in relation to past business dealings with Singapore' s Land Transport Authority (LTA). 

 

CEO and executive director Pek Lian Guan and Tiong Seng Contractors director Pay Teow Heng were each charged on Friday on two counts of abetting to conspire to give gratification in the form of loans to Henry Foo Yung Thye, a former deputy group director of the LTA. They had allegedly done so in order to advance the business interest of TSCPL.

 

No charges were filed against TSCPL or any other companies in the group.

 

Mr Pek and Mr Pay are currently on bail and have told the board that they deny having committed the alleged offences. They intend to take " rigorous steps" to defend the charges. Their relinquishing of their executive roles is pending the outcome of the cases. 

 

Pay Sim Tee, an executive director of Tiong Seng Holdings and an executive director of TSCPL, will replace Mr Pek as the CEO of the company and managing director of TSCPL from Aug 1. He has more than 40 years of experience with the group.

 

Mr Pek will be retained as advisor to the group and Mr Pay will be an operational consultant to Tiong Seng Civil Engineering for a year, so that the group can tap their knowledge and expertise.

 

Their scope of duties and renumeration will be decided by the board. Both men will also step down from all their board appointments within the group.

 

Tiong Seng said it does not expect Mr Pek and Mr Pay' s relinquishment of their executive roles to have a major impact on its business as the company has a team of long-standing senior management staff with a strong track record.