The settlement is expected to have a material adverse impact on the financial position of the company

 

Technology solutions provider CSE Global : 544 +1.08% has agreed to a US$8 million settlement payment with the customer of its wholly owned subsidiary, Hankin Environmental Systems.

 

The settlement is expected to have a material adverse impact on the financial position of the company for the financial year ending Dec 31, 2024 as the company will record the settlement sum for the financial year.

 

The technology solutions provider said in a filing to the Singapore Exchange on Monday (Sep 9) that the customer had instituted arbitration proceedings in the US on Sep 3.

 

Hankin was engaged by the customer to perform certain engineering, materials procurement and installation services on a construction project in the US for which the customer was the general contractor.

 

The customer alleged in the arbitration proceedings that it had suffered losses due to Hankin&rsquo s delays in carrying out the contracted work.

 

However, Hankin claimed that the delays were predominantly caused by supply chain disruptions due to the Covid-19 pandemic and the customer&rsquo s instructions to vary the approved existing design plan.

 

The parties agreed to a &ldquo full and final settlement&rdquo of all claims asserted by the customer in the arbitration proceeding on Sep 8. The payment is subject to the execution of a written settlement agreement and release by the parties.

The company specialises in customising integrated systems across three major areas: automation processes, communications networks and electrification

 

Lim Boon Kheng, the CEO of CSE Global, wins best CEO award in the small-cap category at the Singapore Corporate Awards 2024. PHOTO: BT FILE

Singapore Corporate Awards 

 

WHEN its projects in the oil and gas industry began to wane about six years ago, CSE Global, which started off as an automation company, went on the hunt for other sources of revenue.

 

At the time, chief executive officer Lim Boon Kheng realised that electric vehicles (EVs) were gaining in popularity. Secured communications were also becoming more important as governments paid more attention to security issues.

 

This led the company to turn to the electrification and communications network systems industries.

 

CSE Global is now reaping the fruits of its diversification strategy with business growing &ldquo very well&rdquo over the last two to three years, said Lim in an interview with The Business Times.

 

In its latest financial results, the mainboard-listed technology solutions provider reported a profit of S$15 million for the first half of FY2024, up 36.4 per cent from the corresponding period in 2023.

 

Revenue for H1 was up 22.8 per cent to S$428.9 million, led by the growth of its electrification business segment.

 

For his foresight, Lim won best CEO in the small-cap category, for companies with market capitalisation of under S$300 million at this year&rsquo s Singapore Corporate Awards.

 

The award recognises CEOs who have led an organisation to scale new heights in their respective industry segment, while also achieving excellence in corporate governance.

 

Lim attributes the success of the company to the expertise of his staff who, he says, have been integral to the company&rsquo s efforts to diversify.

 

&ldquo As CEO, you&rsquo re just trying to get everybody on the same page and get work done but we truly depend on all the staff,&rdquo he said.

 

CSE Global is an engineering company which specialises in customising integrated systems for clients. Its work spans across three major areas: automation processes, communications network systems and electrification.

 

Its electrification business is the biggest driver of its revenue. The segment grew 32.4 per cent year on year to S$216.7 million in H1 2024. In its latest financial results, the group attributed the growth to higher project revenue achieved from major contracts secured in 2023.

 

The company&rsquo s communications business segment registered a more modest growth of 6.1 per cent over the same period, while its automation segment grew by 25.5 per cent.

 

Overall, however, the automation segment comprises only about a quarter of its total business revenue, down from 90 per cent six years ago, prior to the company&rsquo s diversification efforts, said Lim.

 

Trendspotting

Although CSE Global initially had a foothold in the oil and gas industry, tighter environmental regulations meant that automation projects by its clients in the industry were reduced.

 

At the same time, around 2018, Lim observed that digitisation was becoming a growing trend.

 

More people were switching to EVs, fuelling the need for electric power. The growth of data centres also meant a higher demand for power management.

 

&ldquo Those are the big trends that most countries are moving towards and hence they put more demand on the power grid and electricity requirements. People like ourselves who came in to do electrification work then benefited from these trends,&rdquo said Lim.

 

Governments were also paying greater attention to security-related issues, including secured communications. This has boosted the demand in critical communication services and products, such as secured walkie-talkies, said Lim.

 

Having already provided critical communication and electrification services to some of its clients in the oil and gas industry, CSE Global eventually expanded its services in these two areas to other industries and built up its clientele.

 

Challenges

The company has been able to adapt to these new businesses given that engineering principles across its three business segments are similar.

 

However, Lim said the biggest challenge CSE Global is facing now is hiring enough people to keep up with the booming business.

 

He added that CSE Global&rsquo s headcount is &ldquo growing well&rdquo by about 10 per cent every year.

 

&ldquo But our (business) growth is much higher, so we have to keep on adding people.&rdquo he said. However, it is tough to find people with the right skills given that not many want to be engineers and technicians, he added.

 

To overcome this challenge, Lim said CSE Global is expanding the role of its technicians and engineers. For example, some of the work that used to be done by degree holders is now done by diploma holders.

 

Doing so also helps in retaining manpower as staff are allowed to scale up in their responsibilities.

 

The company also trains its engineers to work across different product brands and different functions, such as back end work or project management. Therefore, they become proficient in both hard, technical skills and soft skills such as project management.

 

Looking forward

Although Lim is not optimistic about the company&rsquo s outlook for its automation processes business, he believes that CSE Global is poised to ride the growth in these trends for the next three to five years.

 

This is especially so with the growing trend of EVs and the boom in artificial intelligence, which will drive the growth of more data centres. Growing security concerns globally will also propel demand for critical communications, he added.

 

&ldquo I would say we are just beginning in this trend of electrification and critical communications. We are just starting to do better.. We still have many more good years of growth in front of us,&rdquo said Lim.

 

While CSE Global will continuously monitor new business trends, it expects to be busy capturing the upcycle of its existing business in the near term.

 

&ldquo I think we&rsquo ve got many more good years to come, so we might as well ride this wave and do our best first,&rdquo said Lim.