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Annual Reports
Chairman's Statement

30 March, 2012

Dear Shareholders,

We are pleased to announce that United Engineers Limited and its group of companies (the ďGroupĒ) will celebrate its centennial in 2012. Formed on 12 July 1912, the Groupís origins can be traced back to the merger of two engineering powerhouses: Riley Hargreaves & Co. (circa 1865) and Howarth Erskine & Co. Ltd. (circa 1875). Their consolidation gave birth to ďUnited Engineers LimitedĒ which represented the formation of an engineering force in those times.

A 100-year legacy brandname
The Groupís legacy can be found not just in history books, but also in numerous life-sized landmarks and monumental superstructures in Singapore which it either constructed, provided engineering services for, or supplied parts to: the former Supreme Court, Victoria Memorial Hall, British High Commission, Cavenagh Bridge, Golden Shoe multi-storey car park, Shangri-la Hotel and OCBC Centre, just to name a few.

For close to a century, the Group played an integral role in the physical and economic growth of Singapore. Even in recent years, the Group provided construction and/or engineering services to several iconic edifices that define the landscape of Singapore in the new millennium: from the hotel towers of Marina Bay Sands, to ION Orchard, to the co-generation system in Gardens by the Bay, to the mixed-use development at one-north comprising Rochester Mall (retail mall), Park Avenue Rochester (hotel and serviced suites) and The Rochester (condominium).

Record revenue and profit
For the year ended 31 December 2011, the Groupís revenue increased 108% to $1.2 billion mainly due to the adoption of the Completion of Construction (COC) method of accounting for private residential project The Rochester sold under the Deferred Payment Scheme (DPS) and Design, Build and Sell Scheme project Park Central @ AMK. Arising from the increased revenue, the Groupís net profit increased to $269.5 million.

Besides strong profit contribution from its property businesses, the Group also benefited from higher revaluation gains from its portfolio of property assets and gain on disposal of investment assets of $59.1 million.

Based on the above financial performance, the Groupís directors are pleased to propose a first and final ordinary dividend of 5 cents per ordinary stock and a special dividend of 10 cents per ordinary stock. The proposed first and final and special dividends, if approved by members of the forthcoming Annual General Meeting, will be paid on 18 May 2012.

Strong net cash balance and improved debt profile
The Group ended the year with a strong net cash balance of $439 million, an increase from $253 million as at 31 December 2010. This is partly due to progress billings received from The Rochester, Park Central @ AMK and Austville Residences, and net cash proceeds derived from the initial public offering of its construction-and-mechanical-and-electrical-engineering subsidiary UE E&C Ltd. in February on the Mainboard of the Singapore Exchange Securities Trading Limited.

The Groupís net debt-to-equity ratio maintained at 0.74x. About 87% of the Groupís debt is in longterm borrowing ranging from two to five years.

The Group established a $500 million Multicurrency Medium Term Note programme (the ďProgrammeĒ) and in January 2012 issued the first series of notes comprising $150 million in aggregate principal amount of 4.20% per annum fixed rate notes due 2017. The Programme will diversify the Groupís funding options and strengthen its financial position to take advantage of investment opportunities in Singapore and overseas.

The Group’s growing focus in property
While the listing allows UE E&C Ltd. to set off on a more focused growth path, it also enables the Group to streamline its operations and focus on growing its property business comprising property development and property rental and services.

The Group will focus on developing housing and mixed-used projects, either on its own or through joint ventures, and retain suitable commercial properties for recurring rental income. Building a more stable base of recurring rental income will also help to smoothen the Group’s fluctuating development profit.

Integrated Property Services Division: Strengthening of asset portfolio
During the year, the Group added two major property assets to its portfolio: the 271-room Park Avenue Rochester and 86,111 sft Rochester Mall at one-north which obtained temporary occupation permit (TOP) in July.

While strengthening its asset portfolio, the Group also continued to plan for new development projects. The Group secured a 99-year leasehold, 200,402 sft residential land site at Bendemeer Road/Whampoa East for $543 million which will be developed into a large-scale condominium named 8 Riversuites expected to launch by first half of 2012.

During the year, the Singapore housing market was affected by two rounds of cooling measures where an additional sellers’ and buyers’ stamp duty were imposed. While the housing market underwent much changes, home-buying interests remained relatively healthy. The Group’s executive condominium (EC) Austville Residences launched in January was more than 80% sold as at 31 December 2011, partly boosted by the raise in household income ceiling for EC buyers.

Engineering & Construction Division: Riding on a robust engineering and construction demand
Singapore’s construction demand for the year remained strong and grew 16% year-on-year from $27.6 billion in 2010 to $32 billion in 2011, backed by a strong public sector construction demand. During the year, the Group secured a $94 million construction contract for the National Continuing Education & Training Campus at Paya Lebar Central (East). It also won an $89 million construction contract for Watercolours, an EC at Pasir Ris Drive 3/Pasir Ris Link which it has a minority development stake.

In Brunei, the Group was awarded a $132 million construction project for Prime Minister’s Office Building Complex and a $42 million contract for the construction of 232 terrace houses. In Vietnam, the Group secured a US$22 million engineering contract for MGM Grand Ho Tram, a large-scale integrated resort.

For environmental engineering, the Group was awarded a $27.5 million contract for the proposed expansion of digestors and effluent pumping station at Changi Water Reclamation Plant.

Management change
The Group appointed Mr Lester Wong Hein Jee as its Chief Financial Officer from 1 October 2011 to take over from Mrs Jessie Peh who retired after serving the Group for the past 22 years.

Looking ahead and beyond
In view of the global economic uncertainties and slower GDP growth in Singapore, the Group expects 2012 to be a relatively challenging year.

However, we are more positive about the hospitality, engineering and construction sectors. The good tourist arrival growth and limited supply of new rooms in 2012 might have positive implication on our current hotel and serviced suites Park Avenue Clemenceau, Park Avenue Robertson and Park Avenue Rochester and the upcoming Park Avenue Changi Business Park. The total construction demand in 2012 is projected to be between $21 billion and $27 billion which we believe will contribute to a busy year for the industry.

The completion of major residential projects The Rochester and Park Central @ AMK, adoption of the COC method of recognising development profit, and a net surplus on revaluation of the Group’s investment properties together contributed to record profit for the year. Going forward, the COC method of accounting is expected to cause development profit for ongoing projects to fluctuate.

The Group’s ongoing development projects – UE BizHub EAST, 8 Riversuites, Austville Residences and orchardgateway – are not expected to contribute significantly to its development profit in 2012. The Group expects its revenue and operating profit to be derived from recurring income from the Engineering & Construction and Property Rental & Services segments.

Thank you to all
We would like to welcome Mr Koh Poh Tiong who is appointed to serve as non-executive and independent director on the Board.

On behalf of the Board of Directors and management, we thank all staff, shareholders, business partners and associates for their continued commitment and support of the Group.