2019 UEM Edgenta Annual Report

CFO’s Review 41 UEM Edgenta Berhad MESSAGE FROM OUR LEADERSHIP STRATEGIC FOCUS OPERATIONAL REVIEW SUSTAINABILITY EFFORTS CORPORATE GOVERNANCE INTRODUCTION FINANCIAL REVIEW ADDITIONAL INFORMATION UEM EDGENTA AT A GLANCE FINANCIAL POSITION REMAINS ROBUST Improved collections from customers and an increase in net operating cash flow allowed us to maintain a healthy financial position during the year in review. Our balance sheet showed ample room to leverage on for growth, with total assets rising 1.2% year-on-year to RM2.91 billion and net assets per share growing 4.6% to RM1.89 per share. While total liabilities decreased by 2.4% to RM1.33 billion, we have reduced our gross gearing ratio to 0.33 times from 0.35 times in the previous year. Total equity increased 4.5% to RM1.58 billion and we will continue to focus on improving our working capital management and optimising our capital structure. As at the financial year ended 31 December 2019, our total cash, bank balances, deposits and short term investments stood at RM621.0 million. Additionally, our net cash position improved to RM101.9 million in FY2019 from RM71.0 million in the previous year. With our low gearing and healthy cash balance, we are well positioned to weather short- term volatility and deploy for growth, where required. Given our robust financial position, we are pleased to deliver continued returns to our shareholders, with return on equity rising to 11.8% from 9.6% in FY2018 and a dividend payout of 14 sen, representing a dividend payout ratio of 64%. 0.33 X Gross Gearing Ratio RM101.9 million Net Cash Position RM1.89 Net Assets per Share 4.6% 43.5% 11.8 % ROE* from 9.6% for FY2018 MOVING FORWARD For the year ahead, we expect the Healthcare Support division’s Malaysia projects to register revenue growth from the scaling up of value-added services at MoH hospitals and the development of more digital healthcare solutions, as well as expansion into private hospitals. Regionally, the division will focus on operationalising and optimising new contracts secured, in particular the contracts won from MoH Singapore. In our Property & Facility Solutions division, revenue will be driven by the scaling up of Energy Performance Contracts and efforts to champion the industry in the green / sustainability and industrial space. Additionally, we will pursue selective focus on projects undertaken within the highly competitive facility management sector in Malaysia, targeting industrial and high-value commercial sectors. Revenue in our Infrastructure Services and Asset Consultancy divisions will be anchored on our expansion in East Malaysia and Indonesia, as well as the provision of infrastructure solutions such as RAMS and the use of our Pavement Research Centre. To improve margins and profitability, we will continue to focus on operational efficiency through process improvement and operational excellence initiatives, including Innovation Garage and LEAN programmes. We will also implement tighter cost controls and leverage on technology to enable efficiencies. Specifically, we expect to implement Enterprise Resource Planning (“ERP”) on three core support functions: Finance, Human Capital Management and Procurement in the second quarter of 2020. ERP will facilitate us in streamlining financial information and processes across our companies, improve spending and strategic sourcing analysis, as well as cost control and increase visibility into spending. It will also increase efficiency through supplier enablement, integrate project and financial information and improve human resource analysis for better decision-making. Additional finance initiatives to be focused on for the year 2020 include improving collections from customers and cost optimisation to maintain our strong cash position and strengthen our financial position. In terms of earnings prospects, our orderbook remains healthy with RM13.2 billion worth of work-in-hand as at 31 December 2019, with our long-term contracts providing a base for expansion and visibility for revenue recognition. MUHAMMAD NOOR BIN ABD AZIZ @ HASHIM Chief Financial Officer Figures in RM mil unless other wise stated 2019 2018 Increase / (Decrease) RM’mil RM’mil RM’mil % Summary of Statement of Financial Position Total Assets 2,912.8 2,877.7 35.1 1.2 Property, plant and equipment 212.0 185.0 27.0 14.6 Right-of-use assets 30.9 - 30.9 100.0 Intangible assets 734.3 731.9 2.4 0.3 Inventories 133.8 156.8 (23.0) (14.7) Trade and other receivables 672.7 896.6 (223.9) (25.0) Contract-related assets 379.9 199.8 180.1 90.1 Short-term investment 62.5 107.2 (44.7) (41.7) Cash, bank balances and deposits 558.5 496.3 62.2 12.5 Total Liabilities 1,328.4 1,360.9 (32.5) (2.4) Borrowings 519.1 532.5 (13.4) (2.5) Trade and other payables 673.6 744.8 (71.2) (9.6) Lease liabilities 30.3 - 30.3 100.0 Contract liabilities 21.1 14.4 6.7 46.5 Total Equity 1,584.4 1,516.8 67.6 4.5 Shareholders’ fund 1,572.0 1,502.3 69.7 4.6 Non-controlling interest 12.4 14.5 (2.1) (14.5) Net Asset per share 1.89 1.81 0.08 4.6 Gross Gearing Ratio 0.33 0.35 (0.02) (6.7) Net Cash Position 101.9 71.0 30.9 43.5 * PATANCI / Average (Opening + Closing Shareholders’ Fund) Annual Report 2019