2019 UEM Edgenta Annual Report

Our Market Landscape 49 UEM Edgenta Berhad UEM EDGENTA AT A GLANCE MESSAGE FROM OUR LEADERSHIP STRATEGIC FOCUS OPERATIONAL REVIEW SUSTAINABILITY EFFORTS CORPORATE GOVERNANCE INTRODUCTION FINANCIAL REVIEW ADDITIONAL INFORMATION IMPACT OF THE MARKET LANDSCAPE ON OUR OPERATIONS UEM Edgenta plans to respond to the trends impacting the healthcare sector by focusing on healthcare beyond hospitals, shifting from the B2B segment towards the B2B2C segment, increasing our digital and technology solutions, as well as driving solutions which cover the entire life span while improving quality of life for the ageing population. We will also leverage digital and technology solutions within our infrastructure segment, while focusing on addressing developments and growing demand for climate action and sustainability. We have already initiated measures to address our market landscape by leveraging on our Edgenta Way, which focuses on raising industry standards to go above and beyond in delivering value-added services. These efforts and their results are captured in our Operational Review on page 55 - 63 of this Report. Moving forward, with the emergence of the COVID-19 as a global pandemic towards the end of 2019 and another change of Government in Malaysia in March 2020, we expect economic and business uncertainties to prevail in 2020. However, we remain confident that our financial position and ability to provide quality and value-added services will allow us to remain resilient in the face of challenges. For more information on our key risks and opportunities, and how we address them, please refer to pages 51 - 54 of this Report. TECHNOLOGY DISRUPTIONS As the world has rapidly become entrenched in the mobile and digital era, the market we operate has become heavily influenced by technology disruptions which impact all industries, from agriculture to financial services. This has accelerated the time-to-market for products and services, while also providing organisations with the agility to review and revise their strategies to adapt with new norms. The development of 5G technology has also raised considerations on its impact on our operating environment going forward. In view of this, we will continuously enhance and develop innovative technology solutions to add value to all our businesses, achieve operational excellence and benchmark the industry to the highest standards, showcasing our leadership in the sectors we are in. CHANGING BEHAVIOURAL TRENDS The consumer market is currently dominated by two distinctive generations: Millennials born between 1980 and 1996, and Generation Z born between 1997 and the 2010s. Despite some similarities, the two generations display distinct attitudes towards key behaviours, such as spending and ideals. These could be driven by the differing economic landscapes the generations grew up in, with millennials brought up during an economic boom and Generation Z growing up during a recession. Against this backdrop, we have observed the emergence of a generation that is purpose-driven to work. At the same time, the acceleration of climate-related events has created growing consciousness and demands on climate change and sustainability. To this end, we will build on our capabilities in green, sustainability-led solutions in providing energy efficiency initiatives in the buildings we manage. This will see us scaling up our Energy Performance Contracting solutions, where our services have contributed to reducing carbon emissions. HEALTHCARE TRENDS We see three key trends impacting the Healthcare sector. These consist of ageing populations, with more people aged 65 and older than those less than five years old in 2020. Additionally, data has shown an increase of chronic diseases such as arthritis, cardiovascular, cancer and diabetes. The prevalence of these non-communicable diseases, largely attributed to lifestyles, has shifted the focus on treatment from administering cures to prevention and wellness. Technological advancements have opened up solutions in the areas of genomics, microbiomics, synthetic biology and quantum computing & sensing. This takes healthcare beyond hospitals and provides potential for cutting-edge, value-added healthcare services. As discussed previously, technology and innovation have added value across industries. In the healthcare sector, advancements in areas including wearable devices, robotics, mobile survey, virtual and augmented reality, digital health and Big Data will continue to influence the provision of care. In view of these trends, our Healthcare division will continue developing value- added services for our clients and developing Digital Healthcare solutions, with projects we will focus on including our Replacement Through Maintenance programme, Blood Bank Information Systems and Energy Performance Contracting services. INFRASTRUCTURE TRENDS In addition to environmental concerns, the emphasis on sustainability has also led to the need for sustainable infrastructure development. In the context of our Infrastructure Services division, this has created demand for improving interconnectivity of cities through better roads and rail, which must be planned by taking into account the creation of socioeconomic benefits. In this regard, we see continued opportunities in Sabah and Sarawak as well as Indonesia, where we are expanding our presence. Sustainable infrastructure also includes water security, which is why we are seeking more water-related projects where we can deploy our technology systems. We will also focus on lifecycle infrastructure solutions, which we will couple with the commercialisation of our technology solutions to provide end-to-end services. Economic and operating conditions remained challenging in 2019, as geopolitical tensions and Brexit weighed on the global economy while the domestic economy continued to see uncertainty due to the change in Government in 2018. Malaysia recorded GDP growth of 4.3% during the year, slower than 4.7% in 2018. Growth was driven by private consumption and investment, and was also impacted by supply disruptions in the commodities sector. UEM Edgenta remained largely resilient against this backdrop, as evidenced by the continued award of new projects across all our businesses. Please refer to our Operational Review on page 55 - 63 or this Report. Further reporting on our economic and operating conditions is also available in our Chairman’s Statement on pages 33 - 35, MD/CEO’s Statement on pages 36 - 39 and CFO’s Review on pages 40 - 41 of this Report. Across our market landscape, we have also seen the emergence of industry megatrends which will impact our businesses and influence the services we deliver. As discussed below, these comprise technology disruptions, changing behavioural patterns as well as healthcare and infrastructure trends. Annual Report 2019