Switchgear Division

Our Switchgear Division continued to be the Group’s main driver for revenue and profit growth in FY2007. This Division contributed $96.2 million in revenue for FY 2007, an increase of 39.2% over the $69.2 million in FY2006. Its contribution to the Group’s top line was 50.2% as compared to 41.1% in FY2006.

The increase in revenue was attributable largely to the flourishing local construction sector which has seen the highest growth rate since the last boom in 1997. Some of the bigger projects completed in the past year included commercial and industrial buildings such as data centres for banks and wafer fabrication plants for semiconductor clients.

Profit before interest and tax improved to $9.7 million from $6.2 million in FY2006. This reflected the contribution of projects with quick turnaround time that yielded better profit margins.

FY2007 was a bumper year for our Switchgear Division as we increased our market share in providing switchgears to data centres of banks, the process & semiconductor industries and the oil rigs for the marine/oil & gas sector. Developing switchgears to these industries requires specialist knowledge as these industries work under very fine tolerances and cannot afford to have downtime of their equipment.

Our performance during the year under review demonstrated our capabilities to take on large projects with short lead times, and our production capacity was a key factor limiting our ability to cope with even larger projects.

To address this, we have doubled our production floor space to some 120,000 square feet which will be fully operational within the second quarter of FY2008. We expect high utilisation of our capacity in the year to come with the Group now being able to tackle larger, higher yield projects.

On the local front, we expect construction demand to be bullish. The BCA forecasted that construction demand is likely to reach between $23 and $27 billion in 2008. This augurs well for the Group’s business growth. Going forward, we will focus our attention on data centres, the semiconductor industry and the oil & gas and marine sectors to spearhead our revenue growth.

FY2007 has also seen expansion in the Group’s other geographical markets for switchgears.

Our Malaysian subsidiary in Johor Bahru, dealing primarily in providing metal fabrication support for our local operations has expanded to 130,000 square feet with the addition of a rented factory. The latter is intended to cater to growing demand in the Malaysian market, harness the increasing business opportunities in the Iskandar Development Region, as well as to support our Singapore operations.

Our Australian subsidiary, which has become profitable last year, is looking at possible expansion of its current production capacity.

In Vietnam, our new factory has been established to tap burgeoning market demand, given the strong growth in the construction sector. Our Vietnamese subsidiary has also clinched its maiden project to produce switchgears for an offshore oil platform.

As for our joint venture (JV) in China with the Yanlord Industrial Group, operations have commenced in the new factory in the Baoying province. We intend to tap our JV partner’s local knowledge and contacts while providing them with industry-specific expertise.

While FY2008 looks to be a good year ahead, we are still mindful of the pitfalls and challenges. We will continue to exercise prudence in our operations while striving to maintain our competitive edge.

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