Our revenue is derived from the 2 main business segments, namely construction and manufacturing and supply of concrete products. The contribution from the provision of IBS and trading in construction and building materials is immaterial to our Group during the financial period under review. We have included revenue from our provision of IBS and trading in construction and building materials as part of the revenue of manufacturing and supply of concrete products.

In respect of our construction segment, revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of revenue can be measured reliably. Where the outcome of a construction contract can be reliably estimated, contract revenue and costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion method is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs. Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of actual costs incurred that it is probable will be recoverable, and costs incurred are recognised as expenses. Where it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

In respect of our manufacturing and supply of concrete products, revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of revenue can be measured reliably. It is recognised net of discounts upon the transfer of risks and rewards.

Our revenue is derived from 2 geographical markets, namely Malaysia and Singapore. For FYE 31 December 2009, our construction segment revenue is derived from Malaysia, while more than 70% of our revenue from the manufacturing and supply of concrete products segment is derived from Singapore with the remaining revenue being derived from Malaysia.

Our cost of sales mainly comprises raw materials costs, sub-contracting costs and labour costs. Our cost of sales accounted for approximately 87.06%, 88.67% and 85.97% of our total revenue in FYE 31 December 2007, FYE 31 December 2008 and FYE 31 December 2009 respectively.

The main factors that affect our costs of sales include inter alias, the fluctuation in the prices of raw materials, our sourcing capabilities, our ability to control our sub-contracting costs and our ability to ensure a timely performance of our obligations.

Our revenue increased by 5.36% or RM22.15 million, from RM413.26 million in FYE 31 December 2008 to RM435.41 million in FYE 31 December 2009. This was attributable to the increase in revenue from our construction segment partly offset by the decline in revenue from our manufacturing and supply of concrete products segment. Our revenue from the construction segment increased by 11.35% or RM39.83 million in FYE 31 December 2009 as a result of increase in revenue contribution from existing projects amounting to RM28.16 million from RM153.17 million in FYE 31 December 2008 to RM181.33 million in FYE 31 December 2009 and increase in revenue contribution from new projects amounting to RM11.67 million from RM197.64 million in FYE 31 December 2008 to RM209.31 million in FYE 31 December 2009.

Revenue contribution from existing projects rose in FYE 31 December 2009 mainly due to the progress of the following larger size projects, which were brought forward from FYE 31 December 2008, to more advance stages of construction:-

These existing projects collectively contributed 36.61% to the revenue from existing projects for FYE 31 December 2009.

Revenue contribution from new projects rose mainly due to the commencement of construction work of the following larger size projects which were secured toward the end of FYE 31 December 2008:-

These new projects collectively contributed 23.47% to the revenue from new projects for FYE 31 December 2009.

Our revenue from the manufacturing and supply of concrete products segment declined by 25.71% or RM17.56 million in FYE 31 December 2009 mainly due to lesser sales orders received for the supply of pre-cast concrete building components to Singapore.

Our revenue from the Malaysia market rose by 12.24% or RM43.96 million, from RM359.14 million in FYE 31 December 2008 to RM403.10 million in FYE 31 December 2009, attributable to the increases in revenue from both construction and manufacturing and supply of concrete products segments. Our revenue from the manufacturing and supply of concrete products segment in the Malaysia market increased by 49.69% or RM4.14 million in FYE 31 December 2009 mainly as a result of a large sales order for the supply of cladding pipes to Labuan submarine pipe laying projects partially offset by a reduction in the sales of concrete piles and ready-mixed concrete by RM1.03 million.

Our revenue from the Singapore market declined by 40.30% or RM21.81 million, from RM54.12 million in FYE 31 December 2008 to RM32.31 million in FYE 31 December 2009 mainly attributable to lesser sales orders received for the supply of pre-cast concrete building components.

Our gross profit increased by 30.49% or RM14.28 million from RM46.83 million in FYE 31 December 2008 to RM61.11 million in FYE 31 December 2009 mainly attributable to the increase in revenue and gross profit margin of our construction segment. Our overall gross profit margin improved from 11.33% in FYE 31 December 2008 to 14.03% in FYE 31 December 2009. The gross profit margin of our construction segment improved from 8.21% in FYE 31 December 2008 to 12.29% in FYE 31 December 2009. The improvement in gross profit margin was mainly due to our undertaking of a few better profit margin projects and lower cost of steels. The average steel cost per metric tonne for the construction segment decreased by approximately 29% in FYE 31 December 2009 as compared to the average cost per metric tonne in FYE 31 December 2008. To the best knowledge of our Directors, the cost of steel is driven by market forces. The average cost was lower during FYE 31 December 2009 due to lower international market prices of steel.

The gross profit margin of our manufacturing and supply of concrete products segment declined from 26.38% in FYE 31 December 2008 to 25.79% in FYE 31 December 2009 mainly due to lesser sales of better margin customised pre-cast concrete building components.

Our net profit attributable to equity holders increased by 42.03% or RM9.33 million from RM22.20 million in FYE 31 December 2008 to RM31.53 million in FYE 31 December 2009.

Revenue

Our revenue increased by 12.83% or RM46.98 million, from RM366.28 million in FYE 31 December 2007 to RM413.26 million in FYE 31 December 2008. This was attributable to the increase in revenue from both construction and manufacturing and supply of concrete products segments.

Our revenue from the construction segment increased by 10.06% or RM32.07 million in FYE 31 December 2008 as a result of an increase in revenue contribution from new projects amounting to RM54.22 million from RM143.42 million in FYE 31 December 2007 to RM197.64 million in FYE 31 December 2008, partly offset by a decline in revenue from existing projects, amounting to RM22.15 million from RM175.32 million in FYE 31 December 2007 to RM153.17 million in FYE 31 December 2008.

New projects refer to projects secured in either the preceding financial year(s) or current financial year, and which commenced revenue generation in current financial year. Existing projects refer to projects carried forward to current financial year and have commenced revenue generation in preceding financial year(s).

Revenue from new projects rose mainly due to increase in new projects secured from both our new and existing customers in FYE 31 December 2008 compared to FYE 31 December 2007. The major new projects which were carried out during the financial year include, amongst others, the following:

These new projects collectively contributed 34.55% to the revenue from new projects for FYE 31 December 2008.

Revenue from existing projects declined due to greater proportion of work carried out for new projects in FYE 31 December 2007 vis-à-vis work carried out for new projects in FYE 31 December 2006, thus resulting in lower amount of work carried forward to FYE 31 December 2008 when compared to amount of work carried forward to FYE 31 December 2007. The major existing projects which were carried out during the year include, amongst others, the following:

These existing projects collectively contributed 33.63% to the revenue from existing projects for FYE 31 December 2008.

Our revenue from the manufacturing and supply of concrete products segment increased by 38.24% or RM18.89 million in FYE 31 December 2008, mainly attributable to the increase in revenue from the sale of pre-cast concrete building components to Singapore. We had secured more orders for the supply of building components to Singapore and most of the orders were duly fulfilled during the financial year. The increase in our revenue from the manufacturing and supply of concrete products segment was also partly attributable to the partial fulfilment of a sales order for the supply of cladding pipes to Labuan submarine pipe laying projects. However, the bulk of the aforesaid cladding pipes order was carried forward to the following financial year.

Our revenue from the Malaysia market increased by 7.29% or RM24.41 million, from RM334.73 million in FYE 31 December 2007 to RM359.14 million in FYE 31 December 2008 mainly attributable to the increase in our revenue from construction segment offset partially by a decline in revenue from our manufacturing and supply of concrete products segment. The revenue from our manufacturing and supply of concrete products segment in the Malaysia market declined by 47.97% or RM7.67 million in FYE 31 December 2008 mainly as a result of our Group’s decision to reduce the production and sale of concrete piles and ready-mixed concrete, which collectively contributed about 52.91% of our Malaysia market concrete products revenue in FYE 31 December 2007, so that our resources could be channelled to producing customised pre-cast concrete products such as pre-cast building components and cladding pipes.

The collective gross profit contribution of concrete piles and ready-mixed concrete to the gross profit of our Group’s concrete products segment was 11.73% in FYE 31 December 2007 and 2.03% in FYE 31 December 2008. The reduction in the production and sales of concrete piles and ready-mixed concrete products affected only our Malaysia market, as sales of these two products to Singapore were not material during the financial year under review.

Our revenue from the Singapore market increased by 71.59% or RM22.58 million, from RM31.54 million in FYE 31 December 2007 to RM54.12 million in FYE 31 December 2008, mainly attributable to an increase in revenue from the sale of pre-cast concrete building components to Singapore.

Our gross profit declined by 1.16% or RM0.55 million from RM47.38 million in FYE 31 December 2007 to RM46.83 million in FYE 31 December 2008 despite the increase in revenue.

Our overall gross profit margin declined from 12.94% in FYE 31 December 2007 to 11.33% in FYE 31 December 2008 due to the decline in the gross profit margin of our construction segment.

The gross profit margin of our construction segment declined from 11.68% in FYE 31 December 2007 to 8.21% in FYE 31 December 2008. The decline was mainly due to the escalation in raw material costs, sub-contracting costs and overheads arising from the following events which took place in FYE 31 December 2008:-

We were unable to pass most of the sudden and unexpected escalation in construction costs to our customers given that most of the construction contracts with our customers do not provide for upward revisions to the contract value for escalation in construction costs.

The gross profit margin of our manufacturing and supply of concrete products segment improved from 20.52% in FYE 31 December 2007 to 26.38% in FYE 31 December 2008. The improvement was mainly attributable to larger proportion of our sales being contributed by better profit margin products especially in relation to customized pre-cast building components and a large cladding pipes order. The collective gross profit margin for the pre-cast building components and the cladding pipes order was 10.64 percentage points higher than the average gross profit margin of our Group’s non-customised concrete products. Economies of scale arising from larger volume of business also contributed to improvement in gross profit margin of this segment.

The effect of the surge in cement and steel costs on our manufacturing and supply of concrete products segment was less severe as some of our clients supplied steels for the production of products ordered by them based on price which was mutually agreed upon at the point of finalisation of sales order. In addition, the time taken from confirmation of sales order to actual production is generally short. As such, the impact of an escalation in raw material costs can be passed on to our customers in subsequent sales orders fairly quickly.

Our net profit attributable to equity holders decreased by 13.99% or RM3.61 million from RM25.81 million in FYE 31 December 2007 to RM22.20 million in FYE 31 December 2008.