UEM EDGENTA BERHAD Integrated Annual Report 2025 58 OPERATING ENVIRONMENT AND KEY MARKET TRENDS ECONOMIC REVIEW AND OUTLOOK The global economy performed relatively resiliently in 2025, delivering growth of approximately 3.3%, in line with growth levels in the year prior, supported by front-loaded trade activity and easing monetary conditions in key markets. Despite this resilience, underlying economic fundamentals remained challenging. Businesses continued to operate in a high-cost environment characterised by persistent inflation in labour and utilities, volatility in energy prices, and foreign exchange fluctuations. These conditions resulted in elevated operating costs, heightened uncertainty and a more cautious approach to investment. Within this environment, clients prioritised cost optimisation, placing sustained pressure on margins across the business. Competitive intensity increased further as some clients shifted towards insourcing services, widening supply-demand imbalances and amplifying pricing pressures. In response, we continued to leverage technology and data-driven solutions to help clients mitigate cost pressures while reducing our own cost base. At the same time, sustainability-led solutions emerged as an important source of differentiation in a competitive marketplace. We also refined our commercial focus towards longer-tenure, outcome-based contracts and higher-value integrated facilities management scopes, while exercising greater discipline in contract selection and portfolio rationalisation. MALAYSIA Malaysia serves as our operational hub and remains a key market for the Group, supporting core management functions, operational coordination and service delivery across the region. The market continues to play an important role in our growth trajectory, providing a strong platform for capability development, operational integration and the expansion of our facilities management and support services. As the business landscape evolves, Malaysia remains central to strengthening our service offerings and supporting sustainable business growth. Trends • Rising costs driven by manpower, consumables, parts and higher maintenance requirements for ageing assets. • Evolving regulatory changes in labour laws impacting our operational capacity and service levels, including minimum wage increases, living wage policies, stamping requirements for employment contracts, and mandatory EPF coverage for non-Malaysians. • Tightening operating margins following the additional 8% SST framework effective 1 July 2025 and minimum wage implementation effective 1 February 2025. • Stronger private sector preference to insource operations, intensifying competition for outsourced contracts. • Rapid adoption of digital technology heightening expectations for efficiency and productivity. • Increasing regulatory standards and stakeholder expectations on sustainability and ESG. • Government-led initiatives (e.g. Public-Private Partnership (“PPP”) Masterplan 2030, National Energy Transition Roadmap (“NETR”), and New Industrial Master Plan (“NIMP”) 2030) continuing to influence demand for infrastructure, energy efficiency and sustainable asset management services. Our Response • Strengthening cost efficiency through continued investment in skills development, centralised maintenance services, strategic sourcing of consumables and parts, and tighter operational and overhead controls. • Continuously monitoring and reviewing workforce requirements to optimise costs while meeting service expectations. • Working closely with clients to adjust service fees where required, while implementing value-driven, transparent pricing to sustain long-term partnerships. • Enhancing the outsourcing value proposition through flexible delivery models and measurable, outcome-based milestones. • Reinforcing service quality through robust quality assurance frameworks, continuous training and data-driven performance monitoring. • Advancing digitalisation through phased transformation and modular technology adoption. • Building financial resilience through risk-sharing mechanisms, inflation-linked pricing where feasible, performance-based incentives and ESG-aligned financial controls. • Accelerating sustainable and resilient delivery capabilities for highway and infrastructure works.
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