2019 UEM Edgenta Annual Report

48 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. During the year in review, we recorded the following achievements towards our strategic focus areas: Progress in 2019 Strategic Focus Area Achievements Group Strategy • Recorded year-on-year growth in Revenue (+10.5%) , EBITDA (+22.0%) and PAT (+23.4%) for 2019 results • Implemented Continuous Improvement (“CI”) & LEAN methodologies and techniques throughout the operations of business divisions, where employees have been certified up to Yellow Belt and trained up to Green Belt • Opening of new offices in Jakarta, Indonesia and Kuching, Sarawak • Realised RM29.1 million operational savings from LEAN programmes and Innovation Garage initiatives under Operational Excellence Operational Excellence Please refer to Operational Review on pages 55 - 63 of this Report. Organisational Excellence Please refer to our Sustainability Statement on pages 64 - 83 in this Report. • Invested RM6.0 million in capability development, training 11,477 employees over 16,969 training days • 6% improvement in our Employee Engagement Survey results to 74%. This has put UEM Edgenta as one of the top-quartile companies within the Government-Linked Company (“GLC”) and Malaysian Norm 2017 / 2018 companies • Fully operationalised the Human Resources module of our ERP System • Launched Edgenta Academy, the Centre of Excellence for technical learning in the industry and to build talent pipeline • Implementation of Performance-Based Incentive Schemes to instil high performance culture and financial accountability • New key contracts secured: - Healthcare Support - Energy Performance Contracts for MoH Malaysia hospitals; Replacement Through Maintenance for four MoH Malaysia hospitals, mega-tender of MoH Singapore’s restructured hospitals, Blood Bank Information System at MoH Malaysia’s blood banks and hospitals - Property & Facility Solutions – Additional facility management for wasl group sites in Dubai, United Arab Emirates and Architecture and Green Design & Build works for Sime Darby Motors - Infrastructure Services - Maintenance and asset management for Cikampek-Palimanan Highway, Indonesia, in partnership with Astra Group, Road Asset Management System (“RAMS”) for the Sarawak State Roads and upgrade of Sewerage Treatment Plants (“STPs”) along the North-South Expressway - Asset Consultancy - Project management consultancy for the Sarawak Coastal Road Network and Second Trunk Roads (Phases 1 & 2) Client Solutions Please refer to Operational Review on pages 55 - 63 of this Report. Technology & Innovation Please refer to Our Technology Solutions and Operational Review on pages 26 - 27 and 55 - 63 of this Report. • Launched mechanised vehicles for highway maintenance operations • First productisation of RAMS for Sarawak State Roads • Increased adoption of technology at additional MoH Malaysia hospitals: UE Track TM at 8 more hospitals, RFID Linen Tracking across 5 sites and started with Active FM dashboard monitoring which uses predictive, condition-based and Internet of Things (“IoT”) technology coupled with Infra-red Thermography (“IrT”), Vibration Analysis and Drones at four hospitals • Rolled out optimisation of existing 24-hour Regional Helpdesk Centre operations for all 32 hospitals we manage in the Northern region of Peninsular Malaysia • Installed Ambulance Monitoring Systems in 213 ambulances • Facilities Management Company of the Year 2019 from Frost & Sullivan Asia Pacific for 5 th year running • Merit Certificate for Annual Report 2018 at the National Annual Corporate Reports Awards (“NACRA”) 2019 • BrandLaureate Awards: Most Valuable Brand Award 2018-2019 in Integrated Asset Solutions • Launched new UEM Edgenta corporate website and Edgenta Connect portal for staff • Held Integrity Day event to reaffirm our commitment against corruption with guests from MACC • Hosted various visits and tours to governmental stakeholders and foreign delegates for greater engagement and to promote further collaboration with our Company. Most notably a visit from JKR Sarawak and the Ministry of Infrastructure and Port Development Sarawak was planned in conjunction with the signing of an MoU to set up a pavement research centre to propel pavement research and innovation initiatives • Increased visibility via participation in several industry-related external events, including, International Greentech & Eco Products Exhibition & Conference Malaysia 2019, ASEAN Health Summit and the 26 th World Road Congress • Participated as the subject company for 2019/2020 CFA Institute Malaysia Research Challenge Stakeholder Management & Communications Please refer to Investor Relations on pages 114 - 117 of this Report. • Silver Award at the Malaysian Society for Occupational Safety & Health (“MSOSH”) - Occupational Safety & Health Awards • Executed an agreement with the Malaysian Highway Authority (“MHA”) and the Construction Industry Development Board Malaysia (“CIDB”) to set highway maintenance, demonstrating our leadership in HSSE • Conducted Safety Day event across operational sites locally and internationally to promote awareness on safety culture HSSE Please refer to our Sustainability Statement on pages 64 - 83 in this Report 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