UEM EDGENTA BERHAD ANNUAL REPORT 2021 1 2 3 4 5 6 7 MANAGEMENT DISCUSSION & ANALYSIS 43 42 OUR OPERATING ENVIRONMENT OUR OPERATING ENVIRONMENT COVID-19 continued to play a disruptive role globally, with volatility and uncertainty remaining as common themes. Respite came following the improved levels of vaccinations and containment of the virus, resulting in an economic recovery around the world – albeit to varying degrees. Supply disruptions that prevailed in the first half of 2021 eased towards the second half as supply chains were gradually restored to meet increased demand and heightened economic activities. These positive developments helped push the global economic growth to an estimated 6.0%1 in 2021 compared to negative growth in 2020. In Malaysia, varying forms of nationwide MCOs dramatically changed people’s daily activities and business operations. Safety and health concerns, reduced disposable income and rising unemployment resulted due to extended lockdowns, which continued well into 2021. Industries and businesses were severely impacted by cross-border closures and restrictions on people’s movements and business activities, which limited production capacity and sales. To cushion the economic impact of the pandemic, the Government took action and implemented assistance and economic stimulus packages totalling RM530 billion, with RM225 billion allocated in 2021. Further, the adoption of the National Recovery Plan, and implementation of the National COVID-19 Immunisation Programme served to ease hospital admissions and transition to an endemic phase. In the healthcare support sector, undertaking hospital support services in portering, housekeeping and cleansing for public and private hospitals. Housekeeping services expanded to other commercial sectors TAIWAN Impact • Escalating cost of operations • Higher healthcare expectations and requirements Mitigating Measures • Increased automation and mechanisation efforts to optimise resource utilisation and reduce the reliance on manpower • Diversified clientele base into recovery sectors, namely hospitality, education and commercial sectors Involved in the infrastructure sector via road maintenance and asset management contracts INDONESIA Impact • Limited engagement for business development efforts due to border closure • Delay in major infrastructure projects and new projects Mitigating Measures • Right-sized team and resources are gearing up for expansion • Enhanced our technology proposition in RAMS and gained a competitive advantage in road asset maintenance Involved in the healthcare support sector via our associate, Faber Sindoori, providing housekeeping, biomedical engineering and facility engineering services to Government hospitals and other medical institutions INDIA Impact • Intensifying competitive pressure in bidding for healthcare support services contracts Mitigating Measures • Provision of high-value services that require technical and engineering capabilities Presence in Dubai via Operon Middle East, a subsidiary of the Property & Facility Solutions division, providing mainly FM services UAE Impact • Tightening in spending is shifting financing to alternative models such as Public Private Partnership • Limited and suboptimal engagement for business development efforts • Increasing use of technologies, data and IoT in facilities management Mitigating Measures • Resumed engagement with asset owners with a large portfolio under management • Building tech-enabled IFM service capabilities • Expansion beyond current operations in Dubai to other countries in the UAE i.e. Sharjah, Abu Dhabi and Fujierah • Deployment of technology and development of a host of IoT and smart city solutions based on client needs Providing hospital support services in portering, housekeeping, kitchen stewarding and cleansing to public and private hospitals. Housekeeping services expanded to other commercial sectors SINGAPORE Impact • Escalating cost of operations • Manpower supply challenges due to border closure • Higher healthcare expectations and requirements • Fast-changing and uncertain market environment • Changes in regulations i.e. Progressive Wage Model, which increases minimum wage Mitigating Measures • Government grants to ease manpower shortage due to border closure • Diversified clientele base into recovery sectors, namely hospitality, education and commercial sectors • Continue to embark on technology-based solutions such as autonomous equipment and robotics to increase productivity • Strengthen business and product offerings by embarking on opportunities beyond the provision of existing hospital support services Providing engineering maintenance services, clinical waste management, laundry, housekeeping & cleaning, portering, sustainability, digital solutions in healthcare facilities. In addition to managing highways and roads, we also provide building facilities management and consultancy services for various infrastructure projects MALAYSIA Impact • Increased operational costs e.g. PPE • Reduced clients’ spending • Mobility and resource allocation challenges • Deferment of non-critical works • Opportunity to further support the Government in providing pandemic solutions • Increased demand to support the healthcare industry (increasing COVID-19 cases, nationwide vaccination effort, home quarantine requirements) on the back of increased operating costs (e.g. PPE, manpower to ensure safe and timely delivery of services) • Muted recovery in property and facility solutions, infrastructure solutions (lower occupancy rate in offices/ commercial buildings with continuing working from home arrangement, lower traffic on highways and roads, inability to mobilise project teams) Mitigating Measures • Asset Management & Infrastructure Solutions > Pivoted our efforts to drive vaccination rates in UELC, Petaling Jaya to support the nationwide effort in combating COVID-19, construction of Field Hybrid ICUs and provision of a cloud-based Epidemic Management System for the National Crisis Preparedness & Response Centre (“CPRC”) > Leveraged our technology solution, QuickMed, to support COVID-19 testing (drive through, clinic testing, Mobile OnSite Testing Facility) and quarantine requirements (RFID e-bracelet and HQMS) > Diversified into non-PLUS and energy performance contracts, new industry verticals, new geographies in Saudi Arabia > Encouraged performance-based contracts and productisation of Road Asset Management System (“RAMS”) to JKR and PLUS > Group-wide cost optimisation exercise 1 Source: World Bank
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