|  WE VALUE ALLIANCES; DEVELOP OUR TEAM; STRIVE FOR EXCELLENCE
FY2008 was a relatively good year,
not withstanding the difficult
circumstances and challenges in the
global financial market that had affected
all industries across the board.
The year in review saw the Federal Group
making significant progress in meeting
its business objectives of establishing
new sustainable growth drivers. The
Group has been consistently successful
in securing contract wins and rolling
out constant achievements despite the
economic slowdown in FY2008.
Strategic business development plans
that were started in FY2007 as well as
strategic alliances with other industry
players have reaped fruits in the form of
revenue streams. To this end, the Group
believes that it is able to sustain its efforts
in establishing the Group’s foothold in
the energy and utilities industry in the
years ahead.
In FY2008, revenue streams were
generated for the first time in the Group’s
two new business segments, namely,
Energy & Utilities, and Resources. We
are pleased to report earnings for these
two segments, as they signify the ‘fruits’
of our successful efforts in pursuing
business opportunities in the Build-
Operate-Own and Build-Operate-Transfer
power and utilities sector two years ago.
In line with the business expansion, we
have incorporated new subsidiaries and
set up local or overseas offices for the
execution of the projects undertaken
in China, Indonesia and Singapore. As
a result, additional operating expenses
were incurred. However, the Group
believes that these investments and
expenses are necessary to develop these
new business segments in the long run.
Also, higher finance costs were incurred
during FY2008, given the drawdown of
the term loans for the equipment, plant
and equipment for the new projects.
This strong bottom line was achieved on the back
of higher revenue of $154.5 million, an increase of
2.8% over $150.3 million in FY2006. Gross profit
margins also improved to 27.1% compared to
25.7% in FY2006.
FINANCIAL PERFORMANCE
In 2008, the global financial market
turmoil almost derailed major economies
while foreign exchange markets remained
highly volatile. The Group was not left
unscathed and incurred substantial losses
on the back of foreign exchange volatility
and mark-to-market losses.
These expenses and losses have dented
our net profit for the year to $3.8 million,
a hefty 87.0% drop from $29.2 million
recorded in FY2007. Nevertheless, Group
revenue rose by 29.8% to $200.5 million
from $154.5 million in FY2007, driven by
an overall improvement in the existing
business segments of Trading and
Marine Logistics, and reflecting new
revenue streams from Energy & Utilities
and Resources.
Gross Profit also improved by 38.8%
from $41.8 million in FY2007 to
$58.0 million in FY2008. Gross Profit
margin also improved slightly from
27.1% in FY2007 to 28.9%. In line with
the lower profit, earnings per share for
the year stood at 0.40 cents compared
to 8.96 cents in FY2007.
ON THE HORIZON
The global financial slowdown will
inadvertently affect the oil and gas
industry, albeit largely in the short term.
Despite the volatility of oil prices in the
last quarter of 2008, the oil and gas
industry is believed to be promising in
the long run. This is because this sector
remains a fundamentally important sector
that addresses the rising energy needs of
the growing global population, and in
particular, the Asian countries which
require energy to fuel their economic
growth. Hence, there are still significant
market opportunities in the future.
ENLARGING OUR BUSINESS FOOTPRINT
While some delays and cutbacks of
development plans have been announced
in the global oil and gas sector, the
Group is preoccupied with the major
projects secured in the last two years.
We will be focusing on executing and
delivering these projects, while exploring
business opportunities in areas that are
not affected by the economic slowdown.
Moreover, the Group’s strong market
presence in Indonesia facilitates our
access to the growing energy sector.
As Indonesia is considered one of the
major importers of power and utilities in
the region, the growth potential of the
Indonesian energy sector is immense.
The Group’s strategic alliances and good
relations with other industry players have
placed the Group in a favorable position
against the industry competition. We
are optimistic that with our diversified
business portfolio, we will be able to tap
into the business opportunities in the
various growing industries.
Moving forward, the Group aims to
further strengthen our Marine Logistics
business, and explore opportunities to
expand our vessel portfolio. We will also
continue to grow the Trading business so
as to seek new prospects and increase
our foothold in the global market.
GROWTH STRATEGIES
We are continuously seeking ways
to venture into new markets such
as Middle East region and Algeria.
Our recent Algerian contract win has
boosted our confidence and built on our
credentials for future market expansion.
Should opportunities arise which
require local knowledge and expertise,
we will form strategic partnerships to
harness these prospects.
To sharpen our competitiveness in
these challenging times, we will remain
focused on our vision and our business
strategy, whilst keeping in mind the
importance of ensuring a strong financial
position in the areas of balance sheet,
cash flow management and cost control.
We will stay prudent with discretionary
expenditures and exercise cost discipline.
We will also shed any underperforming
non-strategic business so as to streamline
and consolidate our businesses for
greater efficiency and productivity.
The Group is especially concerned with
the impact of credit tightness in the
global financial market. To this end, we
will have to strengthen our business
and competencies, so as to raise the
confidence of investors and bankers in
the Group. We will also monitor industry
developments and respond quickly to
changing market dynamics so as to
mitigate any risks under the current
volatile economic conditions.
DIVIDEND
Despite the lower earnings and in order
to express our thanks to our shareholders
for their continued support, the Board
is proposing to declare a dividend of
0.5 cents per ordinary share for FY2008,
subject to shareholders’ approval at our
forthcoming Annual General Meeting.
ACKNOWLEDGEMENTS
I would like to thank my Board of
Directors for their wise counsel in helping
to steer the company in these uncertain
times. I would also like to thank all
business par tners, customers and
suppliers worldwide for their continued
support. To our shareholders, we would
also like to thank you for your faith in
us. We are mindful of your expectations
in us, and we hope to take the Group
forward with a better performance in
the current financial as our new income
streams from our new business segments
continue to kick in.
Most importantly, I would like to thank all
my staff for their invaluable contributions
and perseverance during these turbulent
times. Let us stay strong and united and
bring the company to greater heights!
Koh Kian Kiong
Executive Chairman and Chief Executive Officer
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