final output

We are dependent on foreign labour for manpower as we currently have approximately 430
foreign labourers at our work sites
The construction industry in Singapore is highly labour intensive. As local manpower is scarce, we
rely substantially on foreign workers. The supply and recruitment of foreign labour is subject to
policies imposed by the Ministry of Manpower. In the event of any changes in such policies, our
ability to recruit foreign labour may be affected. Currently, the Ministry of Manpower imposes levies
of $30 per month on skilled foreign workers and $470 per month on unskilled foreign workers. Any
increase in the aforesaid levies will increase our cost of sales and thus reduce our profitability.
The construction industry in Singapore is also discussed on pages 46 and 55 of this Prospectus.
We may lose our business licence, we may also lose our BCA gradings or we may be
downgraded
We are registered with BCA as an L6 grade contractor under the category “Plumbing & Sanitary
Works” and an L5 grade contractor under the category “Electrical Engineering”. The L6 and L5
grades allow us to tender for projects of unlimited value and up to $10 million respectively. In addition,
we possess at least an L1 BCA grade under several other categories.
We have to meet the various requirements of BCA in order to maintain our BCA gradings. The
requirements include (i) a minimum issued and paid-up capital; (ii) qualified personnel with the
necessary professional or technical qualifications and experience; (iii) the necessary performance
track records; (iv) contracts’ profile; and (v) the necessary licences and certificates from the various
authorities such as the Public Utilities Board, Telecommunications Authority of Singapore and ENV.
The gradings awarded by BCA are usually valid for a period of up to three years, and are subject to
review at anytime within that period. This BCA grading only limits the contract value that a company
may directly tender from governmental bodies.
There is no assurance that we can maintain the necessary licences and certificates from the various
authorities. In addition, the respective authorities may revoke our licences, certificates and BCA
gradings. There is no assurance that we will not lose our licences or BCA gradings. To date, we have
been awarded two M&E contracts each exceeding $10 million, and these two projects were completed
in 1996. As at the date of this Prospectus, we do not have any contracts exceeding $10 million.
However, in the event that our L6 status cannot be maintained, we will not be able to directly tender
for any public sector plumbing & sanitary projects with contract value exceeding $10 million. This will
have an adverse impact on our performance.
We may be liable to pay liquidated damages due to delays in the completion of projects
In the event of any delays in the completion of a project, we may be liable to pay liquidated damages
to main contractors or developers. The quantum of liquidated damages payable is normally specified
in the contracts. However, if the delay is due to factors beyond our control, such as unanticipated
site conditions, we may not be liable for liquidated damages and may be granted an extension of
completion time. To date, we have not had to pay any liquidated damages. However, there is no
assurance that there will be no delays in the completion of our current or future projects which may
result in claims for liquidated damages that will adversely affect the profit margins of the project.
Our revenue recognition may be delayed due to delays in the completion of projects
Our revenue is recognised based on the percentage completion basis, which is in line with the
Singapore Accounting Standards and industry practice. We recognise revenue upon incurring 50% of
the estimated cost to completion for the project (“Completion”). If the costs incurred on a project do
not exceed the 50% of Completion when we finalize our annual accounts, the project revenues and
costs would be deferred as work-in-progress in the balance sheet. No profit or loss is recognised in
our results of operations for projects which do not exceed 50% of the estimated cost to completion
for the project.
18