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Message from the chairman

In the 2015, the Thai economy remained sluggish, resulting from lower export volume, consequently causing less investment endeavors and reduced consumption in the private sector. Furthermore, there has been inadequate materialization in the expansion of government investment projects for major infrastructure, which has had significant impact on the construction business. With a very small number of new projects, both from public and private sectors, competition in the construction business has become intense than ever before, significantly impacting the Company’s business. In 2015, the Company had won the bids for a total of 22 new projects, worthy of 8.01 billion Baht; 6.16 billion Baht from the government’s projects and 1.85 billion Baht from the private sector projects, which is somehow lower than what had initially been targeted. Once combined with revenue generated from previously existing projects which was realized in 2015, the Company was left with the backlog at the beginning of 2016 of 12.5 billion Baht. The economic condition has entailed direct and indirect impact upon the Company’s and its subsidiaries’ businesses. In this regard, the Group’s consolidated revenue is 6.23 billion Baht, a 33.46% decreased from 2014, with a total loss of 1.87 billion Baht; equivalent to 1.72 Baht per share.

The decrease in revenue and apparent loss have been the result of lower realizable income from the construction business; an impact from new projects coming in during the end of 2014 and the first six months of 2015 that are below target, coupled with the fact that the MRTA-Purple Line project had already been delivered, resulting in lower realizable income. Also, the construction cost in 2015 had increased slightly as compared to 2014. Additionally, the cost recognition of the project had increased while there was an anticipation to bill extra charges from additional scope of work, while at the same time there was failure to collect some revenue form escalation factor of the project as planned, thus leading to 1.12 billion Baht loss for the MRTA-Purple Line project. When combined with the impairment of the Company’s subsidiaries’ investments and bad debts, the Company had incurred 1.91 billion Baht loss in 2015, as stated in the separate financial statement, and 1.87 billion Baht loss in the consolidated financial statements. Even though such losses did not have any impact upon the Company’s existing construction projects, every single project undertaken by the Company has been well supported by banks in the format of project financing. Taking this further, the Company has prepared enough cash flow ahead of time, both in terms of debentures issuance for high net worth investors on private placement, totaling 1 billion Baht at the beginning of 2015 and intensive debt collection. Still, such losses have had some impact on the Company’s financial position, accounting-wise; reducing shareholders’ equity in the separate financial statement from 3.44 billion Baht in 2014 to 1.48 billion Baht in 2015, and from 2.22 billion Baht in 2014 to 287 million Baht in 2015 in the consolidated financial statements. Such an incident might have affected stakeholders’ confidence, inclusive of clients, business partners, and financial institutions, with regards to business operations in the future. In identifying proper solutions, the Board of Directors has agreed upon several directions, such as the divestment of the Company’s burdensome assets, namely Soho Department Store, owned by the subsidiary, Bumrungmuang Plaza Co., Ltd. (BMP), and the bio-mass power plant, owned by the subsidiary, Power Prospect Co., Ltd. (PPC). The divestment of these two projects will inject an abundant amount of cash into the Company. Regarding the capital base, the Company will focus on identifying qualified parties to become strategic partners for future business expansion. Initially, the Company has been engaged in negotiations with a few partners both in Thailand and overseas. The selection is now in progress, as well as the indication of different terms and conditions for the most optimized outcomes for the Company. Besides, the Company has also been considering the issuance of ordinary shares for existing shareholders to increase the capital. The Board of Directors is currently working on the asset divestment plan and capital injection, in order for them to materialize by the end of June 2016.

The Company is firmly determined to adhere to key objectives in maintaining the market cap of not less than 10 billion Baht by the end of 2017, with the net profit generated from the construction business, which is the Company’s core business, of not less than 300 million Baht per year. In order to achieve such goals, the Company is required to improve work processes on a continuous basis, as well as the implementation of risk management, cost controls in various aspects for higher efficiency and effectiveness, development of human capital in technical and managerial skills, the revision of welfare and benefits to align with performance evaluation, with strict adherence to merit system and human resource management, and the improvement of supply chain to consistently enhance value-added features to all stakeholders.

All in all, the success and achievement of the Company’s business operations will never be possible without essential support from all groups of stakeholders; clients, business partners, financial institutes, government and private sector organizations, employees, the Company’s management team and shareholders. The Board of Directors would like to seize this opportunity to express sincere gratitude towards everyone’s kind support and contribution all along.

On behalf of the Board of Directors

(Mr. Swake Srisuchart)
Chairman of the Board