Photos by Leong Chan Teik
ISOTEAM's Repairs & Redecoration (R&R) business segment was once again a big winner revenue-wise in FY15 (ended June) with higher gross margins to boot and boosting the bottomline to a record $8.1 m.
But how did margins expand from 22.2% to 29.6% when rising labour costs have been a bug bear?
Economies of scale did help: There were more jobs and some were bigger ones, which motivated ISOTeam's sub-contractors to quote lower prices, explained ISOTeam CEO Anthony Koh at a results briefing last week.
(R&R projects are largely painting jobs for HDB flats. In FY2015, ISOTeam did R&R work on 445 HDB blocks, compared to 252 blocks in the previous financial year.)
In addition, with ISOTeam gaining a higher profile after its IPO in 2013, more contractors have stepped forth to work with it, resulting in more competitive sub-contracting bids, added Mr Koh.
Group gross margin stood at 24.7% but going forward, it will be more sustainable at around 20%, said CFO Tan Wei.
Sub-contracting costs accounted for 60% of ISOTeam's R&R total costs in FY15, down from 67% in the previous year.
ISOTeam outsources 75-80% of its R&R jobs, locking in sub-contracting costs when it is awarded contracts.
In FY15, the R&R segment raked in $54.5 million in revenue out of ISOTeam's record revenue of $81.7 million.
ISOTeam estimates that its market share of the R&R pie is about 24%.
Record order book
The near term prospects look good. As at end-June 2015, ISOTeam's orderbook stood at a record high of $84.7 million for delivery over the next two years.
This suggests that post-General Election, there will still be a steady demand for HDB jobs. ISOTeam also expects to benefit from the expanding housing pool (public & private) in Singapore which over the long term will need ISOTeam's services.
In the meantime, the company is awaiting confirmation of another $14.4 million worth of contracts for which it is the lowest bidder.
Another development to look out for is the HDB's new Home Improvement Programme for which ISOTeam has been invited to tender this month (Sept).
At possibly $30-55 million each, the contracts are much larger than R&R ones which typically are of a few million dollars.
In its 'others' business segment, ISOTeam is involved in coatings & paintings works, commercial interior design, home retrofitting, landscaping, leasing services, waterproofing and green solutions.
Still in the early phase of growth (FY15: $9.8 m revenue), it does bear watching.
And there is a handyman portal launched on 18 Aug this year, www.isohomecare.com, which offers home maintenance services directly by ISOTeam or by its sub-contractors.
These developments will be keenly watched by shareholders, among whom are Nippon Paint Singapore (which owns a 5.93% stake in ISOTeam) and Asdew Acquisitions (slightly below 5%).
Comments by fund manager
Wesley Widjaja of Ascapia Capital, which manages a stake of slightly under 5% of ISOTeam, spoke at the results briefing. His key points: