Integrated Annual Report 2023 2 3 4 5 6 7 8 9 1 49 OUR OPERATING ENVIRONMENT AND MARKET TRENDS Macroeconomic Challenges After a year of ongoing geopolitical tensions and inflationary pressures, the global economy's growth trajectory remains subdued but with optimism for a soft landing for markets across the world in the coming years. Following the expected growth rate of 3.0% in 2023, the projected growth for 2024 is constrained by several factors, such as shifts in monetary policies in the world’s largest economies, including the USA, the Eurozone and China, and supply chain disruptions. IMPACTS Risks: • Continued inflationary pressure led to increasing cost of doing business, thus affecting profit margins • Increasing competition - from traditional and non-traditional FM players, affected margins and ability to secure contracts Opportunities: • Technology and sustainability seen as opportunities - differentiating ourselves through technology and sustainabilitybased asset management solutions that drive cost savings and efficiency • Utilising our cost advantage, agility and proven track record to renew existing contracts and secure new contracts in both local and international markets RESPONSE • A pivotal shift from the traditional repair, restore and maintain facility management services model to: i) A transformation encompassing a dedicated focus on sustainability challenges ii)Embracing cutting-edge technology, such as IoT, artificial intelligence (“AI”) and machine learning, ensuring best-in-class asset performance and delivering an enhanced customer experience • Continued our cost optimisation exercise by implementing automation and mechanisation, streamlining finance and procurement processes and rationalising our business structure • Diversified into high growth and adjacent markets sectors that offer good earnings quality, such as hospitality and commercial sectors • Secured various strategic and operating partnerships to: - Deepen our growth-enabling capabilities such as in tech and our IoT platform partners, Disrupt-X and ZainTech, to collaborate on smart city opportunities - Create integrated real estate services platform – KAIZEN Group acquisition presents opportunity to integrate property management and facilities management capabilities, focusing on customer experience, technology and sustainability OUTLOOK LINK TO UEM Edgenta's approach for 2024 reflects a strategic commitment to driving the digital transformation of FM, underpinned by our international growth strategy. UEM Edgenta is on the right footing to integrate property management and facilities management into a real estate services platform provider in the Middle East, addressing the emerging lifestyle needs with a focus on hospitality, wellbeing, sustainability and technology. UEM Edgenta is well positioned to unlock value by combining our smart buildings and sustainability solutions. We will continue to harness cost efficiency across our business divisions in alignment with our Edgenta of the Future (“EoTF2025”), while pursuing a comprehensive approach to digital transformation that encompasses international expansion, strategic acquisitions, technological innovation, upskilling of our workforce and diversifying into emerging sectors. This forward-looking strategy positions UEM Edgenta as a leader in shaping the future of FM - mitigating against the potential impact of global economic headwinds. Capitals S2 S3 Stakeholders M2 M3 Material Matters R1 R3 Risks Our operating environment presents us with a variety of challenges and avenues for growth. With acceleration of our tech offerings and increasing importance placed on sustainability, we have the growing sustainability solutions demands from clients to position ourselves as a progressive and future-oriented company. At the same time, we continue to optimise costs while remaining attuned to the evolving expectations of our employees so we can deliver a high level of quality to our clients in the services and products we offer. Our stakeholders also require us to pay attention to sustainability matters in our operating environment and in the way we do business. In response to this, we have committed to reducing our carbon footprint, foster sustainability practices in our operations, promote diversity as well as equity in our value chain, emphasise health and safety considerations and do business transparently against the backdrop of a strong governance framework. Key market trends and our response to them are outlined below:
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