DESPITE a year faced with challenging global issues such as rising oil prices, the US sub-prime mortgage crisis, inflationary pressure and currency volatilities, the Singapore economy grew by 7.5 per cent in 2007.

A close-up look at the annual Singapore 1000 (S1000) and SME 500 ranking exercise conducted by DP Information Group saw higher absolute turnover and profit reported by the S1000 and SME500 companies.

In line with observations made in the past years, S1000 companies continued to register higher growth year-on-year.

Turnover

S1000 companies: Leading this year's S1000 companies by turnover rank are the construction, communication/ transport and storage, finance and hotels/food establishments sectors, which registered at least 20 per cent growth in absolute turnover (see Table 1).

The construction sector, which recorded negative growth in the previous year, powered ahead with an impressive 51.3 per cent jump in absolute turnover. In fact, the number of construction companies ranked this year has risen from 26 a year ago to the current 32, all but one of which is profit-making.

Noticeably, the manufacturing sector contracted by 8.3 per cent during FY07. In fact, absolute turnover reported by companies in this sector fell after registering positive growth for the last two years. The contraction of the sector was the result of slowing output from one of its key segments - electrical/electronic products. Absolute turnover reported by manufacturers of electrical/electronic products fell by 16.8 per cent, in line with Economic Development Board statistics which showed output from the electronics sector in Singapore shrinking from 36.5 per cent to 32.4 per cent in 2006.

Nonetheless, this year's ranking saw the emergence of precision instruments manufacturing companies within the manufacturing sector. Although precision instruments accounted for 2.1 per cent ($3,447.1million) of the total absolute turnover registered by the manufacturing sector, this is a significant jump from the previous year's 1.1 per cent.

The precision instruments segment currently supports the electronics, transport, medical technology and other manufacturing sectors, and is poised to expand further due to increasing investments in the transport engineering, oil and gas, and medical technology industries.

SME500: Although the percentage growth of absolute turnover reported by this year's SME 500 companies may not be as significant as that of the S1000 companies, the increment at 3.3 per cent is a remarkable rise from the 0.04 per cent of a year earlier (See Table 2).

SMEs in the property sector have recovered from the plunge in the previous year, reporting a 14.1 per cent increase in absolute turnover to $364.7 million in FY07.

Besides the property sector, both the finance and wholesale sectors also rebounded with 17 per cent and 6.3 per cent growth respectively. The improvement of the finance sector was driven primarily by investment/stockbroking SMEs, which accounted for 74.9 per cent of the total absolute turnover reported by this sector.

After a year of single-digit growth, the communication/transport and storage sector reported an impressive 20.3 growth, with total absolute turnover of $1,424.6 million (FY06: $1,183.9 million).

SMEs from the supporting, auxiliary support/post activities continued to take a bigger share of the pie, accounting for 65.3 per cent of the total absolute turnover registered by the sector.

The manufacturing and services sectors, however, contracted significantly, both in terms of the number of SMEs ranked and absolute turnover reported. The manufacturing sector, which contracted by 4.3 per cent in the previous year, shrunk by another 17.1 per cent during the ranking period.

The services sector saw a drop in the number of SMEs ranked this year - from 60 to 47. This reduction in representation arises as a result of better performance by bigger SMEs in the other sectors, which now take up a larger share of the top 500 strongest-performing SMEs. Besides competing with the bigger boys, smaller SMEs are also competing among themselves. Year by year, it gets tougher for SMEs to get into the top SME 500 list; this year the company in the 500th position had a turnover of $12.4 million versus last year's cut-off at $11.7 million.

Highest profit-making companies

The finance sector, which recovered from negative growth, recorded a 48.1 per cent jump in absolute net profit to $14,761 million (FY06: $9,966 million). Contributions from banking services were particularly significant, with 18 companies, accounting for 72.7 per cent of total absolute net profit, taking four of the top 10 positions this year.

Despite a 2.1 per cent contraction in turnover growth registered by companies ranked by turnover from the property sector, 90 companies from the property sector ranked this year accounted for 9.9 per cent of the total absolute net profit. A total of 11 companies made it to the top 100 for this year's ranking exercise.

Mapletree Investments Pte Ltd outshone the rest with an impressive jump from 90th position to 17th. The surge in net profit is attributable to the net revaluation gain on investment properties, which amounted to $1,184 million.

While only 14 companies from the hotels/food establishments sector were ranked in the S1000 companies by turnover rank, the number of hotels/food establishment companies ranked in the S1000 companies by net profit doubled to 28. Of note is the fact that there are 11 companies being recognised in both the ranking by turnover and net profit categories.

Goodwood Park Hotel Ltd continued to lead the pack, with a fifth place in the S1000 companies by net profit rank, the highest position ever attained by the hotels/food establishments sector since ranking by net profit was introduced in 2005.

ROE

This is yet another significant year to note for the S1000 and SME 500 ranking exercise. Following the introduction of ranking companies by net profit in 2005, this annual event will now also recognise companies with strong return on equity (ROE).

The ROE, which measures a company's efficiency at generating profits from every dollar of net assets, takes into account the retained earnings from previous years, and assesses the effectiveness of the capital reinvested. The ROE serves as a gauge of the management's fiscal adeptness in growing their companies.

Being profit-driven, the ranking of companies by ROE is an alternative way of recognising companies which may not be generating high turnover and net profit but are re-investing their capital most effectively.

The S1000 and SME 500 rankings by ROE see the top 1,000 companies reporting a generally higher ROE than the 500 SMEs.

Of the 259 public-listed companies (PLCs) that made it to the top 1,000 ranking by net profit, close to 70 per cent are ranked in the S1000 companies by ROE.

StarHub Ltd, which reported a 62.68 per cent jump in net profit, is the best performing PLC in the S1000 ranking by ROE. The strong profitability was driven primarily by the steady increase in turnover and more efficient operation. Despite the entry of new pay-TV providers, which ended the company's 10 years of sole provider status in 2006, its cable TV business saw a 9 per cent rise in customer base, becoming profitable for the first time in 2006.

Although the wholesale and manufacturing sectors dominated the S1000 companies ranked by ROE, accounting for more than 50 per cent (521) of the 1,000 companies ranked by ROE, it is observed that 30 per cent of the top 10 positions are held by companies from the property sector (see Table 3).

Tincel Properties (Pte) Ltd, which engages in real estate investment and management, took the top spot, recording a margin of 5,211.8 per cent. The payment of an interim exempt dividend (one-tier) in respect of the current financial year of $33 per share, amounting to $1.2 million, has shed its shareholders' funds substantially and boosted its ROE.

SME 500 companies from the wholesale sector dominated the list of SME 500 companies ranked by ROE, with 185 SMEs recording a total absolute profit of $147.1 million and absolute shareholders' funds amounting to $560.3 million.

Among the 500 SMEs ranked by ROE, 422 are repeat winners from the SME 500 ranking by net profit. Four of the five ranked SMEs with net profit exceeding $10 million were among the top 50 in the SME500 ranking by ROE.

Superworld Electronics (S) Pte Ltd, ranked 39th in the SME 500 by net profit, was fourth in the SME 500 ranking by ROE. The company has been registering healthy growth in its profitability and declaring dividends payout in the past few years.

Since its inception in 1987, the S1000, together with the SME 500, rankings have served effectively as the barometer of Singapore's economy. While the economy saw a healthy 7.5 per cent growth in 2007, 2008 is set to be a challenging year for large and small companies alike.

Increasing operating costs, especially in the face of rising oil prices and weakening consumer sentiment and spending in the US as a result of the sub-prime mortgage crisis, are likely to put pressure on most companies' margins.

Nonetheless, 2008 is not without its silver lining. Surging oil prices are likely to drive oil exploration efforts, further spurring demand for oil rigs and rig-conversion projects. In addition, regional growth is set to support the services sector. Meanwhile, Singapore's tourism-related industries will benefit from continued strong inflows of tourists and big-scale events during the year, including the Singapore Formula One Grand Prix in September.

2008 will be yet another year of exciting business activities for our aspiring corporations.

This article was contributed by DP Information Group (www.dpgroup.sg)

About the awards

THE Singapore 1000 award (which is into its 21st year) and the Singapore SME 500 award (which is 10 years old) are ranked and published by DP Information Group. Ernst & Young is the co-producer. The supporting organisations are IE Singapore, Spring Singapore, Infocomm Development Authority of Singapore (IDA) and The Business Times.

This is an annual ranking of Singapore's top 1,000 companies and top 500 small and medium-sized enterprises based on annual audited financial results for the period June 1, 2006, to May 31, 2007. Corporations and SMEs are ranked by financial indicators such as sales/turnover, net profit and return on equity.

Following the annual ranking exercise, two publications listing the financials of the Singapore 1000 and SME 500 are published.

The 21st annual Singapore 1000 and Singapore SME 500 awards gala dinner will be held today at The Island Ballroom, Shangri-La Hotel Singapore.

The awards acknowledge Singapore's top enterprises in two key business groupings of corporations (Singapore 1000) and small and medium enterprises (Singapore SME 500). Forty-four awards will be presented in the following categories:

>> Singapore 1000 - Sales/Turnover Excellence award in seven industries;

>> Singapore 1000 - Net Profit Excellence award in seven industries;

>> Singapore 1000 - Sales/Turnover Growth Excellence award in seven industries;

>> Singapore 1000 - Return on Equity Excellence award in seven industries;

>> Singapore 1000 Honorary Awards (three this year);

>> Singapore SME 500 - Sales/Turnover Excellence award (five recipients)

>> Singapore SME 500 - Net Profit Excellence award (five recipients)

>> Singapore SME 500 - Promising Small & Medium Enterprise Award (three recipients; one each for crossing the $10 million, $20 million and $50 million sales/turnover marks).