INTERVIEW WITH THE GROUP CEO

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HOW WOULD YOU SUM UP THE FINANCIAL YEAR 2020-21 FOR THE GROUP?

As we all know, we are still living in COVID-19’s grip. Since my last message to you, new variants have emerged, some countries have had successive lockdowns and the world is still fraught with uncertainty. On the bright side, thanks to a high number of vaccinated people, restrictions have gradually lifted, and it is encouraging to see businesses and social activities resume. We are entering a new chapter and it is one we are thankful for.
However, Mauritius is a remote island that is highly dependent on trading, making us prone to external financial shocks. We are now dealing with the aftermath of a weakened currency, which has driven up prices and affected consumers’ spending power and habits.

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The construction industry weathered the pandemic much better than other markets. Barring three weeks of lockdown, our activities were almost uninterrupted as we did not face a complete shutdown. In a year characterised by financial and operational disruptions, I am extremely proud of what the Group was able to accomplish. Our foundational strength and the commitment of our workforce allowed us to finish the year with a solid performance and make progress against our strategic objectives. We generated record revenues of Rs 3.3bn, and other equally important metrics like the number of aggregates and blocks sold, new clients acquired and the Group Employee Engagement Score, have all increased significantly. UBP Group is in good standing from a financial standpoint and our future looks promising.

SO HOW DID UBP NAVIGATE THIS LANDSCAPE SO SUCCESSFULLY?

Having lived through a first lockdown and months of disruption in early 2020, we knew what we had to do. All the protocols were in place to transition to remote working and most of our businesses obtained their Work Access Permits in a matter of days. Our back- to-work guidelines are updated and have evolved along with a constantly changing environment. I must point out that all our businesses adjusted very efficiently, easily adapting our working methods to factor in new safety and hygiene rules. This is certainly due to the fact that a strong safety culture has always been front and centre at UBP. In a way, the risks presented by COVID-19 were treated no differently than how we treat other hazards. I do believe that’s a competitive advantage we have over businesses in other sectors, and that’s what allowed us to adjust quickly.

FY2021 confirmed that UBP is a resilient Group. Our business model, which we have been deepening for years by vertically integrating our activities and broadening our areas of expertise, proved that it is solid. Our prudent approach to managing our cash flows and risks have been equally important in our resilience.

COULD YOU TELL US MORE ABOUT HOW THE LOCAL SUBSIDIARIES PERFORMED AND HOW THEY ADAPTED TO MEET HEIGHTENED CUSTOMER EXPECTATIONS?

As mentioned earlier, the Group achieved its highest revenue in company history, and net profit amounted to Rs 215.6m compared to Rs 21.9m last year. Espace Maison generated Rs 995m in revenues, falling short of achieving the Rs 1bn milestone byonlyRs5m.Andthisisinthecontext of customer expectations being at their highest when it comes to service levels. Our shops only closed for five days during lockdown, during which we quickly obtained our Working Access Permits and resumed operating normally, maintaining a positive customer experience. We were well rewarded by our clients, as evidenced by the number of new subscriptions to Club Espace Maison (CEM), our loyalty programme. During the year, the CEM community reached 100,000+ members, and continues to grow. We also used the last year to further develop our ecommerce capabilities and offer an omnichannel experience to Espace Maison’s clients.

We also pursued the development of Espace Pro, a service that is open seven days a week and that places customer service excellence at the heart of its philosophy. As a reminder, Espace Pro is dedicated to our B2B customers in the construction and renovation sectors, including hotels, contractors, architects and government agencies. It offers personalised support for all types of interior and exterior projects, from the tiling and paving process, through to landscaping and outdoor furnishings, to the decorative elements that add the perfect finishing touch to any space. Through this, we aim to strengthen our relationship with our B2B customers and position ourselves as a partner of choice for professionals in our industry.

At UBP, we are constantly innovating to make sure we make our customers’ lives easier. These are the most notables ones:-

Our Megablock, which offers unlimited block combination possibilities thanks to its interlocking system; - We expanded our customer support channels to be more attuned to the needs of our B2B customers. We believe we could set new standards of service and add greater value to our relationships by building on what we have achieved and learnt at Espace Maison. To this end, a Customer Care Centre is being set up to centralise UBP’s needs and enhance the quality of service we offer to both individuals and B2B clients.

Gros Cailloux, for its part, closed the year at a loss of Rs 31m, a reduction of 22.8% over last year’s losses of Rs 40.2m. Despite another unprofitable year, I strongly believe that our subsidiary is on the path to recovery thanks to a series of initiatives that will no doubt position it for growth. For instance, during the year, an animal refuge was set up with the goal of rescuing, sheltering and protecting animals; we expanded the leisure park’s activities and our Tekoma restaurant now offers a food delivery service to meet new customer expectations. We intend to outline a Master Plan to define a new vision, a strong brand identity and a compelling value proposition for the entire estate.

We have also been very selective in our Capex investments, deferring certain capital expenditures in Plant & Equipment and instead directing our resources to the tools that accelerate the transformation of our businesses.

“I am impressed at how quickly we shifted gears, considering we were taken out of our comfort zone. Our teams demonstrated how nimble and adaptable they are, which gives me confidence that we can move to the next level of agility.”

HAVE ANY DECISIONS BEEN MADE ABOUT THE GROUP’S FOREIGN SUBSIDIARIES?

Though we performed well locally, the impact of COVID-19 was more severe in our foreign subsidiaries. We have made great progress in divesting our Sri Lankan subsidiary, having found a prospective buyer. Exiting a business is a lengthy process requiring thoughtful planning and involving various financial, legal and operational obligations. We are therefore hoping to complete the transaction this coming financial year.

We are also facing unprecedented challenges in Madagascar and are seriously assessing our growth prospects in the country, as well as our approach to expanding our activities. Having learnt from our negative experiences in both Sri Lanka and Madagascar, one thing is sure: should an interesting opportunity present itself to us, and should we decide to seize it, we would not attempt to navigate uncharted waters; rather, any foreign expansion would involve partnering with a local strategic partner. And until we find the right opportunity, we intend to deepen our core expertise and know-how so we can add greater value to all future partnerships.

*LAST YEAR, IN RESPONSE TO THE PANDEMIC, THE GROUP IMPLEMENTED A SHORT-TERM STRATEGY FOCUSED ON AGILITY. DID YOU MAKE PROGRESS TOWARDS ACHIEVING IT?

Last year, we readjusted our strategic pillars to enhance our agility in the face of any disruptive event. This involved rallying a united Group around common objectives, maintaining good levels of cash flow, developing innovative products and services, and empowering our employees. This AGILITY strategy is still as relevant as ever.

Looking back, I am impressed at how quickly we shifted gears, considering we were taken out of our comfort zone. Our teams demonstrated how nimble and adaptable they are, which gives me confidence that we can move to the next level of agility. Beyond carefully laid business continuity plans and processes, which the pandemic has taught us could easily get wiped out, it is about making sure that every individual at UBP is inherently ready for continuous change. This comes down to creating a more fluid organisation, in which managers are empowered to make swift decisions and judgment calls, instead of being hindered by fixed Group-level processes.

While we have solidified the foundations for this united, integrated Group, we are ready to take the step of setting up a structure that reinforces synergies between our businesses. This philosophy, which we named
C’Nergy, is centred on a more circular and agile structure, that is conducive to more collaboration and out-of- the-box thinking. We are still in the final steps of the process, so I will be ready to share more on this with you in next year’s report.

COULD YOU TELL US ABOUT THE CHANGES THAT HAVE TAKEN PLACE IN UBP’S WORKPLACE AND IF ANY OF THOSE CHANGES WILL CARRY FORWARD?

Technology and digitisation are what took us all through the pandemic. Without essential video conferencing apps, cloud technology, digital payments, our entities would have had more challenging quarantines. Everyone within the Group responded quickly. Because of the urgent need to communicate and collaborate during lockdown, digital adoption took a quantum leap at UBP, accelerating our digital transformation by several years. This was all driven by a shift in mindset: we questioned our past methods, even the ones we believed were immovable. Today, information is no longer in silos; it is centralised and has led to us collaborating in a smarter, more integrated and more coordinated way. As far as we are concerned, we cannot turn back the clock and there is no “return to normal”. This way of working is definitely here to stay and will play a critical role in helping us realise our C’Nergy vision.

CONSTRUCTION SITES AND WORKERS FACED AND CONTINUE TO FACE SAFETY AND HEALTH CHALLENGES. HOW IS THE GROUP ADDRESSING THESE SAFETY CONCERNS?

Health and safety is at the forefront of our priorities. A new Group Health and Safety manager will be employed as from 1st November to make the Group shift away from a compliant culture, where safety is considered a tick-the-box exercise, to a strong safety culture. We introduced ‘Partaz to lidé’, an initiative that encourages any employee to report a hazard of any sort and offer a recommendation for improvement. The most worthwhile and practical suggestions are implemented, and the employee concerned is rewarded. This not only promotes inclusiveness, but it also ensures that we remain in touch with our worker’s operational realities.

The list of possible risks is constantly evolving, and this requires all players of our industry to come together and develop new norms and standards that maximise the safety of all workers. The Building Materials Manufacturers Association (BMMA), which we co- created and launched in July 2021, aims to modernise the existing health and safety regulations, which do not always evolve fast enough to meet the reality on the ground. The BMMA also aims to join forces to ensure the wide implementation of sustainable practices.

SPEAKING OF SUSTAINABLE PRACTICES, WHAT HAS UBP DONE OVER THE LAST YEAR TO REDUCE ITS IMPACT ON THE ENVIRONMENT?

Construction and real estate are large contributors to the world’s CO2 emissions. Knowing that our activities have a negative environmental impact, we recognise that we need green smart solutions, and we need them at scale. Our goal is to transition towards carbon-neutral and circular models. But before implementing solutions, with no real purpose, we need to gather relevant data that measures our current performance. To achieve this, we use an Environmental Product Declaration (EPD) that evaluates the impact of our blocks. In essence, an EPD assesses and communicates the environmental impact of a product across its entire lifecycle, from its extraction as a raw material, to the manufacturing process and its transport, to its end of life. The results, which are verified by an independent third party, will enable us to compare the carbon emission of different materials and products, and select the most sustainable option. Creating an EPD is voluntary and demonstrates our willingness to provide transparent information to our customers so they can, in turn, make more informed and environment- friendly decisions when selecting a product.

This ambitious project is being led by our Sustainability and Development Manager, thanks to whom we are the first construction company in the Indian Ocean to have created an EPD. Research & Development and innovation play an equally important role in helping us develop sustainable solutions. Our newly hired R&D manager works alongside the sustainability team to realise our vision of offsetting our carbon emissions and implementing more sustainable products and construction practices.

Other initiatives include becoming a signatory of SigneNatir, supporting La Déchetèque and strategically planting more trees at Gros Cailloux and around the island to reduce air conditioning needs, amongst many others.

More information on our environmental commitment

“At UBP, we work hard each day to build a culture in which our people feel safe, engaged and happy. We hope this will help increase the appeal of younger workers that are looking for fulfilling career paths.”

HOW CONCERNED ARE YOU BY THE RISING COST OF BUILDING MATERIALS AND THE ONGOING CHALLENGE OF LABOR SHORTAGES IN THE INDUSTRY?

Import costs have indeed skyrocketed since last year, due to a supply shortage and a considerable increase in sea freight charges. This concerns mainly cement and steel for UBP. Because we use these materials in large volumes, we are able to mitigate the costs, but this is definitely a concern for the industry over the short term.

In response to labour challenges, it is no secret that our industry does not particularly appeal to the younger generation, which is a big contributing factor to this shortage.

UBP Knowledge Hub was created to this end: apprenticeship, training and learning opportunities are vital not only in closing the skills gap, but also in making sure our employees are set up for a successful future. The industry is evolving quickly, and is embracing innovations and technology. This has given rise to a whole range of exciting roles for young people who show an interest in construction. At UBP, we work hard each day to build a culture in which our people feel safe, engaged and happy. We hope this will help increase the appeal of younger workers that are looking for fulfilling career paths.

THE GROUP PULLED THROUGH THE CRISIS RATHER SUCCESSFULLY. WHAT IS YOUR OUTLOOK ON THE FUTURE?

We will continue working towards increasing synergies between our different businesses. We may be composed of four (five in the near future) different companies, with different areas of expertise, but the goal is to operate as one. It isn’t about what UBP or Gros Cailloux or Drymix or Espace Maison can offer individually. It’s about what they can offer when they all come together. Several projects are in the pipeline and being coordinated by our new Group Sales Projects Manager. We are slowly but surely placing the stepping stones to achieve this vision.

UBP Group is a key player in construction in Mauritius, with a strong presence on the island. I believe that we are a brand that inspires trust in the minds of most Mauritians today. But this did not happen overnight, nor is it the result of luck or good timing. We have built this culture withintentionalconsistencyfor67years now, working hard to deliver on our promises and serve people to the best of our abilities. We saw this during our most stressful moments during the year, when our employees were back when we most needed them, and with smiles on their faces. We have nurtured a strong team, who all share the same set of strong values. And here lies our strength and resilience.

As I write this message to you, we are in the process of completing major strategic transactions. We have announced our decision to exercise our rights to acquire 51% of the shares in Pre-Mixed Concrete Ltd, making us 100% shareholders of the entity. We are also increasing our shares in Drymix Ltd from 56.4% to 71.83%. When completed, these transactions will bring us a step closer to vertical integration.

TELL US ABOUT YOUR PERSONAL JOURNEY AS A LEADER THROUGH THIS YEAR. WHAT LEARNINGS ARE YOU TAKING INTO THE NEXT YEAR?

I have come to two conclusions this year.

The first concerns technology. While it is without a doubt improving agility, convenience and efficiency, technologies and remote working have blurred the lines between work and private life. This raises the serious issue of work-life balance and its impact on the wellbeing of our employees.

As much as flexible work arrangements are here to stay, we are determined to ensure that it continues in a balanced way. A humane spirit is deeply ingrained in our DNA, and I don’t believe video calls should entirely replace a “hello” in the halls or a chat by the coffee machine. These are what build connections between colleagues. It also inspires them to have dynamic discussions and generate ideas—all of which make the value of our business. We do not have all the answers yet, but I do believe this is an important discussion to be had.

The second lesson I learned is that in times of uncertainty, it is best to rely on your core expertise. To face the unknown, we must lean on the elements that we do know: we trust facts and scientific evidence, we trust the integrity of our vision, we trust our people and their skills to carry us forward. The world will continue moving in ways we cannot predict. So instead of spending too much time speculating on potential scenarios, we are best off dedicating our time to strengthening our existing resources and assets. This is how we can be future-fit.

DO YOU HAVE ANY CLOSING THOUGHTS AND WORDS OF APPRECIATION?

Firstly I would like to thank our Board members. Despite not having a manual on how to navigate this new landscape, they continue to be sources of strength for all of us. I also welcome our new Board member, Mr Stéphane Brossard, whose extensive experience in the construction sector will no doubt bring us fresh perspectives and invaluable insights. I would also like to thank Mr Joël Harel, who resigned in December 2020, for his important contributions over the last fourteen years. We wish him all the very best for the future.

I am grateful to my colleagues in the executive and management teams, who offered steady and strong leadership during this difficult time.

Our team members across the Group deserve a special thank you for being reliable pillars of support and for their contributions in helping us improve, every day.

To our shareholders and partners, thank you for your trust and support, without which we would not be able to deliver the sustainable profitable growth you rightfully expect from us.

To our loyal customers and business partners, we thank you for your continued support. The Group is undergoing transformative changes and has all the foundations in place to meet the challenges of tomorrow. I look forward to another year of learning, growing and achieving new milestones.