Financial Statement for the Third Quarter and Nine Months Ended 30 September 2018
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Profit & Loss
|Third quarter ended 30 September||9 months ended 30 September|
|Cost of sales||(17,271)||(46,275)||(62.7)||(80,886)||(116,413)||(30.5)|
|Other operating income||695||686||1.3||2,014||2,036||(1.1)|
|Other operating costs||(4,630)||(4,737)||(2.3)||(13,755)||(14,461)||(4.9)|
|Share of results of joint ventures||7,463||714||945.2||8,489||2,271||273.8|
|Share of results of associates||27||150||(82.0)||198||6,310||(96.9)|
|Profit/(loss) before taxation||3,474||1,141||204.5||(2,369)||4,210||N.M|
|Income tax expense||(48)||(814)||(94.1)||(82)||(1,065)||(92.3)|
|Profit/(loss) for the period||3,426||327||947.7||(2,451)||3,145||N.M|
|Other comprehensive income:|
|Items that may be reclassified subsequently to profit or loss|
|Foreign currency translation (loss)/gain||(465)||8||N.M||13||(14)||N.M|
|Other comprehensive income for the period||(465)||8||N.M||13||(14)||N.M|
|Total comprehensive income for the period||2,961||335||783.9||(2,438)||3,131||N.M|
|Profit/(loss) attributable to:|
|Equity holders of the Company||3,829||428||794.6||(1,270)||3,054||N.M|
|Total comprehensive income attributable to:|
|Equity holders of the Company||3,365||436||671.8||(1,258)||3,042||N.M|
N.M. - Not meaningful
|Property, plant and equipment||34,875||38,816||42,979|
|Investments in subsidiaries||-||-||-|
|Investments in associates||16,543||16,145||10,162|
|Investment in a joint ventures||10,351||2,003||-|
|Deferred tax assets||-||-||424|
|Loans to associates||-||-||20,136|
|Loans to a joint venture||27,157||24,537||20,525|
|Loans to an associate||-||13,490||-|
|Amounts due from subsidiaries||-||-||-|
|Properties held for sale||1,121||1,057||9,463|
|Cash and bank balances||34,011||30,435||58,730|
|Income tax recoverable||585||510||-|
|Amounts due to subsidiaries||-||-||-|
|Trade and other payables||26,204||42,179||44,372|
|Loans and borrowings||2,712||1,607||3,201|
|Income tax payable||135||1,026||4,679|
|Net current assets||142,405||156,471||54,868|
|Trade and other payables||4,039||3,447||5,699|
|Deferred tax liabilities||238||308||239|
|Loans and borrowings||98,462||99,428||14,710|
|Equity attributable to equity holders of the Company|
|Foreign currency translation reserve||374||362||-|
Review of Performance
Income Statement Review – Third Quarter 2018 ("3Q2018") vs Third Quarter 2017 ("3Q2017")
The Group recorded revenue of S$19.9 million in 3Q2018 that represented a decrease of 62.7% from S$53.5 million achieved in 3Q2017. Gross profit margin was maintained at 13.4% for both quarters in comparison. As a result gross profit decreased by 62.8% from S$7.2 million to S$2.7 million. The lower revenue for the quarter was attributable to lower construction activities for both the General Construction and Specialised Engineering Segment. The Property Development Segment did not register any sales this quarter as all development units had been sold.
Other income/(expense) which comprised foreign exchange differences and fair value gain or loss on derivatives amounted to a gain of S$0.1 million in 3Q2018. This arose mainly from fair value gain adjustment on interest rate swap entered into by the Group to hedge against interest rate movements on a long term loan.
Administrative costs were reduced by 22.6% or S$0.6 million mainly due to lower depreciation cost recorded in the quarter. In addition, there were fees paid to real estate agents for the sale of condominium units during 3Q17 but nil in 3Q18. Other operating costs were reduced marginally by 2.3%.
Finance costs increased by S$0.6 million as interest was incurred on the term loan obtained from the bank to finance for the purchase of Goh & Goh Building.
Share of results of joint ventures was S$7.5 million for the quarter arising mainly from fair value gain on a commercial investment property held by the Group's joint venture, Wisteria Mall, of which Temporary Occupancy Permit ("TOP") has been obtained in July 2018 and operations has commenced during the quarter. The fair value was based on an independent valuation after obtaining TOP.
Share of results of associates for the period was considerably reduced as the profits from the sale of Lake Life Executive Condominium were almost fully recognised in the last financial year.
Profit attributable to equity holders of the Company was S$3.8 million for 3Q2018.
Income Statement Review – Nine Months 2018 ("9M2018") vs Nine Months 2017 ("9M2017")
Group revenue recorded for 9M2018 was S$90.2 million as compared to S$132.0 million in 9M2017 with lower revenue from the General Construction and Specialised Engineering Segments and no revenue from the Property Development Segment. Gross profit margin for 9M2018 averaged to 10.3% which was slightly below the profit margin of 11.8% achieved in 9M2017.
Administrative costs declined by 10.7% due to depreciation cost and fees paid for property sales as explained above and other operating costs were reduced marginally by 4.9%.
Finance costs increased by S$1.7 million due to the financing cost for Goh & Goh Building.
Share of results of joint ventures for 9M2018 and 9M2017 amounted to S$8.5 million and S$2.3 million respectively. The amount of S$8.5 million in 9M2018 comprised the fair value gain on Wisteria Mall as mentioned above and the progressive recognition of income from the sale of residential units at the Wisteria; whereas the income of S$2.3 million recognised in 9M2017 was derived solely from the progressive recognition of income from sale of residential units at the Wisteria.
Share of results of associates for 9M2018 amounted to S$0.2 million as compared to S$6.3 million in 9M2017 as development profits from the sale of Lakelife Executive Condominium was already substantially recognised in the last financial year.
The Group had a loss attributable to equity holders of the Company of S$1.3 million for 9M2018.
Statement of Financial Position and Cash Flow Review
The Group's financial position remains strong with cash position at S$34.0 million at 30 September 2018 compared with S$30.4 million at 31 December 2017.
Total assets decreased from S$308.4 million at 31 December 2017 to S$290.0 million at 30 September 2018 and total liabilities decreased from S$170.4 million at 31 December 2017 to S$156.3 million at 30 September 2018.
Contract assets decreased by S$10.1 million as contract work done was being certified, billed and settled by customers subsequent to the last financial year end. Consequently the non-current trade receivables which includes retention receivables, also increased.
With subsequent settlement of balances after the last financial year end and the lower construction activities during the period, current trade receivables and current trade and other payables decreased by S$7.1 million and S$16.0 million respectively.
For the nine months ended 30 September 2018, the Group used cash amounting to S$3.3 million in operations. Net cash used in operating activities amounted to S$6.0 million after interest and income tax payments.
The Group extended additional loans of S$2.1 million to a joint venture for its property development project. On the other hand, the Group received full payment of loans of S$13.5 million from an associate. As a result, net cash of S$11.2 million was generated from investing activities for 9M2018.
Net cash used in financing activities amounted to S$1.6 million for 9M2018, mainly due to dividend payment of S$1.9 million declared for the financial year ended 31 December 2017 as well as repayment of bank borrowings.
The Group's cash position remains healthy at S$34.0 million as at 30 September 2018.
On 12 October 2018, the Ministry of Trade and Industry announced that based on advance estimates, the Singapore economy grew by 2.6 per cent on a year-on-year basis in the third quarter of 2018, moderating from the 4.1 per cent growth in the previous quarter. The construction sector contracted by 3.1 per cent on a year-on-year basis in the third quarter, extending the 4.2 per cent decline in the previous quarter. The sector was weighed down by the weakness in public sector construction activities.
The industry outlook remains challenging in the next 12 months with increasing competition, labour shortages and rising business costs. The latest round of property cooling measures announced on 5 July 2018 will dampen and postpone the anticipated recovery of the construction sector. The Group expects the construction demand to remain weak and coupled with intense competition, tenders will continue to be challenging in the near term and bid prices and margins will remain depressed.
On the re-development of Goh & Goh Building, the Group is still in discussions with the relevant authorities to optimise the potential of the development site. The mixed development project, The Wisteria and Wisteria Mall, which the Group holds 25.05% equity interest, obtained Temporary Occupancy Permit ("TOP") in July 2018 and Wisteria Mall has commenced operations during the quarter. The Wisteria is the first residential project of the Group to adopt Prefabricated Prefinished Volumetric Construction ("PPVC") technology and this project has won two awards for the Group - Gold Award for SCAL Productivity & Innovation Awards 2018 and Merit Award for Structural Steel Excellence Awards 2018 in the category of Most Innovation Project. With the continuing push for improved productivity in the built environment industry, the successful completion of The Wisteria and Wisteria Mall sets another track record for the Group in PPVC.
During the period under review, the Group secured a S$39 million contract for the construction of a 7-storey social community facility at Pasir Ris and this project will also deploy PPVC technology in its construction. Beyond Singapore, the Group had clinched a few contracts for post tensioning works in relation to express ways and monorails in Thailand.
The Group will continue to focus on its core businesses by leveraging its strong track record in building construction and civil engineering to secure more projects, as well as enhancing cost effectiveness and efficiency optimisation in the management of on-going projects.
The Group will also explore for business opportunities both locally and in the region, particularly in Thailand and Hong Kong SAR, to maintain and sustain its long term growth. In this respect, a wholly owned subsidiary, Moderna Homes (HK) Limited, has recently been set up to explore PPVC business in Hong Kong SAR.
As at the date of this announcement, the Group has an order book of approximately S$206 million in respect of construction projects, predominantly in Singapore and Malaysia.