Financials
Condensed Interim Financial Statements For the six months and full year ended 31 December 2023
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CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months ended 31 December | 12 months ended 31 December | |||||
---|---|---|---|---|---|---|
2023 S$'000 |
2022 S$'000 |
Change % |
2023 S$'000 |
2022 S$'000 |
Change % |
|
Revenue | 128,390 | 96,331 | 33.3 | 237,297 | 170,485 | 39.2 |
Cost of sales | (108,985) | (81,004) | 34.5 | (200,754) | (143,523) | 39.9 |
Gross profit | 19,405 | 15,327 | 26.6 | 36,543 | 26,962 | 35.5 |
Other operating income | 2,114 | 2,629 | (19.6) | 3,931 | 3,874 | 1.5 |
Other expense | (57) | (311) | (81.7) | (528) | (517) | 2.1 |
Administrative costs | (2,221) | (1,973) | 12.6 | (4,206) | (3,815) | 10.2 |
Other operating costs | (9,771) | (9,485) | 3.0 | (18,580) | (17,135) | 8.4 |
Finance costs | (3,754) | (3,180) | 18.1 | (7,405) | (4,719) | 56.9 |
Share of results of joint ventures | 59 | 175 | (66.3) | 351 | 406 | (13.5) |
Share of results of associates | 715 | 186 | 284.4 | 812 | 192 | 322.9 |
Profit before taxation | 6,490 | 3,368 | 92.7 | 10,918 | 5,248 | 108.0 |
Income tax expense | (1,711) | (100) | N.M | (2,974) | (277) | 973.6 |
Profit for the period | 4,779 | 3,268 | 46.2 | 7,944 | 4,971 | 59.8 |
Other comprehensive income: | ||||||
Items that may be reclassified subsequently to profit or loss | ||||||
Foreign currency translation (loss)/gain | (80) | (419) | (80.9) | (620) | (779) | (20.4) |
Other comprehensive income for the period | (80) | (419) | (80.9) | (620) | (779) | (20.4) |
Total comprehensive income for the period | 4,699 | 2,849 | 64.9 | 7,324 | 4,192 | 74.7 |
Profit/(Loss) attributable to: | ||||||
Equity holders of the Company | 4,280 | 3,942 | 8.6 | 6,376 | 5,688 | 12.1 |
Non-controlling interests | 499 | (674) | N.M | 1,568 | (717) | N.M |
4,779 | 3,268 | 46.2 | 7,944 | 4,971 | 59.8 | |
Total comprehensive income attributable to: | ||||||
Equity holders of the Company | 4,238 | 3,504 | 20.9 | 5,754 | 4,872 | 18.1 |
Non-controlling interests | 461 | (655) | N.M | 1,570 | (680) | N.M |
4,699 | 2,849 | 64.9 | 7,324 | 4,192 | 74.7 | |
Earnings per share (cents per share) | ||||||
Basic | 1.33 | 1.22 | 9.0 | 1.98 | 1.76 | 12.5 |
Diluted | 1.33 | 1.22 | 9.0 | 1.98 | 1.76 | 12.5 |
N.M - Not meaningful
Condensed interim statements of financial position
Group | |||
---|---|---|---|
31-Dec-23 S$'000 |
31-Dec-22 S$'000 |
||
Non-current assets | |||
Property, plant and equipment | 28,904 | 30,699 | |
Right-of-use assets | 5,113 | 3,025 | |
Investments in subsidiaries | - | - | |
Investment in a joint ventures | 672 | 6,231 | |
Investments in associates | 2,225 | 1,668 | |
Deferred tax assets | 291 | 2,921 | |
Contract assets | 11,104 | 11,046 | |
48,309 | 55,590 | ||
Current assets | |||
Trade receivables | 21,600 | 12,874 | |
Loans to a joint venture | - | 5,042 | |
Amounts due from subsidiaries | - | - | |
Contract assets | 107,749 | 92,829 | |
Capitalised contract costs | 1,045 | 4,439 | |
Development properties | 88,059 | 79,028 | |
Properties held for sale | 825 | 1,222 | |
Inventories | 3,038 | 3,571 | |
Investment securities | 10 | 10 | |
Other receivables | 6,980 | 7,312 | |
Pledged deposits | 6,030 | 4,700 | |
Cash and bank balances | 56,938 | 50,989 | |
Income tax recoverable | 406 | 429 | |
292,680 | 262,445 | ||
Total assets | 340,989 | 318,035 | |
Current liabilities | |||
Amounts due to subsidiaries | - | - | |
Contract liabilities | 23,682 | 19,481 | |
Trade and other payables | 63,345 | 50,872 | |
Provisions | 3,082 | 4,391 | |
Deferred income | 207 | 200 | |
Other liabilities | 8,558 | 9,641 | |
Lease liabilities | 1,695 | 854 | |
Loans and borrowings | 88,233 | 5,714 | |
Income tax payable | 393 | 41 | |
189,195 | 91,194 | ||
Net current assets/(liabilities) | 103,485 | 171,251 | |
Non-current liabilities | |||
Trade payables | 4,085 | 451 | |
Deferred income | 2,364 | 2,483 | |
Lease liabilities | 4,701 | 3,007 | |
Loans and borrowings | 40,529 | 127,801 | |
51,679 | 133,742 | ||
Total liabilities | 240,874 | 224,936 | |
Net assets | 100,115 | 93,099 | |
Equity attributable to equity holders of the Company | |||
Share capital | 49,082 | 49,082 | |
Treasury shares | (566) | (566) | |
Retained earnings | 58,006 | 52,597 | |
Foreign currency translation reserve | (1,359) | (737) | |
105,163 | 100,376 | ||
Non-controlling interests | (5,048) | (7,277) | |
Total equity | 100,115 | 93,099 |
Review of performance of the Group
Income Statement Review - Six-Month Period Ended 31 December 2023 (“2H2023”) vs Six-Month Period Ended 31 December 2022 (“2H2022”)
Group revenue increased 33.3% from $96.3 million achieved in 2H2022 to $128.4 million in 2H2023 with lower contribution from the Specialist Engineering business segment offset by higher contribution from the General Construction, Property Development and Green Technology business segments. Revenue from General construction business segment improved as the construction activities from new projects have started to pick up. Specialised Engineering business segment registered a decrease in revenue with lower construction activities for Singapore, Malaysia and Thailand subsidiaries as well as the Prefabricated Prefinished Volumetric Construction (“PPVC”) business during the period in review.
The Group's Property Development business segment launched the sale of the residential units of The LINQ @ Beauty World (“The LINQ”) in November 2020. The LINQ is a 20-storey mixed development along Upper Bukit Timah Road. As construction work progresses, based on the Percentage of Completion (“POC”), a revenue of $57.1 million was recognised in 2H2023 as compared to $29.7 million in 2H2022.
Gross profit margin for 2H2023 was 15.1% as compared to 15.9% achieved in 2H2022. With a higher revenue, the overall gross profit improved 26.6% from $15.3 million in 2H2022 to $19.4 million in 2H2023.
Other operating income decreased by 19.6%. Although higher interest income was earned during the period with higher bank deposit rates, this was offset by a decrease in training income from BCA Approved Training and Testing Centre and Approved Overseas Testing Centre operated by the Group.
Other expense comprised foreign exchange differences amounted to a loss of $0.06 million and $0.3 million for 2H2023 and 2H2022 respectively.
Administrative costs increased by $0.2 million or 12.6% due to increase in maintenance expenses and withholding taxes.
Other operating costs increased by $0.3 million or 3.0%. The Group recorded higher amortisation of capitalised contract cost relating to the sales commission paid for sale of property development units at The LINQ which is amortised in a systematic manner via POC of the development as well as staff cost and professional fees for consultation of corporate matters. These increases were offset by a reduction of impairment losses as the Group made allowances for impairment of some specialised construction equipment in 2H2022 taking into consideration their expected utilization rate.
Finance costs increased by $0.6 million or 18.1% with an increase in interest rates and additional bank borrowings during the period in review.
Share of results of joint ventures and associates were a profit of $0.06 million and $0.7 million in 2H2023 respectively.
Income tax expense increased on the back of higher profit achieved during the period in review.
The Group had a profit attributable to equity holders of the Company of $4.3 million for 2H2023.
Income Statement Review - Financial Year Ended 31 December 2023 (“FY2023”) vs Financial Year Ended 31 December 2022 (“FY2022”)
Group revenue increased 39.2% from $170.5 million in FY2022 to $237.3 million in FY2023. The Group saw revenue growth from all the business segments except for the Specialised Engineering business segment.
The increase in revenue for the General Construction business segment was mainly contributed by the new projects awarded this year. In addition, revenue generated by the Group's 50% owned joint venture, Sinohydro-Singapore Engineering & Construction Joint Venture (“SHSECJV") in relation to the design and construction of Pasir Ris East station under the first phase of the Cross Island Line by the Land Transport Authority (“Contract CR107”) also contributed to the increased revenue for the General Construction business segment. The Group has accounted for SHSECJV as a joint operation using proportionate consolidation of its results and assets and liabilities.
On the other hand, the Group's construction activities for the Specialised Engineering business segment decreased in the current financial year as compared to FY2022 resulting in a drop in revenue.
The improved revenue from the Green Technology business segment was attributable to revenue generated from a number of projects awarded during the financial year for the design, construction and installation of solar photovoltaic and the sale of renewable energy certificates.
The Property Development business segment recognised a revenue of $112.3 million on a POC basis versus $44.6 million in FY2022 in respect of The LINQ.
Gross profit margin decreased slightly to 15.4% achieved in FY2023 as compared with 15.8% achieved in FY2022. With a higher revenue, the overall gross profit improved 35.5% from $27.0 million in FY2022 to $36.5 million in FY2023.
Other operating income increased marginally by 1.5%. Whilst interest income had increased, this was offset by a decrease in gain on disposal of property, plant and equipment, as well as training and rental income.
Other expense comprised foreign exchange differences amounted to a loss of $0.5 million for both FY2023 and FY2022.
Administrative costs increased by $0.4 million or 10.2%. Besides the maintenance expenses and withholding taxes as mentioned above, the Group incurred moving expenses for the relocation of the store which the Group has secured through a three-year Temporary Occupancy Licence and costs for minor fitting-up works at the store in the first half of the financial year.
Other operating costs increased by $1.4 million or 8.4%. Similar to 2H2023, the increase was due to an increase in amortisation of capitalised contract cost, staff cost and professional fees.
Finance costs increased by $2.7 million or 56.9% with higher interest rates and additional bank borrowings during the financial year.
Share of results of joint ventures for both FY2023 and FY2022 was a gain of $0.4 million.
Share of results of associates was a profit of $0.8 million in FY2023 as compared to $0.2 million in FY2022.
The Group had a profit attributable to equity holders of the Company of $6.4 million for FY2023.
Statement of Financial Position and Cash Flow Review
Right-of-use assets increased by $2.1 million as the Group obtained a three-year Temporary Occupancy Licence in respect of a land parcel for storage purpose and also purchased some plant and machinery under finance lease arrangements. The amount of investment in joint ventures decreased by $5.6 million with distribution of profits. Deferred tax assets were reduced as the tax benefit associated with the tax losses was now utilised.
For current assets, loans to a joint venture of $5.0 million were fully repaid during the period.
With the increase in construction activities, current trade receivables and current trade and other payables increased by $8.7 million and $12.5 million respectively.
Current contract assets increased by $14.9 million arising mainly from an increase in contract assets from the sale of development properties relating to the residential units of The LINQ which the progressive claims from the purchasers are not due yet and an increase in retention receivables. Development properties increased by $9.0 million due to capitalisation of construction cost incurred for the unsold commercial units of the development.
Contract liabilities increased by $4.2 million with progress billings raised.
Current and non-current lease liabilities increased with the three-year Temporary Occupancy Licence in respect of a land parcel and plant and machinery purchased under finance lease arrangements.
Current loans and borrowings increased by $82.5 million. This was due to an increase in short term borrowings arising from trade financing obtained for purchase of materials as well as a reclassification of loan and borrowings of $81.3 million from non-current liabilities as these loans were expected to be repaid within the next financial year.
An additional term loan of $3.0 million was obtained for the purchase of the factory at Seelong in Malaysia. With repayment of other existing term loans and the aforesaid reclassification, non-current borrowings decreased by $87.3 million.
For the financial year ended 31 December 2023, operating cash flows before working capital changes was $20.8 million and net cash generated from operating activities was $4.5 million.
Net cash generated from investing activities was $8.8 million. This comprised mainly $5.9 million from the distribution of profits from joint ventures, $3.9 million from repayment of loans from a joint venture and net cash outflow of $1.0 million arising from the purchase and disposal of property, plant and equipment.
Net cash used in financing activities amounted to $7.3 million. This was mainly due to repayment of $8.9 million for long term borrowings and $3.3 million for lease liabilities offset by proceeds of $5.4 million from additional borrowings. In addition, the Group pledged additional deposit of $1.4 million and the Company also paid final dividend of $1 million declared for the last financial year after obtaining shareholders' approval in the annual general meeting held on 27 April 2023.
The Group's cash holding was $56.9 million as at 31 December 2023, up by $5.9 million from $51.0 million as at the end of the last financial year.
Commentary
On 15 February 2024, the Ministry of Trade and Industry (“MTI”) announced that the Singapore economy grew by 1.1 per cent in 2023 and 2.2 per cent on a year-on-year basis in the fourth quarter of 2023.
The construction sector grew 5.2 per cent in 2023, improving from the 4.6 percent growth in 2022, supported by expansions in both public and private sector construction works.
According to the projections released by Building and Construction Authority (“BCA”) on 15 January 2024, total construction demand in 2024 is expected to range between $32 billion and $38 billion, with the public sector contributing about 55 per cent of the total demand. BCA expects a steady improvement in construction demand over the medium term.
Statistics released by the Urban Redevelopment Authority (“URA”) on 26 January 2024 indicated that for 2023, overall private residential property price index increased at a slower pace of 6.8% compared to the increase of 8.6% and 10.6% in 2022 and 2021 respectively. Total transaction volume in 2023 fell 13% as compared to 2022 and was at its lowest point in seven years, since 2016. Given this, the Group will be more cautious in its land replenishment for the next property development project.
The Group is supported by a healthy pipeline of projects. Nonetheless, downside risks in the global economies remain. The Group expects uncertainties in the operating conditions of the construction sector to remain. With the shortage of workers' dormitory, labour supply and an inflationary cost environment, overall construction cost and operating expenses are expected to rise. The high interest rates will continue to add upward pressure on finance costs.
The Group will continue to stay vigilant on managing its project costs and operating expenses. It will remain focus on executing the order book on hand and leverage on its track record in building construction and specialised engineering to secure more projects. The Group will also explore investment opportunities to diversify its business.
In property development, the Group continues to expend in marketing effort for the sale of the two-storey retail podium with 53 strata-titled units at The LINQ.
As at 31 December 2023, the Group has a construction order book of approximately $439 million.
Reference:
Ministry of Trade and Industry Singapore Press Release “MTI Maintains 2024 GDP Growth Forecast at 1.0 to 3.0 Per Cent”, 15 February 2024
Building and Construction Authority Media Release “Steady Demand for the Construction Sector Projected for 2024”, 15 January 2024
Urban Redevelopment Authority Media Release “Release of 4th Quarter 2023 Real Estate Statistics”, 26 January 2024