Financial Statement for the Third Quarter and Nine Months Ended 30 September 2017
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Profit & Loss
|Third quarter ended 30 September||9 months ended 30 September|
|Cost of sales||(38,620)||(56,184)||(31.3)||(98,791)||(204,724)||(51.7)|
|Other operating income||686||955||(28.2)||2,036||2,315||(12.1)|
|Other operating costs||(4,737)||(3,471)||36.5||(14,461)||(11,410)||26.7|
|Share of results of joint ventures||714||803||(11.1)||2,271||711||219.4|
|Share of results of associates||150||(7)||N.M||6,310||113||N.M.|
|Profit/(Loss) before taxation||848||(2,946)||N.M.||4,487||(7,245)||N.M.|
|Income tax expense||(756)||(332)||127.7||(996)||(924)||7.8|
|Profit/(Loss) for the period||92||(3,278)||N.M||3,491||(8,169)||N.M|
|Equity holders of the Company||193||(3,504)||N.M||3,388||(8,497)||N.M|
|STATEMENT OF COMPREHENSIVE INCOME|
|Profit/(Loss) for the period||92||(3,278)||N.M||3,491||(8,169)||N.M|
|Other comprehensive income:|
|Foreign currency translation differences||8||(248)||N.M||(14)||42||N.M|
|Other comprehensive income for the period||8||(248)||N.M||(14)||42||N.M|
|Total comprehensive income for the period||100||(3,526)||N.M||3,477||(8,127)||N.M|
|Total comprehensive income attributable to:|
|Equity holders of the Company||201||(3,713)||N.M||3,376||(8,464)||N.M|
N.M. - Not meaningful
|Property, plant and equipment||40,764||42,979|
|Investments in subsidiaries||-||-|
|Investments in associates||16,179||10,162|
|Investment in a joint ventures||1,438||-|
|Deferred tax assets||436||424|
|Loans to associates||-||20,136|
|Loans to a joint venture||23,396||20,525|
|Amounts due from subsidiaries||-||-|
|Properties held for sale||1,036||9,463|
|Gross amount due from customers for work-in-progress||12,280||6,118|
|Cash and cash equivalents||39,100||58,730|
|Amounts due to subsidiaries||-||-|
|Gross amount due to customers for work-in-progress||27,454||33,635|
|Trade and other payables||33,556||44,372|
|Loans and borrowings||3,417||3,201|
|Income tax payable||3,425||4,890|
|Net current assets/(liabilities)||152,437||56,236|
|Trade and other payables||18,077||5,699|
|Deferred tax liabilities||301||239|
|Loans and borrowings||84,498||14,710|
|Equity attributable to equity holders of the Company|
|Foreign currency translation reserve||(2,664)||(2,652)|
Review of Performance
Income Statement Review – Third Quarter 2017 ("3Q2017") vs Third Quarter 2016 ("3Q2016")
Group revenue decreased by 20.3% from S$57.0 million in 3Q2016 to S$45.5 million in 3Q2017. Although revenue from the Specialised Engineering Segment had increased and the Property Development Segment also turned in some revenue from the sale of condominium units at Bliss @ Kovan, these increases were offset by lower sales from the General Construction Segment as a number of projects were completed at the end of the last financial year. Despite the drop in revenue, gross profit improved significantly from S$0.9 million to S$6.9 million with better project mix this year after the completion of those projects.
Administrative costs rose 23.8% from S$2.0 million to S$2.5 million. This was attributable to higher depreciation cost incurred on the construction of a holding yard at the Group’s logistics and storage premise in Sungei Kadut and factory equipment purchased to cater for Pre-fabricated Pre-finished Volumetric Construction ("PPVC"). The fees paid to real estate agents in relation to the sale of condominium units at Bliss @ Kovan during the quarter also contributed partly to the increase in Administrative costs.
Other operating costs increased 36.5% from S$3.5 million to S$4.7 million. The increase was in part attributable to salaries as the manpower costs of project and site personnel which were previously recorded as project costs were now recorded as other operating costs as these projects were completed at the end of the last financial year. With the ongoing research and development work on the structural works of the PPVC system, R&D cost continued to be incurred. Professional fees, bank facility charge and other costs that were incurred in relation to the acquisition of the Goh & Goh Building at Upper Bukit Timah also added to the rise in other operating costs.
Finance cost increased by S$0.1 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 of S$0.7 million included share of profits from a joint construction project undertaken by Singapore Piling – Shincon JV as well as the Group’s 25% share of joint ventures profits arising from progressive recognition of income from the sale of condominium units of The Wisteria, a mixed residential and commercial development at Yishun.
Share of results of associates amounted to S$0.2 million in 3Q2017 arose from the recognition of sales of a few units of Lake Life Executive Condominium in Jurong Lake district according to financial accounting standards for Executive Condominium development.
Income tax expense of S$0.8 million was provided asthe tax losses of certain subsidiaries cannot be utilised to offset against the taxable profit of other subsidiaries in the Group.
The third quarter ended with a profit attributable to equity holders of the Company of S$0.2 million.
Income Statement Review – 9 Months 2017 ("9M2017") vs 9 Months 2016 ("9M2016")
Group revenue decreased by 46.1% from S$212.4 million in 9M2016 to S$114.6 million in 9M2017. The decline in revenue was from the General Construction Segment and Specialist Engineering Segment which registered lower project work activities in the current financial year. However the gross profit margin improved from 3.6% to 13.8% resulting in gross profit improving by S$8.1 million.
Administrative costs and other operating costs increased by 15.6% and 26.7% respectively due to higher depreciation, salaries, real estate agent fees, professional fees and research and development costs as mentioned above.
Share of results of joint ventures of S$2.3 million for 9M2017 comprised S$0.4 million arising from Singapore Piling – Shincon JV and S$1.9 million from the progressive recognition of income from the sale of condominium units of The Wisteria. To-date, all 216 units were sold and TOP was expected in the second half of 2018.
Share of results of associates amounted to S$6.3 million for 9M2017 from the recognition of sales of 243 units of Lake Life Executive Condominium according to financial accounting standards for Executive Condominium development.
The first nine months of 2017 ended with a profit attributable to equity holders of the Company of S$3.4 million.
Statement of Financial Position and Cash Flow Review
Investment in associates increased by S$6.0 million as the Group equity accounted for the results of associates. At the Company level, investment in subsidiaries increased by S$7.4 million due to the acquisition of the remaining 20% interest in BBRM by the issuance of 16,500,000 new ordinary shares at $0.31 per share (refer to SGXnet announcements dated 18 April 2017 and 17 May 2017) and also issuance of new shares by two of its Singapore subsidiaries.
Properties held for sale dropped S$8.4 million as all the remaining condominium units at Bliss @ Kovan were sold off during the financial period.
Gross amount due from customers for work-in-progress increased by S$6.2 million mainly due to costs incurred for PPVC projects during the quarter. Gross amount due to customers for work-in-progress which represents the excess of progressive claims on work done over costs incurred had decreased S$6.2 million as costs on those projects were progressively being incurred.
Both trade receivables and trade payables decreased with subsequent settlement of these balances after the last financial year end and at the same time, the volume of project work activities was also lower in the current period.
The acquisition of Goh &Goh Building by Alika Properties Pte Ltd ("Alika"), a 62% owned subsidiary, at a purchase price of S$101.5 million was completed in September 2017. The purchase cost and the related stamp duty were reported as Development property. A term loan was obtained from the bank to finance in part for the purchase and the remaining was funded by the shareholders through equity and loans accordingly to their shareholding interest. Consequently loans and borrowing and other payables under non-current liabilities had increased from the last financial year end as a result of borrowings from the bank and minority shareholders in Alika.
Non-controlling interests decreased from S$3.8 million to S$0.7 million after the effect of acquisition of remaining interest in BBRM and dilution of interest in Alika during the financial period.
For the first nine months of the financial year, the Group had net cash used in operating activities of S$103.5 million after the cash outflow of S$104.7 million for the acquisition of Goh & Goh. Excluding this, operating cash flow was a positive inflow of S$1.2 million.
Cash flow from investing activities included a capital outlay of S$2.6 million for the purchase of property, plant and equipment which comprised mainly the cost of construction for the PPVC holding yard in Sungei Kadut.
In financing activities, there was net cash generated of $86.4 million which included S$71.1 million of term loan drawdown for the acquisition of Goh & Goh. Dividends of S$3.6 million were paid and this comprised final and special dividends of S$1.8 million for the financial year ended 31 December 2016 that were paid by the Company to its shareholders on 23 May 2017 and another S$1.8 million of final dividend for the financial year ended 31 December 2016 that was paid by a subsidiary to the minority shareholder. Additionally, the movements of the loans to associate and joint venture resulted in a net repayment of S$4.5 million during the financial period.
The Group’s cash position remained healthy at S$39.1 million as at 30 September 2017.
On 13 October 2017, the Ministry of Trade and Industry announced that based on advance estimates, the Singapore economy grew by 4.6 per cent on a year-on-year basis in the third quarter of 2017, higher than the 2.9 per cent growth in the previous quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 6.3 per cent, an improvement from the 2.4 per cent growth in the second quarter. The construction sector contracted by 6.3 per cent on a year-on-year basis in the third quarter, extending the 6.8 per cent decline in the previous quarter. The sector was weighed down primarily by continued weakness in private sector construction activities. On a quarter-on-quarter seasonally-adjusted annualized basis, the sector contracted by 9.2 per cent, a reversal from the 2.4 per cent growth in the preceding quarter.
The industry outlook remains challenging in the next 12 months with rising business costs, labour shortages and stiffer regulatory controls. With weak demand and intense competition in the market, more construction firms are bidding on projects at thin margins and some at below cost to sustain their business. This may in turn drive down the overall gross profit margins for the construction industry.
The Group will continue to focus on its core business 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.
After the completion of the purchase of Goh & Goh Building, the Group was engaged in discussions with the relevant authorities so as to optimise the site potential of the development. The Group will also explore for business opportunities both locally and in the region to maintain and sustain its long term growth.
As at the date of this announcement, the Group has an order book of approximately S$215 million in respect of construction projects, predominantly in Singapore and Malaysia.