Financial Statement for the Third Quarter and Nine Months Ended 30 September 2016
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Profit & Loss
|Third quarter ended 30 September||9 months ended 30 September|
|Cost of sales||(56,184)||(96,560)||(41.8)||(204,724)||(283,625)||(27.8)|
|Other operating income||955||706||35.3||2,315||2,502||(7.5)|
|Other income/ (expense)||70||(29)||N.M||(288)||15||N.M|
|Other operating costs||(3,471)||(2,921)||18.8||(11,410)||(10,482)||8.9|
|Share of results of joint ventures||803||(88)||N.M||711||(403)||N.M|
|Share of results of associates||(7)||8||N.M||113||66||71.2|
|(Loss)Profit before taxation||(2,946)||1,563||N.M||(7,245)||3,106||N.M|
|Income tax expense||(332)||(399)||(16.8)||(924)||(832)||11.1|
|(Loss)/profit for the period||(3,278)||1,164||N.M||(8,169)||2,274||N.M|
|Equity holders of the Company||(3,504)||1,081||N.M||(8,497)||1,969||N.M|
|STATEMENT OF COMPREHENSIVE INCOME|
|(Loss)/profit for the period||(3,278)||1,164||N.M||(8,169)||2,274||N.M|
|Other comprehensive income:|
|Foreign currency translation differences||(248)||(1,330)||(81.4)||42||(2,006)||N.M|
|Other comprehensive income for the period||(248)||(1,330)||(81.4)||42||(2,006)||N.M|
|Total comprehensive income for the period||(3,526)||(166)||N.M||(8,127)||268||N.M|
|Total comprehensive income attributable to:|
|Equity holders of the Company||(3,713)||28||N.M||(8,464)||374||N.M|
N.M - Not meaningful
|Property, plant and equipment||44,409||44,258|
|Investments in subsidiaries||-||-|
|Investments in associates||952||1,115|
|Investment in a joint ventures||-||-|
|Deferred tax assets||735||735|
|Loans to associates||20,050||19,257|
|Loans to a joint venture||19,261||17,360|
|Amounts due from subsidiaries||-||-|
|Properties held for sale||8,395||8,395|
|Gross amount due from customers for work-in-progress||15,253||30,532|
|Cash and cash equivalents||33,819||23,935|
|Amounts due to subsidiaries||-||-|
|Gross amount due to customers for work-in-progress||49,022||28,968|
|Trade and other payables||38,713||80,542|
|Loans and borrowings||3,817||12,591|
|Income tax payable||320||640|
|Net current assets/(liabilities)||64,732||69,861|
|Deferred tax liabilities||4,957||4,864|
|Loans and borrowings||15,097||12,137|
|Equity attributable to equity holders of the Company|
|Foreign currency translation reserve||(2,224)||(2,257)|
Review of Performance
Income Statement Review – Third Quarter 2016 (‘3Q16’) vs Third Quarter 2015 (‘3Q15’)
Group revenue fell to $57.0 million in 3Q16 from $103.0 million in 3Q15 and the Group recorded a net loss attributable to equity holders of the Company of $3.5 million in 3Q16 compared to $1.1 million net profit in 3Q15.
The Group achieved higher revenue from their new businesses, namely solar leasing projects under the Green Technology Segment and Pre-fabricated Pre-finished Volumetric Construction under the Specialised Engineering Segment. However, overall revenue for the current period was lower due to lesser general construction activities and revenue from property development for sold units was already fully recognised in financial year 2015 after obtaining Temporary Occupancy Permit (“TOP”). The Group’s new property development projects are undertaken either by associates or joint-ventures and hence do not contribute to the Group’s revenue.
Gross profit for 3Q16 was $0.9 million compared to $6.4 million for 3Q15, mainly due to decrease in revenue and cost overruns incurred for certain general construction projects. Cost overruns were mainly attributable to additional costs incurred to expedite completion of some projects. Despite an improvement in profit margins achieved for the Specialised Engineering Segment, overall gross margin for the current quarter was 1.5% compared to 6.2% in 3Q15.
Other operating income for 3Q16 increased to $1.0 million from $0.7 million in 3Q15, mainly attributable to interest income from loans to a joint venture.
Administrative costs in 3Q16 was $2.0 million, compared to $2.4 million for 3Q15 which included a loss on liquidation of Tennessee Pte Ltd, an associate. Other operating cost increased to $3.5 million in 3Q16 from $2.9 million in 3Q15 mainly due to substantially lower doubtful debts written back in 3Q16 compared to 3Q15.
The Group recorded $0.8 million profits from share of results of joint ventures in 3Q16. This is attributable to a joint construction project undertaken by Singapore Piling – Shincon JV, as well as progressive recognition of profits from a mixed residential and commercial development at Yishun (“Yishun Mixed Development”). The Group has 25% equity interest in Yishun Mixed Development which includes residential development properties known as The Wisteria. Construction for The Wisteria has reached the active stage as at 30 September 2016 and profits are progressively recognised for the sold units.
Although the Group recorded losses, income tax expense for 3Q16 was $0.3 million as tax losses incurred by certain Singapore entities cannot be offset against the profits of overseas subsidiaries.
Income Statement Review – 9 months 2016 (‘9M16’) vs 9 months 2015 (‘9M15’)
Group revenue decreased to $212.4 million for 9M16 from $301.7 million for 9M15 and net loss attributable to equity holders of the Company was $8.5 million in the current period as compared to a net profit of $2.0 million in 9M15.
Revenue for 9M15 decreased due mainly to lower revenue recorded for the general construction and property development segments due to similar reasons explained for 3Q16’s results.. Gross profit for 9M16 decreased to $7.7 million from $18.0 million for 9M15, due to lower revenue and losses incurred by the general construction segment. As a result, gross margin for 9M16 decreased to 3.6% compared to 6.0% in 9M15.
Other operating income decreased to $2.3 million for 9M16 from $2.5 million for 9M15, due to lower equipment rental income and administrative fee income from the training and test centres, and partially offset by higher interest income for loans to a joint venture. Other expense of $0.3 million for 9M16 relates to foreign exchange loss for the Group’s financial assets and forward currency purchases denominated in USD.
Administrative costs for 9M16 decreased to $6.0 million from $6.4 million in 9M15 because the Group recorded a loss on liquidation of an associate in 9M15. The lower cost for 9M16 was partially offset by higher depreciation for BBR building and solar leasing plants in operation.
Other operating cost increased to $11.4 million in 9M16 from $10.5 million in 9M15 due mainly to substantially lower doubtful debts written back in the current period, and impairment losses for construction materials inventory. Finance costs for 9M16 increased by $0.1 million to $374,000 from 9M15, attributable to interest expense from a new term loan to finance the purchase of BBR building.
The Group recorded $0.7 million profits from share of results of joint ventures, namely Singapore Piling – Shincon JV and Yishun Mixed Development. For 9M15, share of loss in joint ventures of $0.4 million was attributable to start-up expenses in Yishun Mixed Development.
Contribution from associates for 9M16 was $113,000 compared to $66,000 for 9M15. Associates comprised the Group’s 35% equity interest in Lakehomes Pte Ltd (“Lakehomes”), the developer for LakeLife Executive Condominium in Jurong Lake district. Construction at the development is approximately 96% completed with almost all units sold as at 30 September 2016. However, Lakehomes is unable to progressively recognise revenue and profits from the sales until the development achieves TOP, in accordance to the financial accounting standards for Executive Condominium development. TOP is expected to be obtained in the fourth quarter of 2016 or latest by January 2017.
Income tax expense for 9M16 increased to $0.9 million from $0.8 million for 9M15 due to tax provision for higher profits recorded by the Malaysia subsidiary which cannot utilise the tax losses by Singapore entities.
Statement of Financial Position Review
The carrying amount of the Group’s property, plant and equipment increased to $44.4 million as at 30 September 2016 from $44.3 million as at 31 December 2015. The additional cost of construction for infrastructure and installation works for a 20-year solar leasing contract with Ang Mo Kio Town Council was offset by depreciation charges in the current period.
Loans to an associate and loans to a joint venture increased by $0.8 million and $1.9 million to $20.1 million and $19.3 million, respectively, as at 30 September 2016 to finance construction costs and working capital.
As at 30 September 2016, most of the Group’s general construction projects were at the final stages of construction leading to a decrease in amount due from customers for work-in-progress (which represents cost and profits in excess of billings) to $15.3 million from $30.5 million as at 31 December 2015. The increase in gross amount due to customers for work-in-progress (which represents billings in excess of costs and profits) to $49.0 million as at 30 September 16 from $29.0 million as at end of 2015 was mainly due to billings for preliminary works and increase in progressive claims for projects in Malaysia.
Inventories decreased to $8.1 million as at 30 September 2016 from $10.2 million as at 31 December 2015, due to utilisation as well as impairment loss of construction materials.
Total current and non-current trade receivables decreased to $92.5 million as at 30 September 2016 from $121.1 million as at 31 December 2015, due to lower volume of general construction work carried out. Other receivables decreased to $1.4 million as at 30 September 2016 from $3.4 million as at 31 December 2015 with progressive settlement of sundry debtors and deposits as general construction projects are being completed.
Cash and cash equivalents and pledged deposits rose to $38.6 million as at 30 September 2016 compared with $29.2 million as at 31 December 2015, largely due to increase in cash generated from operating activities, namely amount due to customers for work-in-progress (net) and trade receivables, offset partially by payments for trade payables, bank borrowings and capital expenditure in the current period.
Current and non-current trade and other payables decreased to $46.1 million as at 30 September 2016 from $88.7 million as at 31 December 2015, due to decrease in project costs as a result of lower general construction work volume.
Current and non-current deferred income of $3.1 million arose from a lump sum payment by the lessor for a 20-year solar leasing contract upon successful commissioning of solar panels installed on rooftops of HDB flats. The deferred income is to be amortised over the lease period.
Income tax payable halved to $0.3 million as at 30 September 2016 from $0.6 million as at 31 December 2015 due to tax paid and partially offset by tax provision.
Total bank loans and borrowings decreased to $18.9 million as at 30 September 2016 from $24.7 million as at 31 December 2015, due to repayments for term loans and finance leases.
On 14 October 2016, the Ministry of Trade and Industry announced that based on advance estimates, the Singapore economy grew by 0.6 per cent on a year-on-year basis in the third quarter of 2016, easing from the 2.0 per cent growth in the previous quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy contracted by 4.1 per cent, a reversal from the 0.2 per cent growth in the preceding quarter. Growth in the construction sector slowed marginally to 2.5 per cent on a year-on-year basis in the third quarter, moderating from the 2.6 per cent in the previous quarter. The slowdown was mainly due to a sharper decline in private sector construction activities. On a quarter-on-quarter seasonally-adjusted basis, the sector expanded at an annualized rate of 0.5 per cent, moderating from the 1.1 per cent expansion in the preceding quarter.
The industry outlook remains challenging in the next 12 months with increasing competition and increase in labour cost due to short supply of foreign workers. 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. BBR will also continue to conduct feasibility studies to undertake new property development projects.
As at the date of this announcement, the Group has an order book of approximately $306 million in respect of construction projects, predominantly in Singapore and Malaysia.