Financials

Review of performance of the Group

Income Statement Review – Six-Month Period Ended 30 June 2024 ("1H2024") vs Six-Month Period Ended 30 June 2023 ("1H2023")

Group revenue increased marginally by 1.3% from $108.9 million achieved in 1H2023 to $110.3 million in 1H2024. Whilst increased revenue was recorded from the General Construction and Green Technology business segments, it is offset by a decrease in revenue contribution by the Specialist Engineering and Property Development business segments. Revenue from General Construction business segment improved with increased construction volume from the active ongoing projects. Specialised Engineering business segment registered a decrease in revenue with lower construction activities for Malaysia and Thailand subsidiaries as well as the Prefabricated Prefinished Volumetric Construction ("PPVC") and bored piling 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 progresses nearer to completion, based on the Percentage of Completion ("POC"), a revenue of $25.7 million was recognised in 1H2024 as compared to $55.2 million in 1H2023.

As revenue from the Property Development decreased, the overall gross profit also decreased. Hence gross profit decreased 29.7% from $17.1 million in 1H2023 to $12.0 million in 1H2024. Gross profit margin was 10.9% for 1H2024 versus 15.7% for 1H2023.

Other expense comprised foreign exchange differences amounted to a loss of $0.3 million and $0.5 million for 1H2024 and 1H2023 respectively.

Administrative costs decreased by $0.2 million or 9.8% due to the moving expenses for relocation of store and expenses for minor fitting-up works of the store incurred in 1H2023 which were non-recurring. As part of the Group's sustainability efforts, solar panels were installed at the rooftop of office building for electricity generation and this resulted in a decrease in electricity costs.

Other operating costs increased marginally by 2.7% or $0.2 million. Provision for financial assets comprising trade receivables and contract assets of $0.7 million was made as compared to a write back of $0.6 million in 1H2023. The impact of this increase was offset by a lower amortisation of capitalised contract cost relating to the sales commission paid for the sale of property development units at The LINQ which is amortised in a systematic manner via POC of the development.

Finance costs decreased by $0.7 million or 18.6% with the partial repayment of long term bank borrowings and as well as a decrease in interest paid to non-controlling shareholders.

Share of results of joint ventures was a profit of $3.5 million in 1H2024 and this includes a provisional bargain purchase of $3.1 million arising from the recent acquisition of JSCL Investments Pte Ltd which was completed on 5 June 2024. This investment is classified as a joint venture by the Group for accounting treatment.

Income tax expense decreased on the back of lower profit achieved during the period in review.

The Group had a profit attributable to equity holders of the Company of $2.4 million for 1H2024.

Statement of Financial Position and Cash Flow Review

Investment in joint ventures increased by $18.5 million with the completion of the acquisition of 49% interest of JSCL Investments Pte Ltd, a company which operates and owns the dormitory, Homestay Lodge, on 5 June 2024. Non-current contract assets increased by $1.9 million due to an increase in retention receivables.

Current contract assets increased by $5.7 million arising mainly from costs incurred on ongoing construction projects. Development properties increased by $2.9 million on capitalisation of the construction cost for the unsold commercial units of the development. Trade receivables increased by $5.7 million due to billings raised in the second quarter of 2024 which have yet to be collected. Other receivables decreased by $2.0 million with the refund of a deposit placed.

Current trade and other payables increased by $15.2 million, which was mainly due to the increased construction activities from the General Construction business segment and an increase in retention payables.

Short term borrowings decreased mainly by $9.5 million due to partial repayment of loans obtained for property development purpose out of the project proceeds collected. These loans were reclassified from long term borrowings to short term borrowing on 31 December 2023 as repayment is expected to be within the current financial year and hence the repayment was presented as repayment of long term borrowings in the condensed interim consolidated statement of cash flows. Long term borrowings also decreased with the ongoing regular repayments.

For the financial period ended 30 June 2024, operating cash flows before working capital changes stood at $5.3 million. After accounting working capital changes and interest, the net cash generated from operating activities was $0.2 million.

Net cash used in investing activities was $15.0 million, which is mainly due to the acquisition of JSCL Investments Pte Ltd..

Net cash used in financing activities amounted to $11.5 million. This comprised the net repayment of $10.1 million for all borrowings and $0.8 million for lease liabilities, offset by a reduction in pledged deposits of $0.4 million. The Company also paid the final dividend of $1.0 million declared for the last financial year after obtaining shareholders' approval in the annual general meeting held on 30 April 2024.

The Group's cash holding was $30.7 million as at 30 June 2024, down by $26.2 million from $56.9 million as at the end of the last financial year.

Commentary

On 12 July 2024, the Ministry of Trade and Industry ("MTI") announced that the Singapore economy grew by 2.9 per cent on a year-on-year basis in the second quarter of 2024, extending the 3.0 per cent growth in the previous quarter.

The construction sector grew by 4.3 per cent year-on-year in the second quarter, extending the 4.1 per cent growth in the preceding quarter. Growth during the quarter was supported by an increase in public sector construction output.

With a steady construction demand from both the public and private sectors, construction industry is expected to be stable. Nonetheless there is still stiff competition faced in project tenders. Shortage of foreign labour supply and inflationary cost environment remain to pose challenges on business costs.

The Group will continue to stay vigilant on managing its project costs and operating expenses. It will remain focused on executing the order book on hand and leverage on its track record in building construction and specialised engineering to secure more projects.

For property development, the Linq @ Beauty World is on track to obtain its Temporary Occupancy Permit.

Approval was obtained from shareholders in the Extraordinary General Meeting held on 3 June 2024 for the Group to diversify into the accommodation business. Following the acquisition of the workers dormitory, Homestay Lodge, the Group will continue to explore business opportunities for the accommodation business.

As at 30 June 2024, the Group has a construction order book of approximately $437 million.