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Second Quarter Financial Statement And Dividend Announcement 2018

Financials Archive

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Profit & Loss

Statement of Comprehensive Income

Balance Sheet

Review of Performance

INCOME STATEMENT

2QFY2019 vs 2QFY2018

Revenue

The Group had a total revenue of S$35.2 million for the second quarter ended 30 September 2018 ("2QFY2019"), an increase of S$12.9 million or 58.2% compared to S$22.3 million registered in the corresponding period ended 30 September 2017 ("2QFY2018"). The increase was mainly due to the increase in revenue from construction business of S$13.0 million or 62.7% from S$20.8 million in 2QFY2018 to S$33.8 million in 2QFY2019.

Other income

Other income increased by S$0.5 million or 22.1% from S$2.1 million in 2QFY2018 to S$2.6 million in 2QFY2019, mainly due to the increase in interest income from loans to associates and joint ventures.

Operating expenses

Cost of construction increased by S$14.1 million or 87.3% from S$16.2 million in 2QFY2018 to S$30.3 million in 2QFY2019. The increase was mainly due to the increase in construction works carried out and provision for onerous contract on an on-going construction project.

There were no significant differences in personnel expenses and depreciation of property, plant and equipment between 2QFY2019 and 2QFY2018.

Finance costs increased by S$0.3 million from S$0.7 million in 2QFY2018 to S$1.0 million in 2QFY2019, mainly due to the increase in gearing and interest rates.

Other operating expenses increased by S$0.3 million or 32.5% from S$1.1 million in 2QFY2018 to S$1.4 million in 2QFY2019, mainly due to the increase in foreign exchange losses.

The loss from share of results of associates decreased by S$0.9 million or 93.6%, mainly due to gain from disposal of subsidiaries which held strata units in Prudential Tower by an associate, offset slightly by the increase in expenses incurred from Affinity@Serangoon and Riverfront Residences which were launched in June 2018 and July 2018 respectively. The share of results of joint ventures increased by S$0.6 million or 21.5% from S$2.9 million in 2QFY2018 to S$3.5 million in 2QFY2019, mainly due to the increase in profit recognised from the residential development project - High Park Residences as the construction progressed, offset by expenses incurred for Park Colonial launched in July 2018.

Tax expense decreased by S$0.3 million or 63.0% as compared to 2QFY2018, mainly due to the decrease in profit from operations before share of results of associates and joint ventures.

As a result of the above, the Group registered a net profit attributable to Owners of the Company of S$4.4 million in 2QFY2019 excluding non-controlling interests.

1HFY2019 vs 1HFY2018

Revenue

The Group had a total revenue of S$76.1 million for the half year ended 30 September 2018 ("1HFY2019"), an increase of S$22.7 million or 42.5% compared to S$53.4 million registered in the corresponding half year ended 30 September 2017 ("1HFY2018"). The increase was mainly due to the increase in revenue from construction business of S$22.8 million or 45.4% from S$50.3 million in 1HFY2018 to S$73.1 million in 1HFY2019.

Operating expenses

Cost of construction increased by S$23.2 million or 64.4% from S$36.0 million in 1HFY2018 to S$59.2 million in 1HFY2019. The increase was mainly due to the increase in construction works done in 1HFY2019 as compared to 1HFY2018.

There were no significant differences in personnel expenses and depreciation of property, plant and equipment between 1HFY2019 and 1HFY2018.

Finance costs increased by S$0.9 million or 87.9% from S$1.0 million in 1HFY2018 to S$1.9 million 1HFY2019, mainly due to the increase in gearing and interest rates.

Other operating expenses increased by S$0.8 million or 31.7% from S$2.5 million in 1HFY2018 to S$3.3 million in 1HFY2019, mainly due to the increase in foreign exchange loss.

The loss from share of results of associates decrease by S$0.40 million or 9.7% from S$3.5 million in 1HFY2019 to S$3.1 million in 1HFY2019, mainly due to gain from disposal of subsidiaries which held strata units in Prudential Tower by an associate, offset slightly by the increase in expenses incurred from Affinity@Serangoon and Riverfront Residences which were launched in June 2018 and July 2018 respectively. The share of results of joint ventures increased by S$1.3 million or 28.0% from S$4.7 million in 1HFY2018 to S$6.0 million in 1HFY2019, mainly due to the increase in profit recognised from the residential development project - High Park Residences as the construction progressed, offset by expenses incurred for Park Colonial launched in July 2018.

There were no significant differences in income tax expense between 1HFY2019 and 1HFY2018.

As a result of the above, the Group registered a net profit attributable to Owners of the company of S$10.4 million in 1HFY2019 excluding non-controlling interests.

STATEMENT OF FINANCIAL POSITION

Non-current assets

Property, plant and equipment ("PPE") increased by S$3.2 million from S$15.4 million as at 31 March 2018 ("FY2018") as compared to S$18.6 million as at 30 September 2018 ("1HFY2019"), mainly due to cost incurred for the construction of a new building plant to be used for construction business and purchase of new plant and equipment, partially offset by depreciation of plant and equipment.

Interests in associates increased by S$4.1 million from S$190.2 million as at FY2018 to S$194.3 million as at 1HFY2019, mainly due to the increase in loans to associates to finance development property and investment property projects, offset by share of losses recognised and dividends received from associates.

Interests in joint ventures increased by S$8.1 million from S$82.4 million as at FY2018 to S$90.5 million as at 1HFY2019, mainly due to the increase in loans to joint ventures to finance development property projects and the recognised share of results of joint ventures.

Investment properties decreased by S$5.1 million from S$123.9 million as at FY2018 to S$118.8 million as at 1HFY2019, mainly due to foreign exchange differences from an investment property held in the People's Republic of China ("PRC").

Trade receivables under non-current assets increased by S$1.2 million from S$1.6 million as at FY2018 to S$2.8 million in 1HFY2019, mainly due to the increase in retention sum receivables from on-going construction projects in Singapore.

Current assets

Trade receivables under current assets increased by S$0.7 million from S$27.6 million as at FY2018 to S$28.3 million as at 1HFY2019, mainly due to the increase in amount of progress claims certified for construction projects in progress.

Other receivables and deposits increased by S$0.2 million from S$1.9 million as at FY2018 to S$2.1 million in 1HFY2019, mainly due to deposit paid for acquisition of property.

The decrease in non-trade amounts due from associates and a joint venture as at FY2018 amounting to S$28.7 million is due to collection during 1HYFY2019.

Based on the progress of construction projects in 1HFY2019 as compared to FY2018, contract assets increased by S$11.0 million from S$8.8 million in FY2018 to S$19.8 million in 1HFY2019.

Current liabilities

Trade payables under current liabilities decreased by S$2.9 million from S$15.7 million as at FY2018 to S$12.8 million in 1HFY2019. The decrease was mainly due to the decrease in billings from suppliers and subcontractors which will be due for release of payments in the next 12 months for construction projects in progress.

Other payables and accruals under current liabilities decreased by S$7.2 million from S$55.8 million as at FY2018 to S$48.6 million as at 1HFY2019. The decrease was mainly due to the decrease in accrual made for on-going construction projects and bonuses.

Provision for onerous contract was provided for an on-going construction project.

Non-current liabilities

Trade payables under non-current liabilities increased by S$0.8 million from S$0.5 million as at FY2018 to S$1.3 million in 1HFY2019. The increase was mainly due to the increase in retention sum payables to subcontractors for on-going construction projects.

Total Group's borrowings

Total borrowings increased by S$25.5 million from S$116.2 million as at FY2018 to S$141.7 million as at 1HFY2019, mainly due to the increase in bank term loans.

STATEMENT OF CASH FLOWS

Net cash flows from operating activities of S$1.9 million during 1HFY2019 mainly arose from operating cash flows before changes in working capital of S$8.7 million and interest income received of S$3.4 million, offset by the increase in working capital of S$7.8 million and payment of income tax of S$2.3 million.

Net cash flows from investing activities of S$5.6 million during 1HFY2019 mainly arose from the decrease in loans due from joint ventures of S$27.8 million, decrease in investments in associates of S$1.5 million for capital paid-up reduction and dividends received from associates of S$39.0 million, offset by the increase in loans due from associates of S$60.7 million and purchase of property, plant and equipment of S$2.0 million.

Net cash flows from financing activities of S$10.0 million during 1HFY2019 mainly arose from the net increase in bank term loans of S$29.0 million, offset by the dividends paid of S$6.8 million, repayment of bills payable to banks of S$5.3 million, interest paid of S$1.8 million and decrease in pledged fixed deposits of S$4.9 million.

With the abovementioned, net increase in cash and cash equivalents during 1HFY2019 was S$17.5 million.

Commentary On Current Year Prospects

According to the latest Monetary Authority of Singapore (“MAS”) biannual macroeconomic review, Singapore economy will likely expand at a slower pace for the rest of the year and in 2019 given rising global uncertainties such as trade tensions, coupled with the tightening global financial conditions. Singapore gross domestic product grew by an average of 3.4% year-on-year in the second and third quarter of 2018, slightly lower than the 4.1% from the previous two quarters.

Based on the Construction Sector Second Quarter Review 2018 released by the Building and Construction Authority of Singapore ("BCA"), construction sector contracted by 4.6% year-on-year in 2Q2018, weighed down by lower construction output stemming from the weakness in construction demand in 2015-2020. Nevertheless, the contraction eased from the 5.2% year-on-year decline in the preceding quarter, showing a nascent sign of bottoming out in view of an improved construction demand since September 2017.

Total construction demand increased by 14.8% year-on-year to S$5.6 billion in 2Q18, supported by more construction orders for both public and private residential developments and public civil engineering works. The public sector's construction demand forecast is expected to remain the same as the earlier projected S$16 billion to S$19 billion, with support from higher construction demand for institutional & other building developments as well as civil engineering works. Likewise, the private sector's construction demand forecast is maintained at S$10 billion to S$12 billion, underpinned by redevelopment of some of the en-bloc sale sites transacted before the recent property cooling measures.

Cost of construction and other operating costs are likely to continue the uptrend as a result of increasing manpower cost; higher cost on adoption of advanced systems and technologies as well as equipment; higher utilities cost; higher cost of regulatory compliance; higher financing cost; higher risks in foreign exchange losses and etc. The Group shall continue to strive to raise productivity through technology adoption and innovative measures; training of workers and higher usage of equipment and tools with the assistance from Government grants. The Group will also continue to streamline the operation processes to reduce expenses.

As announced by the Urban Redevelopment Authority of Singapore ("URA"), private residential property prices edged up 0.5% in the third quarter of 2018, a sharp fall from the 3.4% price rise in the previous quarter in the wake of the recent property cooling measures which kicked in from July this year. The developers' sales in third quarter jumped 27.3% quarter-to-quarter to 3,012 units private homes from 2,366 units sold in previous quarter.

The Group's construction order book remains healthy at more than S$553.0 million as at 30 September 2018.

As at 30 September 2018, most of the development property projects held by associates and joint ventures under the Group launched for sales prior to the current financial year FY2019 have been either fully sold or substantially sold.

The development property projects launched by associates and joint ventures under the Group during the current financial year FY2019 upto 30 September 2018 are as set out below:-

Two new property developments have been launched in early July 2018 and were well-received by the market, namely Riverfront Residences and Park Colonial. Together with Affinity @ Serangoon which was launched in June 2018, these 3 projects have sold more than 1,600 units so far, with average selling prices achieved with expectation. As at the end of 2QFY2019, the Group has a balance amount of attributable share of progress billings to be recognised as sales revenue of approximately S$441.2 million from the property development projects held by associates and joint ventures under the Group, the share of results of which will be progressively recognised by the associates and joint ventures and contribute to the Group's results after 2QFY2019.

The investment properties held by the Group in Singapore and overseas have maintained good occupancy rate and shall continue to generate recurring income. The Group currently has 11 hospitality investments overseas of which 7 are in operation and generating income.

In view of the above and barring unforeseen circumstances, the Group remains cautiously optimistic on the outlook of its performance in FY2019.