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First Quarter Financial Statement And Dividend Announcement 2017

Financials Archive

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Profit & Loss

Statement of Comprehensive Income

Balance Sheet

Review of Performance

INCOME STATEMENT

1QFY2018 vs 1QFY2017

Revenue

The Group had a total revenue of S$28.5 million for the first quarter three months 30 June 2017 ("1QFY2018"), a decrease of S$33.0 million or 53.6% compared to S$61.5 million registered in the corresponding period ended 30 June 2016 ("1QFY2017"). The decrease was mainly due to the decrease in revenue from construction business of S$33.1 million or 55.2% from S$60.0 million in 1QFY2017 to S$26.9 million in 1QFY2018, mainly due to delays in handing over of sites by customers for two newly commenced projects. The increase in rental income is mainly from investment property in the People's Republic of China ("PRC").

Other income

Other income increased by S$0.5 million or 24.7% from S$1.8 million in 1QFY2017 to S$2.3 million in 1QFY2018, mainly due to the increase in foreign exchange translation gain.

Operating expenses

Cost of construction decreased by S$33.2 million or 65.6% from S$50.6 million in 1QFY2017 to S$17.4 million in 1QFY2018. The decrease was mainly due to the decrease in construction works carried out and cost savings achieved on completed construction projects.

Personnel expenses decreased by S$0.1 million or 5.1% from S$3.1 million in 1QFY2017 to S$3.0 million in 1QFY2018, mainly due to the decrease in accrual of leave benefits and workers' accomodation expenses.

There were no significant differences in depreciation of property, plant and equipment between 1QFY2018 and 1QFY2017.

Finance costs decreased by S$0.8 million or 69.8% from S$1.2 million in 1QFY2017 to S$0.4 million in 1QFY2018, mainly due to the decrease in the Group's borrowings.

Other operating expenses decreased by S$0.8 million or 36.0% from S$2.2 million in 1QFY2017 to S$1.4 million in 1QFY2018, mainly due to the decrease in foreign exchange loss.

Share of results of associates incurred a S$2.5 million loss in 1QFY2018 as compared to S$5.8 million profit in 1QFY2017, mainly due to the decrease in sales and percentage of completion recognised on development property projects in Singapore after the completion and additional buyer stamp duty accrued by an associated company for a completed development property. The share of results of joint ventures improved from a loss of S$0.1 million in 1QFY2017 to a profit of S$1.8 million, mainly due to the profit recognised from the residential development project - High Park Residences as the construction progressed.

Tax expense increased by S$0.2 million or 18.0% from S$1.1 million in 1QFY2017 to S$1.3 million in 1QFY2018, mainly due to the increase in profit from operations before share of results of associates and joint ventures, offset by the expenses not allowed for tax deduction.

As a result of the above, the Group registered a net profit attributable to Owners of the Company of S$6.0 million in 1QFY2018 excluding non-controlling interests.

STATEMENT OF FINANCIAL POSITION

Non-current assets

Property, plant and equipment ("PPE") increased by S$0.2 million from S$6.7 million as at 31 March 2017 ("FY2017") as compared to S$6.9 million as at 30 June 2017 ("1QFY2018"), mainly due to new purchases, partly offset by depreciation of plant and equipment.

Interests in associates decreased by S$18.1 million from S$156.5 million in FY2017 to S$138.4 million in 1QFY2018, mainly due to the decrease in loans to associates, dividend received from associates and recognised share of losses of associates.

Interests in joint ventures increased by S$2.5 million from S$44.7 million in FY2017 to S$47.2 million in 1QFY2018, mainly due to additional investments and loans to joint ventures to finance development property and investment property projects; and recognised share of results of joint ventures.

Investment properties increased by S$0.2 million from S$120.1 million in FY2017 to S$120.3 million in 1QFY2018, mainly due to foreign exchange differences from an investment property held in the PRC.

Trade receivables under non-current assets increased by S$0.3 million from nil in FY2017 to S$0.3 million in 1QFY2018, mainly due to the increase in retention sum receivables from completed and on-going construction projects in Singapore.

Current assets

Trade receivables under current assets decreased by S$4.7 million from S$33.8 million in FY2017 to S$29.1 million in 1QFY2018, mainly due to the decrease in amount of progress claims certified for construction projects in progress.

Based on the progress of construction projects in 1QFY2018 as compared to FY2017, the construction work-in-progress in excess of progress billings increased by S$1.2 million from S$1.9 million in FY2017 to S$3.1 million in 1QFY2018.

Current liabilities

Trade payables under current liabilities decreased by S$1.2 million from S$17.7 million in FY2017 to S$16.5 million in 1QFY2018. 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.

Based on the progress of construction projects in 1QFY2018 as compared to FY2017, the progress billings in excess of the construction work-in-progress decreased by S$5.2 million from S$5.9 million in FY2017 to S$0.7 million in 1QFY2018.

Non-current liabilities

Trade payables under non-current liabilities decreased by S$0.7 million from S$1.3 million in FY2017 to S$0.6 million in 1QFY2018. The decrease was mainly from the decrease in retention sums payable to subcontractors for completed construction projects.

Total Group's borrowings

Total borrowings decreased by S$16.3 million from S$66.7 million in FY2017 to S$50.4 million in 1QFY2018, mainly due to the decrease in bank term loans of S$18.3 million, offset by the increase in bills payable to banks of S$1.9 million.

STATEMENT OF CASH FLOWS

Net cash flows generated from operating activities of S$4.0 million during 1QFY2018 mainly arose from operating cash flows before changes in working capital of S$7.7 million, and interest income received of S$1.3 million, offset by the increase in working capital of S$4.9 million.

Net cash flows generated from investing activities of S$14.5 million during 1QFY2018 mainly arose from the decrease in loans due from associates of S$14.3 million, dividends received from associates of S$1.6 million and net proceeds from sale of plant and equipment of S$0.3 million, offset by purchase of plant and equipment of S$0.9 million and additional loans injected to a joint venture of S$0.8 million.

Net cash flows used in financing activities of S$21.7 million during 1QFY2018 mainly arose from repayment of bank borrowings of S$33.3 million, increase in pledged fixed deposits of S$5.0 million and interest payment of S$0.4 million, offset by the proceeds from bank term loans of S$15.0 million and bills payable to banks of S$1.9 million.

With the abovementioned, net decrease in cash and cash equivalents during 1QFY2018 was S$3.2 million.

Commentary On Current Year Prospects

Based on advance estimates released by The Ministry of Trade and Industry (“MTI”) last month, the Singapore economy grew by 2.5% on a year-on-year basis in the second quarter of 2017. On a quarter-on-quarter seasonally-adjusted annualised basis, the economy expanded by 0.4%, in contrast to the 1.9% contraction in the preceding quarter. The construction sector contracted by 5.6% on a year-on-year basis in the second quarter, following the 6.1% decline in the previous quarter. The sector was weighed down by a weakness in both private sector and public sector construction activities. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector rebounded to grow by 4.3%, compared to the 14.4% contraction in the preceding quarter.

According to the first quarter 2017 review released by The Building and Construction Authority (“BCA”), construction demand contracted by 52.5% year-on-year to S$4.6 billion in the first quarter of 2017. On a quarter-on-quarter basis, total construction demand fell by 5.0% as the reduction in the private sector construction demand more than outweighed the improvement in the public sector construction demand. On a year-on-year basis, total construction demand fell by 52.5% to S$4.6 billion in the first quarter of 2017. BCA projected that total construction demand to pick up in the later half of the year with the anticipated rolling out of major infrastructure contracts.

Although prices of key construction materials are expected to remain competitive, cost of construction and other operating costs are likely to continue the uptrend as a result of increasing manpower cost stemming from various foreign manpower tightening measures and labour shortage; higher cost on adoption of advanced systems and technologies as well as equipment; higher cost of regulatory compliance; hikes in financing cost and others.

To ride on the abundant opportunities of the construction sector moving forward, the Group will continue to embrace new technologies and innovations to bring about greater productivity. The Group will tap on the various initiatives to upskill workers to build a high-quality workforce and anchor capabilities. The Group is prepared to change, innovate and transform to stay at the forefront of technological innovation, process re-engineering and productivity improvement to sustain growth and competitiveness despite the headwinds under challenging economic conditions.

Singapore property market outlook in residential and office space remains challenging due to the economic factors, rising interest rates and uncertainty in the job market.

In relation to Singapore residential market, according to the Urban Redevelopment Authority ("URA"), developers sold 3,077 units in the second quarter this year, up from 2,962 units a quarter ago. Prices of private residential properties decreased by 0.1 % in second quarter 2017, compared with the 0.4% decline in the previous quarter. A slower pace of decline in private residential prices in the first quarter continues to affirm the view that a bottoming out is under way although factors such as cooling measures still in place, rising interest rates and the uncertain job market are still weighing on the market.

Vacancy rates for office and retail space continue to rise with incoming supply remaining high and demand weakening due to the challenging environment, increasing labour costs and regional competition. Prices and rentals of retail and office space in Singapore continued to fall in the second quarter of 2017.

The Group has an order book on construction projects in Singapore of more than S$348.0 million as at 30 June 2017.

The projects launched by associates and joint ventures under the Group as at 30 June 2017 which construction has not been completed and those which construction have been completed but not fully sold are as set out below:

As at 30 June 2017, subject to cancellation of contracts, approximately 96.0% of units launched by associates and joint ventures under the Group have been sold. The Group has a balance amount of attributable share of progress billings to be recognised as sales revenue of approximately S$144.6 million from the above projects, the profits of which will be progressively recognised by the associates and joint ventures and contribute to the Group's results after 1QFY2018.

The Group's investment in Grade A office building, Prudential Tower, located at the Raffles Place precinct with high occupancy and good tenant mix given its prime location, is expected to continue in contributing positively to the results of the Group.

In view of the above and barring unforeseen circumstances, the Group remains cautiously optimistic on the outlook of its performance in FY2018.