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Financials

First 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

1QFY2019 vs 1QFY2018

Revenue

The Group had a total revenue of S$40.8 million for the first quarter three months ended 30 June 2018 ("1QFY2019"), an increase of S$9.7 million or 31.3% compared to S$31.1 million registered in the corresponding period ended 30 June 2017 ("1QFY2018"). The increase was mainly due to the increase in revenue from construction business of S$9.8 million or 33.2% from S$29.5 million in 1QFY2018 to S$39.3 million in 1QFY2019. The decrease in rental income is mainly from investment property in Tianjin, the People's Republic of China ("PRC").

Other income

Other income increased by S$0.4 million or 15.4% from S$2.3 million in 1QFY2018 to S$2.7 million in 1QFY2019, mainly due to the increase in interest income.

Operating expenses

Cost of construction increased by S$9.1 million or 45.8% from S$19.8 million in 1QFY2018 to S$28.9 million in 1QFY2019. The increase was mainly due to the increase in construction works carried out and provision for anticipated losses on an on-going construction project.

Finance costs increased by S$0.5 million from S$0.4 million in 1QFY2018 to S$0.9 million in 1QFY2019, mainly due to the increase in the Group's borrowings and interest rates.

Other operating expenses increased by S$0.4 million or 31.1% from S$1.4 million in 1QFY2018 to S$1.8 million in 1QFY2019, mainly due to the increase in foreign exchange losses.

Share of results of associates amounted to a loss of S$3.1 million in 1QFY2019 as compared to a S$2.5 million loss in 1QFY2018, mainly due to the increase in expenses incurred on three property development projects prior to the sales launch. The share of results of joint ventures improved from S$1.8 million in 1QFY2018 to S$2.5 million in 1QFY2019, mainly due to the profit recognised from a residential development project - High Park Residences, as the construction progressed.

Tax expense increased by S$0.3 million or 20.1% from S$1.3 million in 1QFY2018 to S$1.6 million in 1QFY2019, mainly due to the increase in expenses not allowed for tax deduction.

As a result of the above, the Group registered a net profit attributable to Owners of the Company by S$6.0 million in 1QFY2019 excluding non-controlling interests.

STATEMENT OF FINANCIAL POSITION

Non-current assets

Property, plant and equipment ("PPE") increased by S$1.8 million from S$15.4 million as at 31 March 2018 ("FY2018") as compared to S$17.2 million as at 30 June 2018 ("1QFY2019"), mainly due to cost incurred for the construction of a new building plant to be used for construction business, partially offset by depreciation of plant and equipment.

Interests in associates increased by S$17.2 million from S$190.2 million as at FY2018 to S$207.4 million as at 1QFY2019, 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$2.3 million from S$82.4 million as at FY2018 to S$84.7 million as at 1QFY2019, mainly due to the recognised share of results of joint ventures.

Investment properties decreased by S$1.6 million from S$123.9 million as at FY2018 to S$122.3 million as at 1QFY2019, 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 decreased by S$1.6 million as all the retention sum receivables from completed projects in Singapore are expected to be deemed collected within 12 months.

Current assets

Trade receivables under current assets increased by S$7.4 million from S$27.6 million as at FY2018 to S$35.0 million as at 1QFY2019, mainly due to the increase in amount of progress claims certified for construction projects in progress.

Amount due from associates and a joint venture as at FY2018 amounted with S$40.8 million has been collected during 1QFY2019.

Based on the progress of construction projects in 1QFY2019 as compared to FY2018, contract assets increased by S$6.1 million from S$8.8 million in FY2018 to S$14.9 million in 1QFY2019.

Current liabilities

Trade payables under current liabilities decreased by S$1.7 million from S$15.7 million as at FY2018 to S$14.0 million in 1QFY2019. 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 increased by S$3.3 million from S$55.8 million as at FY2018 to S$59.1 million as at 1QFY2019. The increase was mainly due to the increase in cost accrued for construction of building plant for our construction business.

Total Group's borrowings

Total borrowings increased by S$36.9 million from S$116.2 million as at FY2018 to S$153.1 million as at 1QFY2019, mainly due to the increase in bank borrowings.

STATEMENT OF CASH FLOWS

Net cash flows used in operating activities of S$2.1 million during 1QFY2019 mainly arose from the increase in working capital of S$11.1 million, offset by operating profit cash flows before changes in working capital of S$7.6 million and interest income received of S$1.8 million.

Net cash flows generated from investing activities of S$18.0 million during 1QFY2019 mainly arose from the decrease in loans due from joint ventures of S$30.0 million and dividends received from associates of S$38.6 million, offset by the increase in loans due from associates of S$49.3 million and purchase of property, plant and equipment of S$2.1 million.

Net cash flows generated from financing activities of S$28.0 million during 1QFY2019 mainly arose from the net increase in bank borrowings of S$37.0 million, offset by the increase in pledged fixed deposits of S$8.0 million.

With the abovementioned, net increase in cash and cash equivalents during 1QFY2019 was S$43.9 million.

Commentary On Current Year Prospects

According to Ministry of Trade and Industry (“MTI”) advance estimates released in July 2018, Singapore's economy expanded 3.8% year-on-year in the second quarter of 2018, lower than economist expectations of 4.1% growth and down from the 4.3% expansion in the first three months of the year. The lower-than-expected advance GDP figure comes amid growing risks from US-China trade tensions. In addition, the latest property cooling measures may also limit the upsides to near-term domestic growth.

The construction sector remained in contraction but at an easing rate, falling by 4.4% year-on-year, extending the 5.2% decline in the previous quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector shrank by 14.6% reversing the 0.9% growth in the preceding quarter. This was due mainly to continued weakness in private sector construction activities. Nevertheless, according to Building and Construction Authority of Singapore ("BCA") in the 1st Quarter Review 2018, the sector shows a sign of bottoming out as the extent of year-on-year decline has moderated since the second half of last year. Furthermore, total construction demand has increased, driven by more construction orders for private residential and public civil engineering projects as well as institutional and other building projects from both sectors.

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; higher risks in foreign exchange losses and etc.

To ride on the promising outlook of the construction sector amid continual tightening of manpower supply, 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 assistance from Government grants. The Group will also continue to streamline its operation processes to reduce expenses.

Singapore property market outlook remains challenging with the cooling measures implemented in July 2018 on Singapore residential properties and other economic factors such as rising interest rates and uncertainty in the job market.

Property sector sentiment is down, but underlying demand still exists. According to the Urban Redevelopment Authority ("URA"), prices of private residential properties increased by 3.4% in 2nd quarter 2018, compared with the 3.9% increase in the previous quarter. Developers sold 2,366 private residential units (excluding ECs) in 2nd quarter 2018, compared with the 1,581 units sold in the previous quarter.

Prices of office space grew by 1.9% in the 2nd quarter of 2018, higher compared to the 1.3% increase in the previous quarter. Meanwhile, rentals of office space inched up by 1.6%, compared to the 2.6% increase in the previous quarter. The island-wide vacancy rate of office space dropped to 12.2% from 12.5% at the end of the previous quarter.

Prices of retail space decreased 1.3% quarter-on-quarter in the 2nd quarter of 2018, after inching up 0.1% in previous quarter. Rental for retail space decreased 1.1% in the 2nd quarter of 2018 over the previous three months, reversing a 0.1% quarter-onquarter gain in the previous quarter. The islandwide vacancy rate of retail space fell to 7.3% as at the end of 2nd quarter 2018, from 7.5% as at the end of the previous quarter.

Including a contract to be awarded with a letter of intent received from a 35%-owned associated company for a proposed condominium housing development, the Group's construction order book remains healthy at more than S$588 million to-date.

As at 30 June 2018, the associates and joint ventures under the Group have property development projects held for sale which construction has not been completed and projects which construction have been completed but not fully sold as set out below:-

As at 30 June 2018, subject to cancellation of contracts, approximately 76.9% of units launched and held for sales 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$78.0 million from the above projects, the share of results of which will be progressively recognised by the associates and joint ventures and contribute to the Group's results after 1QFY2019.

Two property developments have been launched in early July 2018, namely Riverfront Residences and Park Colonial, which the Group has effective equity interest of 35% and 20% respectively. Within the period of approximately a month since the actual launch of these two projects, more than 42% and 51% of all units in Riverfront Residences and Park Colonial respectively have already been sold with average selling prices achieved within expectation. The share of results from the sales of these two projects will be progressively recognised by the associates and contribute to the Group's results after commencement of construction.

In July 2018, the Group 28%-owned associated company, Epic Land Pte. Ltd. has executed a sale and purchase agreement to dispose of its 6 wholly-owned subsidiaries, holding in aggregate a total of 7 remaining strata office units in Prudential Tower to an unrelated third party. The disposal, subject to actual completion, is expected to contribute positively to the results of the Group in FY2019.

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