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Financials

Full Year 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

FY2018 vs FY2017

Revenue

The Group had a total revenue of S$132.6 million for the financial year ended 31 March 2018 ("FY2018"), a decrease of S$66.7 million or 33.4% compared to S$199.3 million registered in the corresponding financial year ended 31 March 2017 ("FY2017"). The decrease was mainly due to the decrease in revenue from construction business of S$67.0 million or 34.6% from S$193.6 million in FY2017 to S$126.6 million in FY2018, partially caused by the delays in handing over of sites from the customers for two projects, which affected the progress in the certification of work done. The increase in rental income is mainly from investment property in Tianjin, the People's Republic of China ("PRC").

Other income

Other income increased by S$2.3 million or 28.4% from S$8.4 million in FY2017 to S$10.7 million in FY2018, mainly due to the increase in interest income from loans to associates and joint ventures of S$1.3 million and foreign exchange gain of S$1.2 million.

Operating expenses

Cost of construction decreased by S$55.4 million or 36.5% from S$151.9 million in FY2017 to S$96.5 million in FY2018. The decrease was mainly due to the decrease in construction works done.

Personnel expenses decreased by S$0.8 million or 7.3% from S$11.8 million in FY2017 to S$11.0 million in FY2018, mainly due to the decrease in provision for bonuses for the Management and staff.

There were no significant differences in depreciation of property, plant and equipment between FY2018 and FY2017.

Despite the increase in gearing and interest rate in FY2018 compared to FY2017, finance costs decreased by S$0.3 million or 13.1% from S$2.5 million in FY2017 to S$2.2 million in FY2018, mainly due to the full settlement of the term notes in FY2017 which has higher interest rate than the other borrowings.

Other operating expenses decreased by S$1.4 million or 20.8% from S$6.7 million in FY2017 to S$5.3 million in FY2018, mainly due to the decrease in foreign exchange loss and loss on fair value adjustment of investment properties.

Share of results of associates amounted to a loss of S$3.1 million in FY2018 as compared to a profit of S$8.5 million in FY2017, mainly due to the decrease in sales and percentage of completion recognised on development property projects in Singapore and losses recognised by associates from the sales of development property. The share of results of joint ventures increased by S$5.4 million or 92.6%, mainly due to the profit recognised from a residential development project as the construction progressed.

Tax expense decreased by S$1.1 million or 18.9% from S$5.6 million in FY2017 to S$4.5 million in FY2018, 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 decrease in net profit attributable to Owners of the Company by S$11.5 million or 28.1% from S$41.0 million in FY2017 to S$29.5 million in FY2018 excluding non-controlling interests.

STATEMENT OF FINANCIAL POSITION

Non-current assets

Property, plant and equipment ("PPE") increased by S$8.7 million from S$6.7 million as at 31 March 2017 ("FY2017") as compared to S$15.4 million as at 31 March 2018 ("FY2018"), mainly due to on-going construction of a new building to be used for construction business.

Interests in associates increased by S$31.1 million from S$156.5 million as at FY2017 to S$187.6 million as at FY2018, mainly due to an increase in loans to associates to finance development property and investment property projects, offset by share of losses recognised, reclass from non-current assets to current assets on loans and dividends received from associates.

Interests in joint ventures increased by S$37.7 million from S$44.7 million as at FY2017 to S$82.4 million as at FY2018, mainly due to the increase in loans to joint ventures to finance development property and investment property projects and share of profits recognised offset by the reclass from non-current assets to current assets on loans.

Investment properties increased by S$3.8 million from S$120.1 million as at FY2017 to S$123.9 million as at FY2018, mainly due to gain on fair value adjustments and foreign exchange differences from an investment property held in the People's Republic of China ("PRC").

Trade receivables under non-current assets increased from nil as at FY2017 to S$1.6 million as at FY2018, 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$6.2 million from S$33.8 million as at FY2017 to S$27.6 million as at FY2018, mainly due to the decrease in amount of progress claims certified for construction projects in progress.

Based on the progress of construction projects in FY2018 as compared to FY2017, the construction work-in-progress in excess of progress billings increased by S$7.7 million from S$1.9 million in FY2017 to S$9.6 million in FY2018.

Current liabilities

Trade payables under current liabilities decreased by S$2.0 million from S$17.7 million as at FY2017 to S$15.7 million in FY2018. 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 as at FY2018 as compared to FY2017, the progress billings in excess of the construction work-in-progress decreased from S$5.9 million as at FY2017 to nil as at FY2018.

Non-current liabilities

Trade payables under non-current liabilities decreased by S$0.8 million from S$1.3 million as at FY2017 to S$0.5 million as at FY2018. The decrease was mainly from the decrease in retention sums payable to subcontractors for completed construction projects.

Total Group's borrowings

Total borrowings increased by S$56.2 million from S$66.7 million as at FY2017 to S$122.9 million as at FY2018, mainly due to the increase in bank term loans, net of S$19.9 million, bills payable to banks of S$29.6 million and bank overdraft of S$6.7 million.

STATEMENT OF CASH FLOWS

Net cash flows generated from operating activities of S$8.5 million during FY2018 mainly arose from operating cash flows before changes in working capital of S$23.0 million and interest income received of S$6.8 million, offset by the increase in working capital of S$14.7 million; payment of income taxes of S$6.1 million and exchange differences of S$0.6 million.

Net cash flows used in investing activities of S$112.9 million during FY2018 mainly arose from the increase in investments and loans injected in associates and joint ventures of S$108.8 million, and purchase of plant and equipment (including a new building under construction) of S$10.7 million, offset by dividends received from associates of S$6.2 million and net proceeds from sale of plant and equipment of S$0.3 million.

Net cash flows generated from financing activities of S$27.5 million during FY2018 mainly arose from net increase in bank borrowings of S$56.2 million, offset by dividends paid of S$14.8 million, increase in pledged fixed deposits of S$5.1 million and interest payment of S$1.9 million.

With the abovementioned, net decrease in cash and cash equivalents during FY2018 was S$76.9 million.

Commentary On Current Year Prospects

Singapore economy is expected to remain on its steady expansion path for 2018, despite downside risks brought about by escalating global trade tensions and rising global interest rates and tightening financial conditions. Growth momentum is expected to remain strong with the slightly improved external demand outlook barring the full materialisation of downside risks.

According to the latest forecast of the Ministry of Trade and Industry ("MTI"), Singapore economy grew 4.4% in the 1st quarter of 2018 with full-year growth expected to come in at 2.5% to 3.5% this year.

Construction sector shrank 5.0% year-on-year for the sixth consecutive quarter, even as GDP grew year on year. However an impending increase in building demand is expected in Singapore, as The Building and Construction Authority ("BCA") predicted in January that S$26 billion to S$31 billion of construction contracts could be awarded this year, up from S$24.5 billion last year. About 60% of the total projected demand is supposed to come from the public sector.

The collective sales boom will also soon see opportunities for builders in Singapore. So far this year, the total collective sales transaction value for 27 residential sites and 1 industrial sites amount to S$8.81 billion, higher than the 30 collective sales sites of S$8.7 billion transacted last year. A lot of construction activity from these collective sales are expected in the near future.

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 the assistance from Government grants. The Group will also continue to streamline the operation processes to reduce expenses.

According to the Urban Redevelopment Authority ("URA"), private home prices increased by 3.9% in 1st quarter 2018, marks the steepest quarter-on-quarter gain since 2nd quarter 2010. Prices of landed properties rose by 1.9% in the 1st quarter 2018 compared with the 0.5% increase in the previous quarter. While, prices of non-landed properties rose by 4.4% compared with the 0.8% increase in the previous quarter. According to URA, developers sold 1,581 units of new private housing in 1st quarter 2018, fewer compared to 1,864 units in the previous quarter.

The office market in Singapore for sale and rental has also improved. Rentals of office space rose 2.6% in the 1st quarter of 2018 over the 4th quarter of last year. Prices of office space increased by 1.3% in the 1st quarter 2018, a slower pace of increase compared with the 2.7% incresae recorded in 4th quarter 2017. The island-wide office vacancy rate decreased slightly to 12.5% as at the end of 1st quarter 2018 from 12.6% as at the end of the previous quarter.

Sale and rental of retail space remains weak. According to URA, price of retail space slightly rose by 0.1% in the 1st quarter of 2018, softer than the 1% increase in the preceding quarter while rentals of retail space rose by the same 0.1% which improved from the 0.5% decrease last year. The islandwide vacancy rate of retail space increased from 7.4% as at the end of 4th quarter in 2017 to 7.5% as at the end of 1st quarter 2018.

Including a contract to be awarded with a letter of intent received from a 35%-owned associated company for the proposed condominium housing development, the Group’s construction order book remains healthy at more than S$542.0 million as at 31 March 2018.

The projects launched by associates and joint ventures under the Group as at 31 March 2018 for which construction has not been completed and those for which construction have been completed but not fully sold are as set out below:-

As at 31 March 2018, subject to cancellation of contracts, approximately 96.5% 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$85.9 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 FY2018.

Given its prime location at the Raffles Place precinct, the Group's investment in the Prudential Tower, a Grade A office building, along with other investment properties held in Singapore and overseas, will continue to contribute 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 FY2019.