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Second Quarter and Half Year 2018 Financial Statements Announcement

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INCOME STATEMENT FOR THE SECOND QUARTER ("2Q2018") AND HALF-YEAR ENDED 31 DECEMBER 2017 ("1H2018")

Statement of Comprehensive Income for the Second Quarter and Half-Year Ended 31 December 2017

Balance Sheet

Review of the performance

Review on Group's Financial Results

6 months ended 31 December 2017 (1H2018) vs 6 months ended 31 December 2016 (1H2017)

The Group reported revenue of $94.7 million in 1H2018, an increase of $32.4 million or 52.0% from $62.3 million in 1H2017. The increase was primarily from the Group's bored piling operation as a result of higher value of work undertaken in the current period.

Cost of sales increased from $53.7 million in 1H2017 to $85.8 million in 1H2018, in tandem with the increase in business activities.

The Group registered a gross profit of $8.8 million in 1H2018. The decrease in gross profit margin as a result of higher operating costs incurred for projects during the current period.

Other income increased from $1.4 million in 1H2017 to $1.8 million in 1H2018, was mainly due to the increase in sales of minor and other assets.

The increase in administrative expenses from $9.3 million in 1H2017 to $9.7 million in 1H2018 was mainly due to the increase in administrative staff costs.

Other gains in 1H2018 include gain on disposal of property, plant and equipment of $1.6 million partially offset by an exchange loss of $0.7 million. Other gains in 1H2017 was mainly related to exchange gain of $1.7 million. The exchange loss in 1H2018 was as a result of the depreciation of Vietnamese Dong and Australian Dollar against Singapore Dollar during the current period.

The income tax expense was in relation to the profitable entities within the Group. The higher effective tax rate was mainly due to losses incurred by some entities which cannot be offset against profitable entities.

As a result of the above, the Group registered a profit for the period of $0.4 million in 1H2018.

3 months ended 31 December 2017 (2Q2018) vs 3 months ended 31 December 2016 (2Q2017)

The Group reported revenue of $50.1 million in 2Q2018, an increase of $16.2 million or 47.8% from $33.9 million in 2Q2017. The increase was primarily from the Group's bored piling operation as a result of higher value of work undertaken in the current period.

Cost of sales increased from $29.4 million in 2Q2017 to $45.6 million in 2Q2018, in tandem with increase in business activities.

The Group registered a gross profit of $4.5 million in 2Q2018. The decrease in gross profit margin as a result of higher operating costs incurred for projects during the current period.

The increase in administrative expenses from $4.7 million in 2Q2017 to $4.9 million in 2Q2018 was mainly due to the increase in administrative staff costs.

Other gains in 2Q2018 include gain on disposal of property, plant and equipment of $1.4 million partially offset by an exchange loss of $0.6 million. Other gains in 2Q2017 was mainly related to exchange gain of $0.8 million. The exchange loss in 2Q2018 was as a result of the depreciation of Vietnamese Dong and Australian Dollar against Singapore Dollar during the current period.

The income tax credit was in relation to the over provision of income tax in prior year by some entities.

As a result of the above, the Group registered a profit for the period of $0.2 million in 2Q2018.

Review of Statements of Financial Position and Cash Flow

Current Assets

Current assets increased by $19.4 million were mainly attributable to the followings:

  1. Increase in trade receivables of $6.2 million mainly due to progress billings issued to customers towards the end of the financial period.

  2. Increase in amounts due from customers on construction contracts of $6.5 million which was in line with the increase in business activities during the period.

  3. Increase in construction work-in-progress of $10.1 million mainly due to higher costs incurred in excess of value of work done for the on-going projects.

Partially offset by:

  1. Positive cash flow generated from financing activities of $15.0 million was offsetted by cash flow used in operating activities and investing activities amounted to $19.1 million, resulting in the decrease in cash and cash equivalents of approximately $4.1 million in 1H2018.

Non-Current Assets

Non-current assets decreased by $4.5 million were mainly attributable to the followings:

  1. Decrease in property, plant and equipment of $4.4 million as a result of depreciation charge of $8.1 million which was partially offset by additions in property, plant and equipment of $4.0 million.

  2. Decrease in available-for-sale financial assets of $0.7 million mainly due to funds received.

Partially offset by:

  1. Increase in investment of associates of $0.9 million mainly due to loan to an associate.

Current Liabilities (excluding borrowings)

Decrease in trade and other payables and accruals of $5.2 million was mainly due to decrease in accruals and more payments made during the current period.

Total Borrowings

Net increase in total borrowings was in line with the increase in business activities in the current period.

Commentary

Outlook

Ministry of Trade and Industry Singapore announced on 2 January 2018 that the growth in the construction sector contracted by 8.5 per cent on a year-on-year basis in the fourth quarter of 2017, extending the 7.7 per cent decline in the previous quarter. The contraction was largely due to the weakness in private sector construction activities.

The Group's net order book as at 31 December 2017 stood at $167.3 million, comprising projects from public infrastructure, public housing, residential, commercial and geoservices.

The Group remains cautious about the local and regional markets where it operates. External factors such as keen competition, rising costs and the tight labour market will continue to add pressure on the Group's performance.

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