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Third Quarter and Nine Months 2017 Financial Statements Announcement

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INCOME STATEMENT FOR THE THIRD QUARTER ("3Q2017") AND NINE MONTHS ENDED 31 MARCH 2017 ("9M2017")

Statement of Comprehensive Income for the Third Quarter and Nine Months Ended 31 March 2017

Balance Sheet

Review of the performance

Review on Group's Financial Results

9 months ended 31 March 2017 (9M2017) vs 9 months ended 31 March 2016 (9M2016)

The Group reported revenue of $101.6 million in 9M2017, a decrease of $40.1 million or 28.3% from $141.7 million in 9M2016. The revenue contribution from the Group's bored piling operations decreased by $28.6 million or 36.6% from $78.1 million in 9M2016 to $49.5 million in 9M2017. The revenue contribution from its eco-friendly piling, geoservices and other operations decreased by $9.5 million or 15.8% from $60.0 million in 9M2016 to $50.5 million in 9M2017. The decrease in the revenue was mainly due to lower value of workdone in the current period.

Cost of sales decreased by $39.0 million or 30.9% to $87.1 million in 9M2017 from $126.1 million in 9M2016, in tandem with the decrease in business activities.

Gross profit decreased by $1.1 million or 7.0% from $15.7 million in 9M2016 to $14.6 million in 9M2017, mainly due to decrease in revenue. However, the gross profit margin increase from 11.0% in 9M2016 to 14.3% in 9M2017 as a result of lower cost incurred for certain projects in 9M2017.

The increase in other income was mainly due to higher rental income and premium gained from derivative financial instruments.

The decrease in administrative expenses was mainly due to a reduction in professional fee.

The Group reversed from other losses of $7.5 million in 9M2016 to other gains of $1.4 million in 9M2017. The other losses in 9M2016 was mainly due to a one-off unrecoverable progress claim written off of $7.4 million. The other gains in 9M2017 was mainly as a result of foreign exchange gain of $1.4 million which was derived from the appreciation of Australian Dollar and Vietnamese Dong against Singapore Dollar during the period.

The lower finance costs in 9M2017 was in line with the decrease in borrowing.

The income tax expense was in relation to the profitable entities within the Group. The higher effective tax rate was mainly due to certain losses which cannot be offset for income tax purpose.

As a result of the above, the Group reported a profit before income tax of $1.6 million in 9M2017 as compared to a loss before tax of $7.7 million in 9M2016. Profit for the period was $0.8 million as compared to a loss of $8.2 million in 9M2016.

3 months ended 31 March 2017 (3Q2017) vs 3 months ended 31 March 2016 (3Q2016)

The Group reported revenue of $39.6 million in 3Q2017, a decrease of $2.6 million or 6.2% from $42.2 million in 3Q2016. The revenue contribution from the Group's bored piling operations increased by $2.1 million or 10.3% from $20.4 million in 3Q2016 to $22.5 million in 3Q2017. The revenue contribution from its eco-friendly piling, geoservices and other operations decreased by $4.0 million or 19.3% from $20.7 million in 3Q2016 to $16.7 million in 3Q2017. The decrease in the revenue was mainly due to lower value of workdone in the current period.

Cost of sales decreased by $1.6 million or 4.5% to $33.7 million in 3Q2017 from $35.3 million in 3Q2016, in tandem with decrease in business activities.

Gross profit decreased by $1.1 million or 15.7% from $7.0 million in 3Q2016 to $5.9 million in 3Q2017, mainly due to decrease in revenue and higher cost incurred for certain projects in 3Q2017. Accordingly, the gross profit margin decrease from 16.5% in 3Q2016 to 14.8% in 3Q2017.

The increase in other income was mainly due to higher rental income, sales of minor assets and government incentives.

Administrative expenses for 3Q2017 of $5.2 million was comparable to $5.3 million in 3Q2016.

The income tax expense was in relation to the profitable entities within the Group. The higher effective tax rate was mainly due to certain losses which cannot be offset for income tax purpose.

As a result of the above, the Group reported a profit before income tax of $0.5 million in 3Q2017 as compared to a profit before tax of $0.9 million in 3Q2016. Profit for the period was $0.3 million as compared to a profit of $0.5 million in 3Q2016.

Review of Statements of Financial Position and Cash Flow

Current Assets

Current assets decreased by $1.7 million were mainly attributable to the followings:

  1. Positive cash flow generated from operations of $2.5 million was utilised in investing activities and financing activities of $2.0 million and $16.6 million respectively, resulting in decrease in cash and cash equivalents of $16.1 million in 9M2017.

Partially offset by:-

  1. Increase in trade and other receivables of $5.1 million mainly contributed by the increase in trade receivables and due from customers on construction contracts of $1.3 million and $3.3 million respectively. The increase was due to higher billings/claims during the financial period.

  2. Increase in inventories of $1.3 million mainly due to increase in construction materials purchased for the on-going projects.

  3. Increase in construction contract work-in-progress of $7.8 million mainly due to higher value of construction work-in-progress over progress billing issued during the period.

Non-Current Assets

Non-current assets decreased by $8.5 million were mainly attributable to the followings:

  1. Decrease in property, plant and equipment of $7.1 million mainly due to depreciation charge of $11.9 million, which was partially offset by additions of property, plant and equipment of $5.1 million.

  2. Decrease in available-for-sales financial assets of $1.3 million mainly due to repayment of funds received.

Current Liabilities (excluding borrowings)

Current liabilities (excluding borrowings) increased by $3.8 million were mainly attributable to the followings:

  1. Increase in trade payables of $6.8 million mainly due to increase in construction materials purchased for the on-going projects.

Partially offset by:-

  1. Decrease in construction contract work-in-progress of $2.6 million mainly due to completion of certain projects during the financial period.

Total Borrowings

Net decrease in total borrowings were mainly due to repayment made in the current period.

Commentary

Outlook

According to Ministry of Trade and Industry press release announced on 13 April 2017, the construction sector contracted by 1.1 per cent on a year-on-year basis in the first quarter, extending the 2.8 per cent decline in the previous quarter. The contraction was due to slowdown in private sector construction activities.

The Group's net order book as at 31 March 2017 stood at $178.7 million, comprising projects from public infrastructure, public housing, residential, commercial and geoservices.

The Group expects the outlook for the construction industry to remain challenging due to keen competition. Therefore, the Group will remain cautious about the local and regional markets where it operates and will continue to strive to secure more projects.

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