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Full Year 2017 Financial Statements Announcement

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INCOME STATEMENT FOR THE FOURTH QUARTER ("4Q2017") AND FINANCIAL YEAR ENDED 30 JUNE 2017 ("FY2017")

Statement of Comprehensive Income for the Fourth Quarter ("4Q2017") and Financial Year Ended 30 June 2017 ("FY2017")

Balance Sheet

Review of the performance

Review on Group's Financial Results

Full Year ended 30 June 2017 (FY2017) vs Full Year ended 30 June 2016 (FY2016)

The Group reported revenue of $144.8 million in FY2017, a decrease of $46.2 million or 24.2% from $191.0 million in FY2016. The revenue contribution from the Group's bored piling operations decreased by $33.2 million or 32.5% from $102.2 million in FY2016 to $69.0 million in FY2017. The revenue contribution from its eco-friendly piling, geoservices and other operations decreased by $11.5 million or 13.6% from $84.7 million in FY2016 to $73.2 million in FY2017. The decrease was mainly due to lower value of work undertaken in the current year.

Cost of sales decreased by $42.1 million or 25.0% to $126.5 million in FY2017 from $168.6 million in FY2016, in tandem with the decrease in business activities.

Gross profit decreased by $4.0 million or 17.9% from $22.3 million in FY2016 to $18.3 million in FY2017, mainly due to decrease in revenue. However, the gross profit margin increase from 11.7% in FY2016 to 12.7% in FY2017 as a result of lower cost incurred for certain projects in FY2017.

Other income increased was mainly due to the increase in sales of minor and other assets and premium gained from derivative financial instruments.

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

The Group reversed from other losses of $13.9 million in FY2016 to other gains of $1.1 million in FY2017. The other losses in FY2016 were mainly due to a one-off unrecoverable progress claim written off of $7.4 million and the impairment loss of goodwill in relation to our Australia subsidiaries of $5.6 million. The other gains in FY2017 was mainly due to foreign exchange gain of $0.9 million which was derived as a result of the appreciation of Australian Dollar and Vietnamese Dong against Singapore Dollar during the year.

Finance costs decreased 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 $1.1 million in FY2017 as compared to a loss before tax of $12.7 million in FY2016. The profit for the year was $1.1 million as compared to a loss of $12.8 million in FY2016.

3 months ended 30 June 2017 (4Q2017) vs 3 months ended 30 June 2016 (4Q2016)

The Group reported revenue of $42.8 million in 4Q2017, a decrease of $6.5 million or 13.2% from $49.3 million in 4Q2016. The revenue contribution from the Group's bored piling operations decreased by $4.6 million or 19.1% from $24.1 million in 4Q2016 to $19.5 million in 4Q2017. Revenue contribution from its eco-friendly geo-services and other operations decreased by $2.0 million or 8.1% from $24.7 million in 4Q2016 to $22.7 million in 4Q2017. The decrease was mainly due to lower value of work undertaken for the projects in the current period.

Cost of sales decreased by $4.3 million or 10.1% to $38.3 million in 4Q2017 from $42.6 million in 4Q2016, in tandem with decrease in business activities.

Gross profit decreased by $2.1 million or 31.3% from $6.7 million in 4Q2016 to $4.6 million in 4Q2017, mainly due to decrease in revenue and higher cost incurred for certain projects in the current period. Accordingly, the gross profit margin decrease from 13.6% in 4Q2016 to 10.6% in 4Q2017.

Other income increased was mainly due to the increase in sales of minor and other assets.

Administrative expenses decreased was mainly due to decrease in staff costs.

Other losses decreased by $6.1 million from $6.4 million in 4Q2016 to $0.3 million in 4Q2017. This was mainly due to an impairment loss of goodwill of $5.6 million incurred in 4Q2016. The other losses in 4Q2017 was mainly due to foreign exchange loss of $0.5 million which was derived as a result of the depreciation of Australian Dollar against Singapore Dollar during the period.

The income tax credit was as a result of certain group reliefs which were utilised to offset against tax expense and the recognition of deferred income tax credit in the current period.

As a result of the above, the Group reported a loss before income tax of $0.4 million in 4Q2017 as compared to a loss before tax of $5.0 million in 4Q2016. The profit for the period was $0.3 million as compared to a loss of $4.7 million in 4Q2016.

Review of Statements of Financial Position and Cash Flow

Current Assets

Current assets increased by $12.4 million were mainly due to the followings:

  1. Increase in trade and other receivables of $3.3 million was mainly contributed by the increase in trade receivables of $3.4 million. The increase was due to higher claims during the financial year.

  2. Increase in inventories of $5.7 million mainly due to increase in construction materials purchased for the on-going projects.

  3. Increase in construction contract work-in-progress of $11.8 million mainly due to higher value of construction work-in-progress over progress billing issued during the year.

Partially offset by:-

  1. Positive cash flow generated from operations of $12.0 million was offsetted with cash flow used in investing activities and financing activities of $3.3 million and $17.0 million respectively, resulting in decrease in cash and cash equivalents of $8.3 million in FY2017.

Non-Current Assets

Non-current assets decreased by $11.0 million were mainly attributable to the followings:

  1. Decrease in property, plant and equipment of $10.2 million. The decrease was mainly due to depreciation charge of $16.0 million which was partially offset with the purchase of property, plant and equipment of $6.7 million.

  2. Decrease in available-for-sales financial assets and increase in associates of $12.4 million and $11.8 million respectively, mainly due to reclassification.

Current Liabilities (excluding borrowings)

Current liabilities (excluding borrowings) increased by $14.9 million were mainly attributable to the followings:

  1. Increase in trade payables of $17.8 million mainly due to increase in purchase of construction materials for the on-going projects.

Partially offset by:-

  1. Decrease in construction contract work-in-progress of $6.1 million mainly due to completion of certain projects during the financial year.

Total Borrowings

Net decrease in total borrowings were mainly due to repayment of bank borrowing made in the current year.

Commentary

Outlook

According to Ministry of Trade and Industry Singapore press release announced on 11 August 2017, the construction sector contracted by 5.7 per cent year-on-year, extending the 6.3 per cent decline in the previous quarter. The weak performance of the sector was due to a fall in both private sector and public sector construction output. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector rebounded from the 15.0 per cent contraction in the preceding quarter to post growth of 4.9 per cent.

The Group's net order book as at 30 June 2017 stood at $173.6 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 and weaken in private sector construction. 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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