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First Quarter 2018 Financial Statement Announcement

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INCOME STATEMENT FOR THE FIRST QUARTER ENDED 30 SEPTEMBER 2017("1Q2018")

Statement of Comprehensive Income for the First Quarter Ended 30 September 2017

Balance Sheet

Review of the performance

Review on Group's Financial Results

3 months ended 30 September 2017 (1Q2018) vs 3 months ended 30 September 2016 (1Q2017)

The Group reported revenue of $44.5 million in 1Q2018, an increase of $16.1 million or 56.7% from $28.4 million in 1Q2017. The increased 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 $24.3 million in 1Q2017 to $40.2 million in 1Q2018, in tandem with the increase in business activities.

Despite the increased in revenue, the Group registered a comparable gross profit of $4.3 million in 1Q2018. This was mainly due to the decrease in gross profit margin from 14.4% in 1Q2017 to 9.7% in 1Q2018 as a result of higher operating cost incurred for projects during the current period.

Other income increased from $0.6 million in 1Q2017 to $1.1 million in 1Q2018, was mainly due to the increase in sales of minor and other assets.

Administrative expenses increased marginally from $4.6 million in 1Q2017 to $4.7 million in 1Q2018 was mainly due to increase in administrative staff costs.

Other gains decreased from $0.9 million in 1Q2017 to $0.2 million in 1Q2018. This was mainly due to exchange loss of $0.1 million registered in 1Q2018 as compared to exchange gain of $0.9 million in 1Q2017. The exchange loss derived was as a result of the appreciation of Vietnamese Dong against Singapore Dollar during the period.

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 incurred by some entities which cannot be offset against profitable entities.

As a result of the above, the Group registered a profit before income tax of $0.4 million in 1Q2018. The profit for the period decreased from $0.3 million in 1Q2017 to $0.1 million in 1Q2018.

Review of Statements of Financial Position and Cash Flow

Current Assets

Current assets increased by $9.6 million were mainly attributable to the followings:

  1. Increase in trade receivables of $2.1 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 $4.6 million which was in line with the increase in business activities during the period.

  3. Increase in construction work-in-progress of $6.0 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 $8.8 million was offsetted against cash flow used in operating activities and investing activities of $11.8 million and $0.5 million respectively, resulting in the decrease in cash and cash equivalents of $3.5 million in 1Q2018.

Non-Current Assets

Non-current assets decreased by $1.6 million were mainly attributable to the followings:

  1. Decrease in property, plant and equipment of $1.3 million as a result of depreciation charge of $4.0 million, which was partially offset by additions in property, plant and equipment of $2.7 million.

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

Current Liabilities (excluding borrowings)

Decrease in trade and other payables and accruals of $4.0 million was mainly due to decrease in accruals and repayment 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 13 October 2017 that the growth in the construction sector contracted by 6.3 per cent on a year-on-year basis in the third quarter, extending the 6.8 per cent decline in the previous quarter. The sector was weighed down primarily by continued weakness in private sector construction activities.

The Group's net order book as at 30 September 2017 stood at $164.5 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 tight labour market will continue to add pressure on the Group's performance.

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