Financial Statements And Related Announcement - Full Yearly Results 2020

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• CONSOLIDATED INCOME STATEMENT
  
• STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
  
• BALANCE SHEET
  
• FINANCIAL PERFORMANCE REVIEW

  Revenue

  Revenue increased by $4.9 million or 9.0% to $59.3 million for the financial year ended 30 June 2020 ("FY2020") from $54.4 million for the financial year ended 30 June 2019 ("FY2019").

  • Marine & Offshore Segment revenue in FY2020 increased by 8.8% or $4.7 million in FY2020 as compared to FY2019. The increase was mainly attributable to increased revenue contribution from the mooring and rigging business. The water treatment and engineering business contributed to an increase of $2.0 million and $0.2 million respectively.
  • Revenue contribution from property consultancy increased by 0.2% or $0.2 million in FY2020 as compared to FY2019.

  Gross profit

  The Group's gross profit of $22.1 million in FY2020 increased by $3.3 million or 17.7% from $18.8 million in FY2019. The Group's gross profit margin also increased to 37.3% in FY2020 as compared to 34.5% in FY2019.

  • Marine & Offshore Segment contributed gross profit of $21.2 million to the Group in FY2020 as compared to $18.0 million in FY2019. The gross profit margin increased to 36.3% in FY2020 from 33.6% in FY2019.
  • Property Development Segment contributed gross profit of $0.9 million to the Group in FY2020, primarily arising from the property consultancy business.

  Other income

  Other income increased by $238,000 or 44.0% to $780,000 in FY2020 from $542,000 in FY2019. The increase was mainly due to the receipt of the Singapore Government's Job Support Scheme payouts of $301,000 which is recognised in FY2020.

  Distribution expenses

  Distribution expenses decreased by $0.2 million or 13.2% to $1.4 million in FY2020 from $1.6 million in FY2019. The decrease was mainly due to cancellation of business travel and trade exhibition as a result of the travel bans and restrictions from the COVID-19 pandemic.

  Administrative expenses

  Administrative expenses increased by $0.9 million or 7.3% to $13.2 million in FY2020 from $12.3 million in FY2019. The increase was mainly due to:

  • Employee benefits expenses and related staff costs increased by $0.6 million due to an increase in overall staff costs as a result of setting up wire rope rigging facilities at Houston (Texas) and TEHO Ropes Korea Co., Ltd. ("TEHO Korea").
  • Insurance expenses increased by $0.1 million as a result of the increase in number of staffs and equipment in the overseas mooring and rigging business in Houston (Texas) and TEHO Korea.
  • Legal and professional fees increased by $0.2 million as a result of the legal and professional fees incurred in FY2020 in relation to the setting up of TEHO Korea.

  Other operating expenses

  Other operating expenses increased by $78,000 in FY2020. The increase was mainly due to:

  • Increase in foreign exchange loss by $368,000 due to fluctuation in USD against SGD.
  • Recognition of fair value loss on interest rate swap of $186,000.
  • Impairment loss on investment property of $152,000.

  The increase was offset by the following:

  • Absence of loss on disposal of subsidiaries of $91,000.
  • Adoption of SFRS(I) 16 - Leases which resulted in the decrease in rental expenses by $1.3 million and these were offset by increases in depreciation of right of use asset by $1.0 million.
  • Decrease in transportation, entertainment, telecommunication and general expenses by $237,000 as most of the employees were working from home due to COVID-19.

  Impairment loss on trade and other receivables and contract assets

  Impairment loss on trade and other receivables and contract assets incurred in FY2020 was $265,000, compared to $83,000 in FY2019. The increase was mainly due to the provision of $234,000 impairment loss of a trade receivables which was placed under interim judicial management.

  Finance income

  The decrease in the Group's finance income, comprising mainly interest income from bank deposits, remained insignificant for FY2020.

  Finance costs

  The increase in the Group's finance costs by $0.3 million in FY2020 as compared to FY2019 was mainly due to the adoption of SFRS(I) 16 – Leases which resulted in an increase of interest on lease liabilities by $0.3 million.

  Income tax expense

  In FY2020, the Group incurred an income tax expense of $0.8 million as compared to $0.2 million in FY2019.

  Profit for the year

  Combining the profit before tax of $3.4 million for the Marine & Offshore Segment, loss before tax of $1.0 million for the Property Development Segment and the unallocated head office expenses of $0.4 million, the Group's profit before tax is $2.0 million in FY2020 as compared to a loss before tax of $0.3 million in FY2019. After accounting for income tax of $0.8 million, the Group's profit for FY2020 is $1.2 million as compared to a loss of $0.5 million in FY2019.

• BALANCE SHEET REVIEW

  Non-current assets

  Non-current assets increased to $13.6 million as at 30 June 2020 from $10.4 million as at 30 June 2019. This increase was mainly due to the following:

  • Adoption of SFRS(I) 16 – Leases which resulted in an increase of right of use asset by $5.8 million.
  • Acquisition of a warehouse in the Netherlands for $2.1 million, as well as plant and equipment for $0.4 million as part of the Group's strategy for business expansion for its Marine & Offshore Segment.

  The increase was offset by the following:

  • Depreciation of investment property and property, plant and equipment of $1.9 million.
  • Reclassification of investment property to assets held for sale of $3.2 million.

  Current assets

  Current assets of $52.9 million as at 30 June 2020 increased by $6.4 million or 13.8% from $46.5 million as at 30 June 2019. The increase was mainly due to the following:

  • Assets held for sale increased by $3.2 million as at 30 June 2020 following the proposed disposal of two leasehold properties owned by TEHO Development Pte Ltd. The options to purchase of the two leasehold properties were duly exercised on 16 July 2020.
  • Inventories increased by $2.0 million mainly due to the Group's strategy for business expansion for its Marine & Offshore Segment in Europe, USA and Korea. Despite the increase in the inventory, the inventory turnover days decreased from 218 days in FY2019 to 210 days in FY2020 due to increase in turnover in FY2020.
  • Development properties increased by $1.2 million from $9.6 million as at 30 June 2019 to $10.8 million as at 30 June 2020. The increase arose from the redevelopment of a landed residential property located at 16 Lorong Salleh. The Group has completed construction of its Farleigh Avenue project during the year and has begun marketing the property.
  • Cash and cash equivalents increased by $0.7 million. Please refer to the "Cash Flows Review" section below for details.

  The increase was offset by the following:

  • Trade and other receivables decreased by $0.6 million. Trade and other receivables turnover days for the Marine & Offshore Segment decreased by 5 days from 70 days in FY2019 to 65 days in FY2020.

  Non-current liabilities

  Non-current liabilities increased by $1.1 million or 7.5% to $15.3 million as at 30 June 2020 from $14.2 million as at 30 June 2019. The increase was mainly due to the following:

  • Adoption of SFRS(I) 16 – Leases which resulted in an increase of non-current lease liabilities by $4.2 million.

  The increase above was offset by:

  • Non-current portion of loans and borrowings decreased by $3.3 million, mainly due to (i) classification of land and construction loans of $4.5 million to current portion as the Group completed construction of its development at 88 Farleigh Avenue, which is due in the second quarter ("Q2") of the financial year ending 30 June 2021 ("FY2021") (ii) classification of mortgage loan of $2.4 million to current portion following the proposed disposal of two leasehold properties, which is expected to be repaid in FY2021 and (iii) repayment of term loan of $0.3 million. The decreases were offset by a $2.1 million increase due to extension of term loan tenure and $1.5 million additional bank loan for the acquisition of a warehouse in the Netherlands.

  Current liabilities

  Current liabilities increased by $7.4 million or 25.3% to $36.4 million as at 30 June 2020 from $29.0 million as at 30 June 2019. The increase was mainly due to the following:

  • Adoption of SFRS(I) 16 – Leases which resulted in an increase of current lease liabilities by $0.9 million.
  • Current portion of loans and borrowings increased by $5.7 million, mainly due to (i) transfer of land and construction loans of $4.3 million to current portion as the Group completed construction of its development at 88 Farleigh Avenue, which is due in the Q2 of FY2021 (ii) classification of mortgage loan of $2.4 million to current portion following the proposed disposal of two leasehold properties, which is expected to be repaid in FY2021 (iii) increase in utilisation of trade facilities by $2.1 million and (iv) additional bank loan of $0.6 million. The increases were offset by $3.7 million decrease due to repayment of term loan and extension of term loan tenure.
  • Current tax liabilities increased by $0.5 million.
  • Trade and other payables increased by $0.3 million was mainly due to Job Support Scheme received which was recognised as deferred income.

  Shareholders' equity

  Shareholders' equity increased by $1.2 million or 8.8% to $14.9 million as at 30 June 2020 from $13.7 million as at 30 June 2019. The increase was mainly due to the following:

  • Profit for FY2020 amounted to $1.2 million.
  • Foreign currency translation gain of $0.2 million

  The increase above was offset by:

  • Adjustment on initial application of SFRS (I) 16 – Leases which resulted in a decrease of $0.2 million in shareholders' equity.
• CASH FLOWS REVIEW

  Cash flows from operating activities

  Operating cash inflows before changes in working capital was $6.0 million in FY2020. Net cash outflow used in working capital was $2.4 million due to the following:

  • Cash outflows arising from an increase in inventories of $2.0 million;
  • Cash outflows arising from an increase in development properties of $1.1 million;
  • Cash inflows arising from a decrease in trade and other receivables of $0.3 million;
  • Cash inflows arising from a decrease in contract assets of $49,000;
  • Cash inflows arising from an increase in trade and other payables of $0.4 million; and
  • Cash outflows arising from a decrease in contract liabilities of $64,000.

  After deducting income taxes paid of $0.3 million, net cash from in operating activities in FY2020 was $3.3 million.

  Cash flows used in investing activities

  Net cash used in investing activities in FY2020 was $0.9 million which was mainly attributable to the purchase of property, plant and equipment by the Marine & Offshore Segment.

  Cash flows from financing activities

  Net cash used in financing activities in FY2020 was $1.7 million, mainly attributable to the following:

  • Interest paid of $1.6 million;
  • Repayment of bank borrowings and lease liabilities totalling $29.0 million; and
  • Proceeds from bank borrowings amounting to $28.9 million.

  As a result of the above, cash and cash equivalents increased by approximately $0.7 million during FY2020. Cash and cash equivalents as at 30 June 2020 were $5.3 million.

• COMMENTARY

  Marine & Offshore Segment

  Despite the unprecedented impact inflicted by the COVID-19 pandemic on the global economy, the Marine & Offshore Segment has maintained 8.7% growth in its revenue. The growth in the mooring and rigging business in FY2020 continues from FY2019.

  However, we anticipate headwind ahead. The International Monetary Foundation (IMF) has forecasted that all major economies in the world except for China, are heading for recession due to the COVID-19 pandemic¹.

  Notwithstanding, we will continue to grow our mooring and rigging business, while at the same time manage our costs prudently and align cash flows with business volume and potential opportunities.

  In May 2020, the Group has acquired a warehouse in the Netherlands. The acquisition will further strengthen TEHO's rigging facilities and distribution points around the world. The new warehouse will increase our capacity in the Netherland by over 40%.

  Property Development Segment

  With the uncertainty over the impact of COVID-19 pandemic on the global economy, we expect that the Singapore property market will remain soft in the next financial year.

  In July 2020, the Group has granted an option to purchase ("Option") to an unrelated third party buyer for the disposal of two (2) leasehold properties located at 33 Ubi Avenue 3, #01-14 and #01-15, Singapore 408868 for $3.2 million and the buyer has exercised the Option ("Proposed Disposal"). The Proposed Disposal will enable the Group to realise the value of the properties and result in a positive cash inflow of S$800,000 (post-deductions for the payment of mortgage loan and the agent's commission fee), thereby improving the liquidity of the Group.

  The Group has completed construction of its detached house at Farleigh Avenue and has begun marketing the property. The Group has commenced construction for redevelopment of a semi-detached house at Lorong Salleh and expects completion of construction by end of 2020.

  1. 1. Source: IMF, World Economic Outlook Update, June 2020