Financial Statements And Related Announcement - Half Yearly Results 2019
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CONSOLIDATED INCOME STATEMENT
STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME
FINANCIAL PERFORMANCE REVIEW
Revenue decreased marginally by $0.1 million or 0.4% to $25.6 million for the financial period ended 31 December 2018 (“HY2019”) from $25.7 million for the financial period ended 31 December 2017 (“HY2018”).
- Marine & Offshore Segment revenue in HY2019 increased by 14.1% or $3.1 million as compared to HY2018. The increase was mainly attributable to increased revenue contribution from the mooring and rigging business.
However, the increase in revenue from the Marine & Offshore Segment was offset by the following:
- Revenue from the Property Development Segment in HY2019 decreased by $3.2 million as compared to HY2018, mainly due to the absence of revenue contribution of $2.3 million in HY2018 from the sale of units of the Elite Terrace development project which was fully sold in HY2018.
- In addition, revenue contribution from the property agency and property consultancy decreased by $0.8 million and $0.1 million respectively.
The Group's gross profit of $8.5 million in HY2019 increased by $0.7 million or 8.3% from $7.8 million in HY2018. The Group's gross profit margin in HY2019 increased to 33.1% in HY2019 as compared to 30.4% in HY2018.
- Marine & Offshore Segment contributed gross profit of $8.1 million to the Group in HY2019 as compared to $7.4 million in HY2018. The gross profit margin decreased to 32.1% in HY2019 from 33.6% in HY2018.
- Property Development Segment contributed gross profit of $0.4 million to the Group in HY2019, primarily arising from the property consultancy business. The gross profit margin improved to 97.3% mainly due to the absence of the gross loss of $0.2 million contributed by the Elite Terrace development project in HY2018.
Other income decreased by $41,000 or 10.4% to $352,000 in HY2019 from $393,000 in HY2018. The decrease was mainly due to the following:
- Absence of fair value gain on derivatives of $41,000 recorded in HY2018.
Distribution expenses decreased by $0.6 million or 41.2% to $0.7 million in HY2019 from $1.3 million in HY2018. This was mainly due to the absence of commission expense incurred on the sale of units of the Elite Terrace development project in HY2018.
Administrative expenses decreased by $0.8 million or 11.9% to $6.0 million in HY2019 from $6.8 million in HY2018. The decrease was mainly due to the following:
- Legal and professional fees decreased by $0.6 million as a result of the absence of legal and professional fees incurred in HY2018 in relation to the proceedings announced on 24 January 2017, 4 April 2017, 16 May 2017 and 22 May 2017.
- Employee benefits expenses and related staff costs decreased by $0.2 million due to a decrease in overall staff costs in the Marine & Offshore Segment and a decrease in headcount in the Property Development Segment.
Other operating expenses
Other operating expenses remained stable at $2.2 million in HY2019. Other operating expenses include the following:
- Loss on disposal of subsidiaries of $0.1 million in HY2019.
- Bad debts written-off of $77,000 (HY2018: $2,000), representing an increase of $75,000. These were mainly attributable to the Marine & Offshore Segment's retention amounts written-off in HY2019.
The increases mentioned above were offset by:
- Reduction in entertainment and transport expenses by $0.1 million in HY2019.
- Depreciation charges for investment property and property, plant and equipment decreased by $72,000, mainly attributable to more equipment becoming fully depreciated in the Marine & Offshore Segment.
The increase in the Group's finance income, comprising mainly interest income, remained insignificant for HY2019.
In HY2019, the Marine & Offshore Segment increased its usage of credit facilities. This resulted in an increase in finance costs in HY2019 of approximately $0.1 million as compared to HY2018. The loans and borrowings of the Property Development Segment did not have a significant impact to the Group's finance costs during HY2019 because most of the segment's finance costs are capitalised and included in the carrying amount of development properties.
Income tax expense
There was an income tax credit of $0.1 million in HY2019 as compared to an income tax credit of $0.4 million in HY2018. The over provision of income tax was mainly due to the utilisation of group relief in respect of prior year's taxes.
Loss for the period
Combining the profit before tax of $0.6 million for the Marine & Offshore Segment, loss before tax of $1.1 million for the Property Development Segment and the unallocated head office expenses of $0.2 million, the Group's loss before tax is $0.7 million in HY2019 as compared to a loss before tax of $2.5 million in HY2018, representing a 72.9% reduction in losses. After accounting for income tax credits of $0.1 million, the Group's loss for HY2019 is $0.6 million as compared to a loss of $2.1 million in HY2018, representing a 72.8% reduction in losses.
Total comprehensive (loss) / income for the period
After accounting for foreign currency translation differences, the total comprehensive loss for HY2019 is $0.6 million, compared to a total comprehensive loss of $2.9 million in HY2018.
BALANCE SHEET REVIEW
Non-current assets decreased to $10.2 million as at 31 December 2018 from $10.6 million as at 30 June 2018. This decrease was mainly due to the following:
- Depreciation of investment property, and depreciation of property, plant and equipment of $0.5 million. Acquisition of property, plant and equipment was insignificant.
Current assets decreased by $20.5 million or 31.2% to $45.2 million as at 31 December 2018 from $65.7 million as at 30 June 2018. The decrease was due to the following:
- Trade and other receivables decreased by $2.3 million, of which $1.4 million relates to outstanding receivables collected following the sale completion of the Elite Terrace development project in HY2018. $1.1 million of the decrease was due to utilisation of prepayments relating to the acquisition of a residential property for redevelopment. The decrease aforementioned is offset by a $0.2 million increase in trade receivables attributable to the Marine & Offshore Segment. Trade and other receivables turnover days for the Marine & Offshore Segment decreased by 4 days from 79 days in FY2018 to 75 days in HY2019.
- Contract assets decreased by $0.5 million as a result of conversion into billings to customers by the electrical and mechanical engineering systems business.
- Cash and cash equivalents decreased by $0.9 million. Please refer to the “Cash Flows Review” section below for details.
- Assets held for sale reduced by $21.9 million, following the completion of the disposal of TEHO Development (Cambodia) Pte. Ltd. and TEHO-SBG Development Co., Ltd. in November 2018.
The decrease mentioned above was offset by:
- Inventories increased marginally by $0.2 million. Inventory turnover days in HY2019 decreased to 236 days from 254 days in FY2018.
- Development properties increased by $4.9 million arising from the redevelopment of a landed residential property located at 88 Farleigh Avenue for sale.
Non-current liabilities increased by $2.0 million or 15.7% to $14.7 million as at 31 December 2018 from $12.7 million as at 30 June 2018. The increase was due to the following:
- Drawdown of a land loan of $3.4 million by the Property Development Segment to fund the purchase of a landed residential property with the intention to re-develop the property for sale.
The increase above was offset by:
- Repayment of long-term loans and borrowings of $1.4 million.
Current liabilities decreased by $0.1 million or 0.4% to $26.9 million as at 31 December 2018 from $27.0 million as at 30 June 2018. The decrease was due to the following:
- Current tax liabilities decreased by $0.1 million as settlements were made throughout the financial period.
- Trade and other payables decreased by $0.9 million. Trade and other payables attributable to the Property Development Segment decreased by $1.2 million, mainly a result of the completion of the Elite Terrace development project in HY2018. A further $0.1 million of the decrease related to the head office. The decreases were offset by an increase of $0.4 million attributable to the Marine & Offshore Segment. Turnover days for the Group's trade and other payables increased from 58 days in FY2018 to 70 days in HY2019, mainly attributable to the Property Development Segment.
The increase above was offset by the following:
- Loans and borrowings (current portion) increased by $0.8 million due to an increase in utilisation of short-term trade facilities.
- Contract liabilities increased marginally by $0.1 million, mainly attributable to an increase in advances received from customers in the Marine & Offshore Segment.
Shareholders' equity decreased by $0.9 million or 6.1% to $13.8 million as at 31 December 2018 from $14.7 million as at 30 June 2018. The decrease was mainly due to the following:
- Adjustment on initial application of SFRS (I) 15 resulted in a decrease of $0.3 million in shareholders' equity.
- Total comprehensive loss for HY2019 amounted to $0.6 million.
CASH FLOWS REVIEW
Cash flows used in operating activities
Operating cash inflows before changes in working capital was $0.6 million in HY2019. Net cash outflow from working capital was $3.5 million due to the following (the amounts below do not add up due to rounding):
- Cash outflows arising from an increase in inventories of $0.2 million;
- Cash outflows arising from an increase in development properties of $5.1 million;
- Cash inflows arising from a decrease in trade and other receivables of $2.3 million;
- Cash inflows arising from a decrease in contract assets of $0.5 million;
- Cash outflows arising from a decrease in trade and other payables of $0.7 million; and
- Cash outflows arising from a decrease in contract liabilities of $0.4 million
After deducting income taxes paid of $33,000, net cash used in operating activities in HY2019 was $2.9 million.
Cash flows used in investing activities
Net cash used in investing activities in HY2019 was $63,000 which was mainly attributable to the purchase of property, plant and equipment and the net cash outflow from the disposal of subsidiaries of S$16,000 which arose from the completion of the disposal of TEHO Development (Cambodia) Pte. Ltd and TEHO-SBG Development CO., Ltd in November 2018.
Cash flows from financing activities
Net cash flows from financing activities in HY2019 was $2.1 million, attributable to the following:
- Interest paid of $0.8 million;
- Repayment of bank borrowings and finance lease liabilities totalling $11.4 million; and
- Proceeds from bank borrowings amounting to $14.3 million.
As a result of the above, cash and cash equivalents decreased by $0.9 million during HY2019. Cash and cash equivalents as at 31 December 2018 were $3.6 million.
Marine & Offshore Segment
The Marine & Offshore Segment's order book remains encouraging. The Group will continue to focus on executing projects well, delivering quality products and services, harnessing technology to create products and services that meet market needs, and exploring new markets and business opportunities in this sector. We will continue to manage our costs prudently and align cash flows with business volume and potential opportunities.
Property Development Segment
Although growth in private home prices stalled in the second half of 2018 after new cooling measures were announced in July 2018, home prices are forecasted to show modest growth in 2019, underpinned by healthy demand and improving supply1. Barring unforeseen circumstances, the Group expects to complete the construction of its Farleigh Avenue project, by the end of 2019. The Group will continue to look for property development opportunities in Singapore.
- 1 Source: Outlook for Singapore property expected to improve in 2019, The Business Times, 8 February 2019.