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UNAUDITED HALF-YEAR FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 2017

Financials Archive

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Consolidated Statement of Profit or Loss

Profit or Loss

Statements of Financial Position

Balance Sheet

Review of the Group's Income Statement

Revenue

The Group typically experiences a fluctuation in revenue contribution from its customers form period to period due to the project-based nature of its business. The Group’s projects differ in their scope and size and are typically non-recurring.

The Group’s revenue for the six-month period ended 31 March 2017 (“1H2017”) was S$12.61 million, an increase of S$1.15 million or 10.0% as compared to S$11.46 million for the corresponding six-month period ended 31 March 2016 (“1H2016”). The increase in revenue was mainly due to revenue contribution from a subsidiary, Grimm Industries Pte. Ltd. (“Grimm”). Grimm recorded an increase in revenue of S$2.01 million from S$0.58 million in 1H2016 to S$2.59 million in 1H2017. This increase was due to a six-month revenue contribution in 1H2017 as compared to two-month revenue contribution in 1H2016, as Grimm was acquired by the Company in January 2016. In addition to the aforementioned, the Group reported:

  1. a decrease in revenue from the sale of door and shutter systems of S$1.06 million as a result of a decrease in sales of manufactured products and distributed products of S$0.92 million and S$0.14 million respectively amidst a slowing economy; and
  2. an increase in revenue from the provision of service and maintenance work amounting to S$0.21 million.

Cost of sales

Cost of sales increased by S$1.39 million or 22.9% from S$6.09 million in 1H2016 to S$7.48 million in 1H2017 mainly due to higher material costs of S$1.67 million which was partially offset by lower labour cost of S$0.20 million.

Gross profit

Gross profit decreased by S$0.24 million or 4.5% from S$5.37 million in 1H2016 to S$5.13 million in 1H2017. Gross profit margin decreased from 46.9% in 1H2016 to 40.7% in 1H2017. The lower gross profit margin was mainly due to lower sales in manufactured products which typically have better margins as compared to distributed products.

Other operating income

Other operating income increased by S$0.03 million or 20.3% from S$0.15 million in 1H2016 to S$0.18 million in 1H2017. The increase in other operating income was mainly attributable to government grant received.

Marketing and distribution expenses

Marketing and distribution expenses increased by S$0.02 million or 8.8% from S$0.31 million in 1H2016 to S$0.33 million in 1H2017. This was mainly due to an increase in freight charges of S$0.03 million.

Administrative expenses

Administrative expenses increased by S$0.73 million or 24.4% from S$2.97 million in 1H2016 to S$3.70 million in 1H2017. The increase in administrative expenses was mainly due to (i) higher personnel cost of S$0.61 million as a result of increased headcount and (ii) higher amortisation of intangible assets of S$0.07 million. The acquisition of Grimm had contributed additional intangible assets to the Group as well as its related amortisation on these intangible assets.

Other operating expenses

Other operating expenses increased by S$0.02 million or 5.7% from S$0.30 million in 1H2016 to S$0.32 million in 1H2017. The increase in other operating expenses was mainly due to the increase in impairment loss on trade receivables of S$0.06 million but was partially offset by a decrease in research and development expenses of S$0.05 million. The higher impairment loss on trade receivables was attributable to debts relating to customers who have filed for bankruptcy.

Investment revenue

Investment revenue, comprising interest income, decreased from S$10,000 in 1H2016 to S$7,000 in 1H2017, mainly due to repayment of an interest-bearing loan from a third party in 1H2016.

Other gains and losses

Other gains and losses reversed from a net loss of S$0.14 million in 1H2016 to a net gain of S$0.05 million in 1H2017 mainly due to the increase in net foreign exchange gain of S$0.20 million arising from the translation of trade receivables and bank balances denominated in US$ in 1H2017.

Finance costs

Finance costs remains the same at approximately S$7,000 for both 1H2017 and 1H2016.

Income tax expense

Income tax expense decreased by S$0.33 million from S$0.28 million in 1H2016 to a tax credit of S$0.05 million in 1H2017. The income tax credit position was mainly due to a tax refund of S$0.12 million received and lower income tax expense as a result of lower profit generated.

Profit for the year

As a result of the above, profit for the year decreased by S$0.47 million or 30.8% from S$1.53 million in 1H2016 to S$1.06 million in 1H2017.

Review of the Group's Financial Position

Current assets

Current assets decreased by S$1.88 million from S$22.84 million as at 30 September 2016 to S$20.96 million as at 31 March 2017. The decrease in current assets was mainly due to a decrease in trade and other receivables of S$1.86 million. Trade and other receivables were lower as a result of (i) a decrease in trade receivables of S$1.75 million; (ii) a decrease in prepayments of S$0.42 million; which were partially offset by an increase in deposits and advance to supplier of S$0.37 million.

Non-current assets

Non-current assets increased by S$0.42 million from S$5.87 million as at 30 September 2016 to S$6.29 million as at 31 March 2017. The increase in non-current assets was mainly attributable to an increase in property, plant and equipment of S$0.54 million. This includes S$0.45 million increase in machinery and equipment relating to production process automation.

Current liabilities

Current liabilities decreased by S$1.45 million from S$5.34 million as at 30 September 2016 to S$3.89 million as at 31 March 2017. The decrease in current liabilities was mainly due to:

  1. a decrease in trade and other payables of S$1.23 million; and
  2. a decrease in income tax payable of S$0.24 million.

Non-current liabilities

Non-current liabilities as at 31 March 2017 remain at about the same compared to 30 September 2016 at S$1.01 million.

Capital, reserves and non-controlling interests

Total equity as at 31 March 2017 remain at about the same compared to 30 September 2016 at S$22.36 million.

Review of the Group's Cash Flows

Net cash from operating activities

In 1H2017, the Group generated net cash of S$1.53 million from operating activities before changes in working capital. The Group’s net working capital inflow amounted to S$0.70 million and was mainly due to the decrease in trade and other receivables of S$1.91 million and the decrease in inventories of S$0.13 million, partially offset by the decrease in trade and other payables of S$1.33 million. After payment of income tax of S$0.19 million, the net cash from operating activities in 1H2017 amounted to S$2.04 million.

Net cash used in investing activities

Net cash used in investing activities amounted to S$0.85 million, mainly due to purchase of property, plant and equipment of S$0.89 million.

Net cash used in financing activities

Net cash used in financing activities amounted to S$1.14 million, mainly due to payment of dividends of S$1.04 million and repayment of bank borrowings and finance lease obligation of S$0.07 million and S$0.04 million respectively.

Commentary

The factors that may impact the Group are as follows:

  1. General health of the Singapore economy;
  2. Level of activities in the commercial and industrial developments in Singapore; and
  3. Changes in the Singapore government’s policies and regulations on the immigration and employment of foreign workers.

Notwithstanding the continued uncertain economic outlook, the Group remains cautiously optimistic that the Notwithstanding the continued uncertain economic outlook, the Group remains cautiously optimistic that the outlook for the door and shutter solutions industry in Singapore will remain positive in the next 12 months. The Group continues to be on the lookout for new projects to maintain or expand its order book while exercising stricter evaluation and assessment when negotiating new contracts.

The Group also expects increasing constraints in labour supply and manpower costs in Singapore. In this regard, the Group will continue to take appropriate steps and measures to address these issues to maintain its competitiveness.