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FULL YEAR FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 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 from 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.

Revenue for the financial year ended 30 September 2017 (“FY2017”) was S$23.88 million, a decrease of S$1.17 million or 4.7% as compared to S$25.05 million for the previous financial year ended 30 September 2016 (“FY2016”). The decrease in revenue was a result of a decrease in the Group’s sales of door and shutter system which was partially offset by an increase in revenue from Grimm Industries Pte. Ltd. (“Grimm”) and an increase in revenue from the Group’s provision of service and maintenance work, as follows:

  1. The Group’s overall sales of doors and shutter system decreased by S$3.98 million or 20.1% from S$19.77 million in FY2016 to S$15.79 million in FY2017. The decrease was mainly due to the decrease of the Group’s sales of manufactured products and distributed products of S$3.71 million and S$0.27 million respectively amidst a slowing economy;
  2. Grimm recorded an increase in revenue of S$2.45 million or 73.1% from S$3.35 million in FY2016 to S$5.80 million in FY2017. This increase was due to Grimm’s full-year revenue contribution to the Group in FY2017 as compared to an eight-month period of revenue contribution in FY2016, as Grimm was acquired by the Company in January 2016; and
  3. The Group’s provision of service and maintenance work recorded an increase in revenue of S$0.36 million or 18.6% from S$1.93 million in FY2016 to S$2.29 million in FY2017.

Cost of sales

Cost of sales increased by S$1.20 million or 8.8% from S$13.67 million in FY2016 to S$14.87 million in FY2017 mainly due to higher material costs of S$1.48 million which were partially offset by lower labour cost of S$0.34 million.

Gross profit

Gross profit decreased by S$2.37 million or 20.8% from S$11.38 million in FY2016 to S$9.01 million in FY2017. Gross profit margin decreased from 45.4% in FY2016 to 37.7% in FY2017. 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 decreased by S$0.07 million or 28.3% from S$0.25 million in FY2016 to S$0.18 million in FY2017. The decrease was mainly due to lower government grant and incentives received in FY2017.

Marketing and distribution expenses

Marketing and distribution expenses decreased by S$0.09 million or 12.2% from S$0.71 million in FY2016 to S$0.62 million in FY2017. This was mainly due to a decrease in travelling, entertainment and advertising cost of S$0.11 million in aggregate.

Administrative expenses

Administrative expenses remained at S$6.66 million in FY2017 as compared to FY2016. During FY2017, there was an increase in personnel cost of S$0.22 million mainly due to an increase in headcount and an increase in government levy. This increase was partially offset by (i) a decrease in rental expenses of S$0.05 million; (ii) a decrease in professional fees of S$0.04 million; and (iii) lower general expenses incurred by the Group of S$0.05 million following the disposal of GDA.

Other operating expenses

Other operating expenses increased by S$0.10 million or 11.1% from S$0.88 million in FY2016 to S$0.98 million in FY2017. The increase was due to an increase in impairment loss on trade receivables of S$0.33 million which was partially offset by a decrease in research and development expenses of S$0.23 million. The higher impairment loss on trade receivables was mainly attributable to debts relating to customers who are in financial difficulties. The lower research and development expenses was attributable to more fire testing carried out in FY2016 as compared to FY2017.

Investment revenue

Investment revenue which mainly comprise interest from bank deposits, decreased from S$16,000 in FY2016 to S$11,000 in FY2017.

Other gains and losses

Other gains and losses decreased from a net loss of S$0.09 million in FY2016 to S$6,000 in FY2017 mainly due to a higher net foreign exchange gain of S$0.14 million arising from the translation of trade receivables and bank balances denominated in US$ in FY2017. The increase in foreign exchange gain was partially offset by a loss on disposal of GDA of S$0.06 million.

Finance costs

Finance costs decreased slightly by $4,000 from S$15,000 in FY2016 to S$11,000 in FY2017 mainly due to the disposal of GDA.

Income tax expense

Income tax expense decreased by S$0.53 million from S$0.55 million in FY2016 to S$0.02 million in FY2017. The decrease in income tax expense 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$1.84 million or 67.0 % from S$2.74 million in FY2016 to S$0.90 million in FY2017.

Review of the Group's Financial Position

Current assets

Current assets decreased by S$3.62 million from S$22.84 million as at 30 September 2016 to S$19.22 million as at 30 September 2017, as a result of the following:

  1. a decrease in trade and other receivables of S$2.97 million, mainly attributable to the disposal of GDA;
  2. a decrease in inventories of S$S$0.38 million; and
  3. a decrease in cash and cash equivalents of S$0.27 million.

Non-current assets

Non-current assets increased by S$0.82 million from S$5.87 million as at 30 September 2016 to S$6.69 million as at 30 September 2017, as a result of the following:

  1. an increase in property, plant and equipment of S$1.19 million mainly due to the automation of the Group’s production process which contributed an increase of S$1.17 million in machinery and equipment;
  2. a decrease in intangible asset of S$0.24 million; and
  3. a decrease in pledged deposits of S$0.13 million as these deposits relate to GDA which has since been disposed by the Group.

Current liabilities

Current liabilities decreased by S$2.25 million from S$5.34 million as at 30 September 2016 to S$3.09 million as at 30 September 2017, as a result of the following:

  1. a decrease in trade and other payables of S$1.72 million mainly attributable to the disposal of GDA;
  2. a decrease in income tax payable of S$0.42 million; and
  3. a decrease in bank borrowings of S$0.14 million as these bank borrowings relate to GDA which has since been disposed by the Group.

Non-current liabilities

Non-current liabilities decreased by S$0.31 million from S$1.01 million as at 30 September 2016 to S$0.70 million as at 30 September 2017, as a result of the following:

  1. a decrease in bank borrowings of S$0.40 million as these bank borrowings relate to GDA which has since been disposed by the Group;
  2. an increase in other payables of S$0.08 million; and
  3. an increase in deferred tax liabilities of S$0.02 million.

Capital, reserves and non-controlling interests

Total equity as at 30 September 2017 was S$22.12 million as compared S$22.36 million as at 30 September 2016.

Review of the Group's Cash Flows

Net cash from operating activities

In FY2017, the Group generated net cash of S$2.49 million from operating activities before changes in working capital. The Group’s net working capital inflow amounted to S$1.66 million and was mainly due to a decrease in trade and other receivables of S$1.47 million and a decrease in inventories of S$0.23 million, which were partially offset by a decrease in trade and other payables of S$0.05 million. After payment of income tax of S$0.42 million, the net cash generated from operating activities in FY2017 amounted to S$3.73 million.

Net cash used in investing activities

Net cash used in investing activities amounted to S$2.77 million, mainly due to the Group’s purchase of property, plant and equipment of S$1.85 million and the cash outflow from the disposal of GDA of S$1.00 million.

Net cash used in financing activities

Net cash used in financing activities amounted to S$1.21 million, mainly due to payment of dividends of S$1.04 million and the net repayment of bank borrowings and repayment of finance lease obligation of S$0.09 million and S$0.07 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.

The industry remains challenging and competitive. The Group will strive to continuously improve its operational efficiency and focus its strength as a trusted door and shutter system solutions provider. 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.