ISOTeam

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UNAUDITED FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE SECOND QUARTER AND SIX MONTHS ENDED 31 DECEMBER 2017

Financials Archive

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Consolidated Statement of Comprehensive Income

Combined Statements of Comprehensive Income

Statements of Financial Position

Combined Statements of Financial Statements

Review of Financial Performance

Review of Financial Performance

Revenue

2QFY2018 vs 2QFY2017

Group revenue decreased by $0.2 million or 1.0% from $24.0 million in 2QFY2017 to $23.8 million in 2QFY2018.

Revenue contribution from the Group's R&R business decreased by $1.6 million or 24.7% from $6.2 million in 2QFY2017 to $4.6 million in 2QFY2018, due to lower revenue recognition.

Revenue contribution from the Group's A&A business segment increased by $2.1 million or 21.7% from $9.7 million in 2QFY2017 to $11.8 million in 2QFY2018.

Revenue contribution from the Group's C&P business segment decreased by $1.9 million or 48.7% from $3.9 million in 2QFY2017 to $2.0 million in 2QFY2018, due to lower revenue recognition.

Revenue contribution from the Group's Others business segment increased by $1.0 million or 25.4% from $4.3 million in 2QFY2017 to $5.3 million in 2QFY2018.

6MFY2018 vs 6MFY2017

The Group's revenue increased by $4.1 million or 9.2% from $44.8 million in 6MFY2017 to $48.9 million in 6MFY2018.

Revenue contribution from the Group's R&R business segment increased by $1.3 million or 12.3% from $10.7 million in 6MFY2017 to $12.0 million in 6MFY2018.

Revenue contribution from the Group's A&A business segment increased by $4.7 million or 27.5% from $17.3 million in 6MFY2017 to $22.0 million in 6MFY2018.

Revenue contribution from the Group's C&P business segment decreased by $3.3 million or 40.3% from $8.2 million in 6MFY2017 to $4.9 million in 6MFY2018, due to lower revenue recognition.

Revenue contribution from the Group's Others business segment increased by $1.3 million or 15.5% from $8.6 million in 6MFY2017 to $9.9 million in 6MFY2018.

Gross profit and gross profit margin

2QFY2018 vs 2QFY2017 & 6MFY2018 vs 6MFY2017

The Group's gross profit decreased by $3.0 million or 37.3% from $8.0 million in 2QFY2017 to $5.0 million in 2QFY2018 and decreased by $3.2 million or 25.3% from $12.6 million in 6MFY2017 to $9.4 million in 6MFY2018. The decrease was mainly due to lower margin contributed by R&R and Others business segments.

Marketing and distribution expenses

2QFY2018 vs 2QFY2017 & 6MFY2018 vs 6MFY2017

The Group's marketing and distribution expenses increased by $0.3 million or 200.7% from $0.2 million in 2QFY2017 to $0.5 million in 2QFY2018 and increased by $0.3 million or 54.8% from $0.5 million in 6MFY2017 to $0.8 million in 6MFY2018. The increase was mainly due to increase in business entities arising from acquisition of a subsidiary and incorporation of new subsidiaries.

General and administrative expenses

2QFY2018 vs 2QFY2017 & 6MFY2018 vs 6M2017

The Group's general and administrative expenses decreased by $1.1 million or 24.1% from $4.4 million in 2QFY2017 to $3.3 million in 2QFY2018 and decreased by $1.5 million or 19.4% from $7.5 million in 6MFY2017 to $6.0 million in 6MFY2018. The decrease was mainly due to absence of one-time costs incurred in relation to allowance for doubtful receivables for a customer under receivership in last financial period and decrease in staff related expenses.

Finance costs

2QFY2018 vs 2QFY2017 & 6M2018 vs 6MFY2017

The Group's finance costs increased by $0.1 million or 72.5% from $0.1 million in 2QFY2017 to $0.2 million in 2QFY2018 and increased by $0.2 million or 54.6% from $0.2 million in 6MFY2017 to $0.4 million in 6MFY2018. The increase was mainly attributable to interest incurred for utilisation of revolving loan and property loan for the purchase of the Group's new corporate office.

Profit before tax

2QFY2018 vs 2QFY2017 & 6MFY2018 vs 6MFY2017

As a result of the above, the Group recorded a profit before tax of $1.3 million in 2QFY2018 and $2.9 million in 6MFY2018 as compared to a profit before tax of $3.8 million in 2QFY2017 and $5.3 million in 6MFY2017.

Tax expenses

2QFY2018 vs 2QFY2017 & 6MFY2018 vs 6MFY2017

The Group's tax expenses decreased by $0.6 million or 113.7% from $0.7 million in 2QFY2017 to $0.1 million in 2QFY2018 and decreased by $0.9 million or 88.0% from $1.0 million in 6MFY2017 to $0.1 million in 6MFY2018. The decrease was mainly due to decrease in business profit and deferred tax expenses.

REVIEW OF FINANCIAL POSITION

Non-current assets

The Group's non-current assets increased by $0.2 million or 0.5% from $43.5 million as at 30 June 2017 to $43.7 million as at 31 December 2017, mainly due to the acquisition of property, plant and equipment ("PPE"), which was partially offset by the depreciation of PPE, disposal of PPE and amortisation of intangible assets.

Current assets

The increase in current assets of $6.1 million or 10.4% from $58.7 million as at 30 June 2017 to $64.8 million as at 31 December 2017 was attributed mainly due to the increase in amounts due from customers for contract work-in-progress and trade and other receivables, which were partially offset by decrease in cash and bank balances.

Non-current liabilities

The increase in non-current liabilities of $0.9 million or 5.8% from $15.6 million as at 30 June 2017 to $16.5 million as at 31 December 2017 was mainly due to the drawdown of bank borrowings, which were partially offset by decrease in finance lease liabilities and deferred tax liabilities.

Current liabilities

The increase in current liabilities of $4.1 million or 14.7% from $27.8 million as at 30 June 2017 to $31.9 million as at 31 December 2017 was mainly due to the increase in trade and other payables, tax payables and drawdown of bank borrowings.

REVIEW OF STATEMENT OF CASH FLOWS

Net cash used in operating activities

2QFY2018 and 6MFY2018

Net cash used in operating activities amounted to $4.0 million in 2QFY2018 and $0.3 million in 6MFY2018 which was mainly due to increase in contract work-in-progress and trade and other receivables which were partially offset by increase in operating cash flow before changes in working capital and trade and other payables.

Net cash used in investing activities

2QFY2018 and 6MFY2018

Net cash used in investing activities amounted to $1.8 million in 2QFY2018 and $2.7 million in 6MFY2018 mainly due to the purchase of PPE which was partially offset by proceeds from disposal of PPE.

Net cash (used in)/ generated from financing activities

2QFY2018

Net cash used in financing activities of $3.0 million was mainly due to dividend payment, repayment of bank borrowings and finance lease which were partially offset by capital contributed by non-controlling interest and drawdown of bank borrowings.

6MFY2018

Net cash generated from financing activities of $1.3 million was mainly due to drawdown of bank borrowings and capital contributed by non-controlling interest which were partially offset by dividend payment, purchase of treasury shares, fixed deposits pledged to banks and repayment of bank borrowings and finance lease.

Commentary

For FY2018, the Group expects the market conditions to remain challenging. Nevertheless, the Group believes it is in a strong strategic position to seize business opportunities given its established track record and multi-disciplinary capabilities in the built environment. As at 31 January 2018, the Group's order book remains healthy at $80.7 million which will be progressively delivered over the next two years.

ISOTeam continues to see opportunities in the R&R and A&A segments in Singapore, supported by Government-led estate rejuvenation schemes including Neighbourhood Renewal Programme ("NRP") and the HDB's Home Improvement Programme ("HIP"). Approximately 101,000 flats have undergone HIP works since the programme was launched in 2007 and works are currently in progress for another 139,400 homes. Remaining eligible flats will be selected by the end of 2018 and more than 300,000 flats are expected to benefit from HIP by the end of the programme. In addition, the Group is also keen to secure more projects from newly acquired customers in the public sector especially the government ministries.

In the private sector, ISOTeam is actively pursuing opportunities in the A&A and C&P segments by leveraging its considerable expertise, growing track record and strong business network. The Group recently completed a multi-milliondollar A&A project, involving the change of use of a restaurant on level 57 of Sands Skypark Tower 1. Backed by the Group's solid track record of assisting in the retrofitting high quality and prestigious high-end restaurants and nightclub at Marina Bay Sands and Resort World Sentosa, ISOTeam is poised to seize greater growth opportunities in retrofitting Food and Beverage sector as more restaurants seek to transform their dining concepts.

The Group's handyman services have continued to grow and in November 2017, the Group incorporated ISO-Homecare with a joint venture partner to champion this segment of the business. The Group holds a 51% stake in the entity.

Following the successful implementation of floating wetland systems at Punggol Waterways, HDB is planning to introduce such systems at lakes and quarry parks throughout Singapore. Through its participation in this pilot project, the Group is optimistic of its prospects of securing more large scale eco-projects in the future.

The Group's capability and vast experience in property maintenance and estate rejuvenation, coupled with its familiarity with HDB/Town Council environment, gave ISOTeam the edge in securing its first landscaping and horticulture term contract with two Town Councils to bring in regular and stable returns.

Going forward, ISOTeam will undertake to develop two strategic Divisions namely Cleaning and Conservancy Division and Energy Management Contract Division to leverage on the Group's networks of property consultants, developers and owners to go into facilities maintenance and green building certification business.

The Group's relocation to its new corporate headquarters in Changi is expected to be fully completed by the first quarter of 2018. With this centralisation and consolidation of operations, the Group expects its overall cost and operational efficiencies as well as productivity to be improved in the future.