UNAUDITED FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE HALF YEAR ENDED 31 DECEMBER 2016
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Consolidated Statement of Comprehensive Income
Statements of Financial Position
Review of Financial Performance
Group revenue increased by $0.1 million or 0.1% from $44.7 million in HY2016 to $44.8 million in HY2017. Revenue from the Group's R&R business decreased by $13.3 million or 55.5% from $24.0 million in HY2016 to $10.7 million in HY2017, due to lower revenue recognition. This was derived largely from projects awarded by Pasir Ris-Punggol Town Council, National Environment Agency, Housing & Development Board (HDB), National University of Singapore and Jurong Central Citizen's Consultative Committee.
Revenue contribution from the Group's Addition and Alteration ("A&A") business segment increased by $7.6 million or 77.6% from $9.7 million in HY2016 to $17.3 million in HY2017. This was derived largely from projects awarded by Public Service Division, Pasir Ris-Punggol Town Council, National Environment Agency, Nee Soon Town Council and Marine Parade Town Council.
Revenue contribution from the Group's Coating and Painting ("C&P") business segment increased by $3.3 million or 67.8% from $4.9 million in HY2016 to $8.2 million in HY2017. This was derived largely from projects awarded by Sato Kogyo (S) Pte Ltd, Singapore Piling & Civil Engineering Pte Ltd, Samsung C&T Corporation, Hexacon Construction Pte Ltd and Welltech Construction Pte Ltd.
Revenue contribution from the Group's others business segment increased by $2.5 million or 41.3% from $6.1 million in HY2016 to $8.6 million in HY2017. This was derived largely from ID works from Resorts World at Sentosa Pte Ltd and residential projects, waterproofing works from Ang Mo Kio Town Council, landscaping works from Mao Sheng Quanji Construction Pte Ltd and rental income for leasing services.
Gross profit and gross profit margin
The Group's gross profit increased by $1.7 million or 15.8% from $10.9 million in HY2016 to $12.6 million in HY2017 was mainly due to higher margin contributed by A&A and C&P works. Overall gross profit margin increased from 24.4% to 28.2%.
There were no material changes in the Group's other income during the financial period under review.
Marketing and distribution expenses
The Group's marketing and distribution expenses decreased by $0.4 million or 36.3% from $0.9 million in HY2016 to $0.5 million in HY2017. The decrease was mainly due to decrease in depreciation and repair and upkeep expenses of motor vehicles.
General and administrative expenses
The Group's general and administrative expenses increased by $2.1 million or 38.8% from $5.4 million in HY2016 to $7.5 million in HY2017. The increase was mainly attributable to increase in staff costs of $0.8 million for the acquisition of a new subsidiary and incorporation of joint venture companies in Myanmar and Malaysia, allowance for doubtful receivables of $0.7 million and increase in overhead costs of $0.6 million, which is in line with the expansion of business and acquisition of a new subsidiary.
The Group's finance costs increased by $0.09 million or 57.9% from $0.15 million in HY2016 to $0.24 million in HY2017. The increase was mainly attributable to interest incurred for trust receipt and the property loan.
Other operating expenses
The Group's other operating expenses decreased by $0.2 million or 52.5% from $0.4 million in HY2016 to $0.2 million in HY2017. The decrease was mainly attributable to the decrease in amortisation of intangible assets arising from the acquisitions of subsidiaries.
Profit before tax
As a result of the above, our profit before tax increased by $0.1 million or 0.6% from $5.2 million in HY2016 to $5.3 million in HY2017. Tax expense has increased in HY2017 due to reduction in claimable tax relief under the PIC scheme.
Review of Financial Position
The Group's non-current assets decreased by $0.8 million or 3.5% from $22.8 million as at 30 June 2016 to $22.0 million as at 31 December 2016, mainly due to depreciation of fixed assets of $1.1 million and disposal of assets of $0.2 million offset by acquisition of new assets of $1.2 million and amortisation of intangible assets of $0.7 million arising from the acquisition of new subsidiaries.
The decrease in current assets of $5.3 million or 7.5% from $71.5 million as at 30 June 2016 to $66.2 million as at 31 December 2016 was attributed mainly due to the decrease in cash and bank balances of $4.3 million, decrease in trade and other receivables of $1.3 million and partially offset by the increase in amounts due from customers for contract work-inprogress of $0.3 million.
The decrease in non-current liabilities of $0.2 million or 2.4% from $4.8 million as at 30 June 2016 to $4.6 million as at 31 December 2016 was attributed to the repayment of bank borrowings of $0.3 million and partially offset by the drawdown of finance lease facilities of $0.1 million.
The decrease in current liabilities of $7.1 million or 19.7% from $35.7 million as at 30 June 2016 to $28.6 million as at 31 December 2016 was attributed mainly to the decrease in amounts due to customers for contract work-in-progress of $3.4 million, decrease in trade and other payables of $5.5 million, partially offset by the increase in tax payable of $0.3 million and the drawdown of bank borrowing of $1.5 million.
Review of Statement of Cash Flows
Net cash used in operating activities
The Group generated a net cash of $7.9 million from operating activities before changes in working capital. Net working capital outflows amounted to $8.7 million. This was mainly due to increase in contract work-in-progress of $3.9 million, decrease in trade and other payables of $5.4 million and partially offset by the decrease in trade and other receivables of $0.6 million. After payment of income tax of $0.7 million and interest of $0.2 million after offsetting with interest received of $0.2 million, the net cash used in operating activities amounted to approximately $1.5 million.
Net cash used in investing activities
Net cash used in investing activities amounted to $0.4 million, which was mainly attributable to the purchase of plant and equipment of $0.7 million which is offset with the proceeds from disposal of property, plant and equipment of $0.3 million.
Net cash used in financing activities
Net cash used in financing activities of $2.0 million was mainly due to dividend payment of $2.1 million, purchase of treasury shares of $1.4 million and repayment of finance lease of $0.5 million which were partially offset by the drawdown of bank borrowing of $1.2 million, capital contributed by non-controlling interest of $0.3 million and fixed deposit released from pledge of $0.5 million.
Government's initiatives on the building related activities in Singapore are increasing and the Group is of the view that revenue will still continue to be driven by awarded projects due to the strong track record and skill set it has. The Group is not just only benefiting from the increase public sectors activities but also expects to grow in the private sectors through newly acquired subsidiaries which have strong business relationship with respective market players for many years.
Despite the Group expecting the industry outlook in the next 12 months to be challenging, especially on competitive market condition as a result of price competition and increase in labour cost, it is currently looking into business collaboration activities across all subsidiaries by sharing resources and expertise in offering complete suite of building related services to its valued customers. It emphasizes on providing quality services and also to maintain the competitiveness.
In addition, the Group also looks forward to the revenue to be contributed by our recently acquired company namely Rong Shun Engineering & Construction Pte Ltd ("Rong Shun") to undertake electrical installations, provision of fire alarm system, security system and wire related works. The acquisition will expand the Group's capability to offer a full suite of engineering services and solutions such as Mechanical & Electrical, Air Conditioning and Mechanical Ventilation, Security, Fire Protection system as well as Sanitary and Plumbing Services which complement our A&A , Upgrading and ID works into other sectors such as private sector across various industries including shopping malls, REITs, factories, schools, hospitals, offices, highend hotels and residences without the need to outsource to other M&E contractors. Furthermore, the vendor of Rong Shun warrants and guarantees to the Group that Rong Shun shall for the period 1 October 2016 to 30 September 2019 achieve a cumulative profit before tax of an aggregate sum representing at least 12% of the Existing Order Book as well as maintain the Existing Order Book to be no less than $13.1 million.
The government-led SolarNova programme aims to have solar power contribute 350 megawatt-peak (MWp) to Singapore's energy supply by 2020. There were 400 HDB blocks installed with solar panels in 2015, and the programme targets to have around 5,500 blocks by 2020, or clean energy for 55,000 four-room flats annually. Renewable energy is fast becoming a reality in Singapore given the strong support from the government. With the partnership with major market leader in the field, track record and experience the Group is amassing now, the Group is in a good position to tap into the immediate upcoming opportunities.
In addition, the Group has been awarded its first HDB Home Improvement Programme ("HIP") project worth $17.5 million as announced on 26 January 2017.The Group believes that the award of this project is a significant milestone.
The Group's order book as at 26 January 2017 stood at $107.1 million which will be progressively delivered over the next two years.