ISOTeam

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UNAUDITED FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE THIRD QUARTER AND NINE MONTHS ENDED 31 MARCH 2018

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

3QFY2018 vs 3QFY2017

Group revenue decreased by $1.8 million or 10.6% from $16.5 million in 3QFY2017 to $14.7 million in 3Q FY2018. The decrease was mainly due to decrease in revenue of R&R, A&A and C&P business segments, which was affected by lesser work done performed during the period and partially offset by increase in revenue of Others business segment.

9MFY2018 vs 9MFY2017

The Group's revenue increased by $2.4 million or 3.9% from $61.2 million in 9MFY2017 to $63.6 million in 9MFY2018. The increase was mainly due to increase in revenue of A&A and Others business segments which were partiall y offset by decrease in revenue of C&P business segment, due to lesser workdone performed during the period.

Gross profit and gross profit margin

3QFY2018 vs 3QFY2017 & 9MFY2018 vs 9MFY2017

The Group's gross profit decreased by $0.8 million or 20.0% from $4.0 million in 3QFY2017 to $3.2 million in 3QFY2018 and decreased by $4.0 million or 24.1% from $16.7 million in 9MFY2017 to $12.7 million in 9MFY2018. The de crease was mainly due to lower margin contributed by R&R and Others business segments.

Other income

3QFY2018 vs 3QFY2017 & 9MFY2018 vs 9MFY2017

The Group's other income decreased by $0.1 million or 12.9% from $0.7 million in 3QFY2017 to $0.6 million in 3QFY2018 and decreased by $0.2 million or 10.4% from $1.8 million in 9MFY2017 to $1.6 million in 9MFY2018. The decrease was mainly due to the absence of negative goodwill arising from acquisition of a subsidiary.

Marketing and distribution expenses

3QFY2018 vs 3QFY2017 & 9MFY2018 vs 9MFY2017

The Group's marketing and distribution expenses increased by $0.1 million or 25.5% from 3QFY2017 to 3QFY2018 and increased by $0.4 million or 45.5% from $0.8 million in 9MFY2017 to $1.2 million in 9MFY2018. 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

9MFY2018 vs 9MFY2017

The Group's general and administrative expenses decreased by $1.6 million or 15.0% from $10.7 million in 9MFY2017 to $9.1 million in 9MFY2018. 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

3QFY2018 vs 3QFY2017

The Group's finance costs recorded at positive of $3.0 thousand was mainly due to the capitalisation of eligible borrowing costs in relation to interest incurred for utilisation of property loan for the purchase of corporate office which was charged to finance costs in prior periods.

Tax expenses

3QFY2018 vs 3QFY2017

The Group's tax expenses increased by $0.1 million mainly due to the decrease in utilisation of tax subsidies schemes which was partially offset by a decrease in deferred tax expenses.

9MFY2018 vs 9MFY2017

The Group's tax expenses decreased by $0.7 million or 73.2% from $1.0 million in 9MFY2017 to $0.3 million in 9MFY2018. The decrease was mainly due to a decrease in business profit and deferred tax expenses.

REVIEW OF FINANCIAL POSITION

Non-current assets

The Group's non-current assets increased by $1.6 million or 3.7% from $43.5 million as at 30 June 2017 to $45.1 million as at 31 March 2018, 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 decrease in current assets of $0.7 million or 1.2% from $58.7 million as at 30 June 2017 to $58.0 million as at 31 March 2018 was mainly due to the decrease in trade and other receivables and cash and bank balances, which were partially offset by an increase in the amount due from customers for contract work-in-progress.

Non-current liabilities

The increase in non-current liabilities of $0.3 million or 1.9% from $15.6 million as at 30 June 2017 to $15.9 million as at 31 March 2018 was mainly due to the increase of bank borrowings and finance lease liabilities, which were partially offset by decrease in other payable and deferred tax liabilities.

Current liabilities

The decrease in current liabilities of $1.4 million or 5.0% from $27.8 million as at 30 June 2017 to $26.4 million as at 31 March 2018 was mainly due to the decrease in amount due to customers for contract work-in-progress and trade and other payables, which were partially offset by an increase in bank borrowings and tax payables.

REVIEW OF STATEMENT OF CASH FLOWS

Net cash generated from operating activities

3QFY2018

Net cash generated from operating activities amounted to $2.5 million in 3QFY2018 which was mainly due to increase in operating cash flow before changes in working capital, decrease in contract work-in-progress and trade and other receivables which were partially offset by a decrease in trade and other payables.

9MFY2018

Net cash generated from operating activities amounted to $2.1 million in 9MFY2018 which was mainly due to an increase in operating cash flow before changes in working capital and decrease in trade and other receivables which were partially offset by increase in contract work-in-progress and decrease in trade and other payables.

Net cash used in investing activities

3QFY2018 and 9MFY2018

Net cash used in investing activities amounted to $1.4 million in 3QFY2018 and $4.1 million in 9MFY2018. This was mainly due to the purchase of PPE.

Net cash used in financing activities

3QFY2018

Net cash used in financing activities of $2.7 million was mainly due to repayment of bank borrowings a nd finance lease and purchase of treasury shares which were partially offset by drawdown of bank borrowings.

9MFY2018

Net cash used in financing activities of $1.4 million was mainly due to dividend payment, purchase of treasury shares, fixed deposits pledged to banks and repayment of bank borrowings and finance lease which were partially offset by drawdown of bank borrowings and capital contributed by non-controlling interest.

Commentary

Although the market conditions remain challenging, the Group has a strong order book of $84.4 million as of 4 May 2018 and it expects to further build on the order book in the coming months. The current order book is expected to be delivered over the next two years.

After the award of first Home Improvement Programme ("HIP") project from Housing Development Board ("HDB") of approximately $17.5 million, ISOTeam continues to see more opportunities in HIP sectors to grow its A&A segment while it is actively participating in A&A and R&R segments in Singapore. Over 100,000 homes are in the process of undergoing HIP works and more than 300,000 flats are expected to benefit from the HIP programme.

The Group is also backed by its record of delivering quality services for A&A projects in the private sector including the change of use of a restaurant on level 57 of Sands Skypark Tower 1 and the prestigious retrofitting for high-end restaurants and nightclub at Marina Bay Sands and Resort World Sentosa.

The Group is currently in the advanced stage of Research & Development to have a better understanding on the floating wetland systems at lakes and quarry parks throughout Singapore. Its track record in the successful implementation of floating wetland systems at Punggol Waterway will unlock opportunities in securing more projects of a similar nature in the future.

Recently, the Group has entered into the collaboration agreement with its overseas business partner, T aisei Oncho, with the objective of expanding its mechanical & electrical engineering arm and it is expected to create another potential business segment for the Group.

ISOTeam and its local subsidiaries have been relocated to its new corporate headquarters in Changi and the Group expects to improve operational efficiencies.