Financial Statements Announcement for the Third Quarter Ended 31 December 2019 (For the Financial Year Ending 31 March 2020)
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Statement of Financial Position
Review of performance
Consolidated Income Statement
3QFY20 – for the 3 months ended 31 December 2019
2QFY20 – for the 3 months ended 30 September 2019
3QFY19 – for the 3 months ended 31 December 2018
9MFY20 – for the 9 months ended 31 December 2019
9MFY19 – for the 6 months ended 31 December 2018
Review of Results for the Third Quarter Ended 31 December 2019
Group revenue for 9MFY20 registered an improvement of 2.4% to $254.3 million (9MFY19: $248.4 million), while revenue for 3QFY20 improved 15.6% to $83.9 million (3QFY19: $72.5 million), on relatively stable work volume.
Quarter-on-quarter, the Group recorded a slight decrease of 6.7% in revenue compared to 2QFY20 as a result of lower sales generated from the Group’s equipment trading division.
Gross Profit and Gross Profit Margins (GPM)
Gross profit and GPM for 9MFY20 tripled to $31.3 million and 12.3% (9MFY19: $10.7 million and 4.3%). Similarly, gross profit and GPM for 3QFY20 increased significantly to $10.8 million and 12.9% (3QFY19: $1.4 million and 2.0%).
In spite of the quarter-on-quarter decline in Group revenue, gross profit and GPM recorded slight increases to $10.8 million and 12.9% respectively (2QFY20: $10.8 million and 12.0%).
The higher gross profit and GPM reflect the improvement in tender prices and business activity in these periods year-on-year.
The Group recorded higher other income of $1.9 million for 9MFY20 (9MFY19: $1.5 million) and $0.7 million for 3QFY20 (3QFY19: $0.2 million; 2QFY20: $0.6 million) respectively. These took into account the gain from the disposal of old equipment, along with the distribution of profit of $0.2 million from a property development project in Iskandar Malaysia.
The Group incurred higher other operating expenses of $21.5 million for 9MFY20 (9MFY19: $20.6 million). The increase was mainly due to higher legal fees accrued to recover outstanding debt and higher staff costs incurred due to an increase in headcount in the period under review.
Other operating expenses for 3QFY20 of $6.7 million was lower compared to $6.9 million in 3QFY19 and $7.8 million in 2QFY20. The decrease was mainly due to lower legal fees incurred in 3QFY20.
The Group recorded higher impairment losses on receivables of $2.8 million for 9MFY20 (9MFY19: $0.3 million) and $2.2 million for 3QFY20 (3QFY19: $0.2 million; 2QFY20: $0.3 million). This took into account specific provisions made for the amounts due from various debtors following the assessment of recoverability of these debts in 3QFY20.
In 9MFY20, other operating expenses to revenue ratio of 8.4% was comparable to 8.3% in 9MFY19. Other operating expenses to revenue ratio for 3QFY20 was lower at 8.0% (3QFY19: 9.5%; 2QFY20: 8.7%), in line with the lower other operating expenses recorded in 3QFY20.
Net Finance Expenses
Net interest expenses were $3.3 million for 9MFY20 (9MFY19: $2.6 million) and $1.1 million for 3QFY20 (3QFY19: $0.9 million). The increase was due to a higher draw-down of short-term borrowings for working capital purposes.
Net interest expenses for 3QFY20 was comparable to 2QFY20.
Profit/(Loss) for the period
The Group recorded net profit before tax of $5.5 million in 9MFY20, a turnaround from a loss before tax of $10.3 million in 9MFY19.
Making its third consecutive quarter of profitability, the Group recorded profit before tax of $1.6 million for 3QFY20 compared to a loss before tax of $6.1 million in 3QFY19. Sequentially, profit before tax for 3QFY20 was lower compared to $2.2 million in 2QFY20, after taking into account the specific provisions made for the amounts due from various debtors of $2.2 million following the assessment of recoverability of these debts in 3QFY20.
Earnings before interest, tax, depreciation and amortisation (EBITDA) improved significantly to $29.4 million for 9MFY20 (9MFY19: $9.2 million) and $8.8 million for 3QFY20 (3QFY19: $0.4 million; 2QFY20: $11.3 million).
Earnings per share for 9MFY20 and 3QFY20 were 0.16 cent (9MFY19: loss per share of 0.56 cent) and 0.07 cent (3QFY19: loss per share of 0.30 cent; 2QFY20: 0.06 cent) respectively.
Statement Of Financial Position
Property, Plant and Equipment
Net book value of property, plant and equipment as at 31 December 2019 was $133.6 million (31 March 2019: $137.1 million).
In 9MFY20, the Group acquired $10.0 million worth of new plant and equipment to replace older equipment. The Group disposed of plant and equipment with carrying values of $4.1 million and recorded a $1.0 million gain on the disposal. Depreciation charge for 9MFY20 was $19.3 million (9MFY19: $18.1 million).
Following the adoption of Singapore Financial Reporting Standards (International) (“SFRS(I)”) 16 Leases as disclosed in “Accounting Policies” on pages 23 to 24, the Group has recognised noncurrent right-of-use assets of $4.0 million.
Net Current Assets
As at 31 December 2019, net current assets was $11.8 million (31 March 2019: $4.1 million). Current ratio (current assets / current liabilities) was 1.06 (31 March 2019: 1.02).
The Group had higher inventories of $32.1 million at 31 December 2019 (31 March 2019: $29.7 million) as it had anticipated an increase in equipment sale and leasing activities.
Trade and other receivables and contract assets were $136.9 million (31 March 2019: $134.6 million) while trade and other payables and contract liabilities were $105.6 million (31 March 2019: $99.7 million).
The Group disposed of assets held for sale with carrying values of $0.9 million and recorded a $0.3 million gain on the disposal in 9MFY20. As at 31 December 2019, assets held for sale was $15.1 million (31 March 2019: $15.5 million).
Following the adoption of SFRS(I) 16 Leases, the Group has recognised current right-of-use assets and current lease liabilities of $6.7 million and $9.1 million respectively.
As at 31 December 2019, total borrowings, excluding lease liabilities arising from the adoption of SFRS(I) 16 Leases, was $94.1 million (31 March 2019: $102.7 million). The reduction was a result of net repayment of debt in 9MFY20.
Consequently, the debt to equity ratio as at 31 December 2019 improved by 12.5% to 0.63 (31 March 2019: 0.72).
Equity and Net Asset Value
As at 31 December 2019, the Group’s equity was $149.8 million (31 March 2019: $142.4 million), while net asset value per ordinary share was 5.8 cents (31 March 2019: 6.1 cents).
Cash Flow from Operating Activities
Net cash inflow from operating activities were higher at $31.0 million for 9MFY20 (9MFY19: $1.5 million) and $14.9 million for 3QFY20 (3QFY19: $6.3 million; 2QFY20: $5.7 million), taking into account the net profits recorded during the periods under review.
Cash Flow from Investing Activities
The Group’s net cash outflow from investing activities for 9MFY20 and 3QFY20 were $3.4 million and $0.8 million respectively (9MFY19: $12.3 million; 3QFY19: $2.7 million; 2QFY20: $2.2 million).
The lower cash outflows in 9MFY20 and 3QFY20 were mainly due to lower capital expenditure incurred during the periods under review.
Cash Flow from Financing Activities
The Group recorded net cash outflow from financing activities of $19.6 million for 9MFY20, compared to a net cash inflow of $4.4 million in 9MFY19, following the net repayment of bank borrowings during the period.
Net cash outflow for 3QFY20 was higher than 3QFY19 and 2QFY20 due to higher net repayment of bank borrowings during the quarter.
Cash and Cash Equivalents
Taking into consideration the abovementioned factors, the Group’s cash and cash equivalents stood at $15.1 million as at 31 December 2019 (31 December 2018: $9.4 million; 30 September 2019: $8.1 million).
In January 2020, the Building and Construction Authority of Singapore projected that total construction demand would remain strong in 2020, ranging between $28 billion and $33 billion, on the back of sustained public sector construction demand.
The Group is mindful of several factors that could cloud the current outlook. The recent outbreak of the novel coronavirus (“Covid-19”) poses a serious health threat and could lead to challenges, including manpower shortage arising from travel restrictions imposed on foreign labour. Construction delays and higher costs of building are expected to be aggravated by disruptions to the construction supply chain as some Chinese factories remain shut until further notice due to the Covid-19 outbreak.
In addition, the wider economic and geopolitical issues surrounding US-China relations, and the UK’s exit from the European Union, remain a source of risk to Singapore and other ASEAN economies.
Against this backdrop, the Group will continue to leverage its strong capabilities and solid track record to tender actively for projects. It will also remain focused on anticipating and adapting to industry changes, while ensuring optimal utilisation of its equipment and resources.
As at 11 February 2020, the Group’s order book stands at about $170 million (5 November 2019: $150 million).