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Financial Summary

3Q2018 Results Ended 30 September 2018

Financials Archive

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Profit & Loss

Profit & Loss

Statement of Comprehensive Income

Statement of Comprehensive Income/(Expense)

Balance Sheet

Balance Sheet

Review of Performance

Overview

3Q18 Overview

For the third quarter ended 30 September 2018 ("3Q18"), the Group recorded a 44% increase in revenue to S$14.2 million and a net loss attributable to equity holders of S$1.7 million, 21% improvement over the loss of S$2.2 million in 3Q17.

For the nine months ended 30 September 2018 ("9M18"), the Group recorded a 41% jumped in revenue to S$36.1 million and a net loss attributable to equity holders of S$3.7 million. This compares with a net loss attributable to equity holders of S$4.4 million a year ago.

As at 30 September 2018, the Group's total equity was S$197.9 million from S$203.3 million as at 31 December 2017. The Group has cash and cash equivalent balance of S$37.5 million. The Group is in a net cash position with a debt-to-total equity ratio of 10.5%.

Revenue from Continuing Operations


Revenue From Continuing Operations

The Group's revenue jumped 44% to S$14.2 million in 3Q18 compared with S$9.9 million in the previous corresponding period and 41% to S$36.1 million in 9M18 against S$25.7 million in 9M17 driven by improvement in all business segments in particular, CP and Solar segments.

E&C segment

Revenue for E&C segment increased 7% year-on-year to S$7.0 million in 3Q18 from S$6.6 million in 3Q17 as revenue from the modular construction business help offset shortfall from the steel engineering business.

For 9M18, revenue for E&C segment rose 18% against 9M17 due to the progressive delivery of pre-fabricated bathroom units for the Lendlease Paya Lebar condominium project of the modular construction business help offset shortfalls from the steel engineering business.

Solar Energy segment

Revenue for the Solar Energy segment rose to S$2.5 million in 3Q18 from S$0.04 million in 3Q17 and also jumped to S$5.5 million in 9M18 from S$0.4 million in 9M17 as it starts to deliver delayed projects in 2017 and new contracts secured for 2018.

CP segment

Revenue for CP segment jumped 44% to S$4.5 million in 3Q18 from S$3.1 million in 3Q17 largely driven by increase orders from the plant operations and to a lesser extent from site operations. With improvement in oil prices we are seeing a slow return of confidence and resultant increase in orders of the marine and offshore sectors in particular new vessel builds which our plant operations are dependent on coupled with our success to secure construction and infrastructure projects placing less reliance on the marine and offshore sectors. For the same reasons, revenue for the CP segment in 9M18 jumped 28% against 9M17.

Gross Profit and Gross Margin

Gross Profit From Continuing Operations

Gross Profit From Continuing Operations

For 3Q18, the Group's gross profit surged 118% year-on-year to S$1.7 million, compared with S$0.77 million in 3Q17 and for 9M18, Group's gross profit increased 8% to S$4.8 million from S$4.5 million in 9M17. The increase was mainly attributable to the CP and Solar segments.

E&C segment

For 3Q18, gross profit for E&C segment fell 86% from S$0.5 million in 3Q17 to S$71,000 in 3Q18. This is driven by significant cost overruns for the above-mentioned PBUs project of the modular construction business which offset the positive contribution of the steel engineering business for 3Q18. For 9M18, gross profit for E&C segment fell 74% against 9M17 as both the modular construction and steel engineering businesses contributed to the dismal performance from cost overruns and margin compression faced in the steel engineering business.

Solar Energy segment

For 3Q18 and 9M18, a gross profit was registered for the Solar Energy Segment against an operating loss in the previous year. The significant improvement in gross profit for the solar energy segment is driven by the higher number of projects being executed in 2018 as explained above.

CP segment

CP segment's gross profit jumped 294% to S$1.1 million in 3Q18 from S$0.3 million in 3Q17 and 151% to S$2.8 million in 9M18 from S$1.1 million in 9M17 on the back of the more CP services from the plant operations and a recovery of the site operations in 3Q18. The increased revenue helped improve utilization of the factory capacity and equipment resulting also in 9M18 gross margin increasing to 25.7% from 13.1% a year ago.

Other Income

Other income increased 9% year-on-year from S$0.72 million in 3Q17 to S$0.78 million in 3Q18 mainly due to higher rental and service income and supply of labor from the E&C segment and; wage credit scheme from the CP segment which helped offset lower interest income earned due to lower yield and lower surplus cash placed in fixed deposits. Similarly, for the same reasons, Other income in 9M18 increased 53% to S$2.0 million from S$1.3 million in 9M17.

Selling, Distribution, Administrative and Other Operating Expenses

Expenses and Finance Costs

Total OPEX increased 27% year-on-year from S$3.8 million in 3Q17 to S$4.8 million in 3Q18 and increased 12% from S$10.8m in 9M17 to S$12 million in 9M18, due largely to higher administrative and other operating expenses from the modular construction business of the E&C segment during the development phase of the business.

Selling and distribution expenses decreased by 32% to S$217,000 in 3Q18 due to the absence of a write-down of business development costs for projects for the modular construction business but increased 33% in 9M18, on higher travelling and business development expenses as the Group extends its operations in Asia in particular its modular construction business in the Australasia region.

Administrative expenses increased 16% to S$2.6 million in 3Q18 on higher staff related expenses incurred for the development of the modular construction business of the E&C segment. For the same reason, 9M18, administrative expenses increased 2% in 9M18 to S$6.4m which was soften by cost rationalization measures in the steel engineering business and CP segment and write backs of provisions no longer required.

Other operating expenses increased 58% to S$2.0 million in 3Q18 due largely to higher depreciation expense from the redevelopment of the Hetat office building of the E&C segment and higher operating expenses incurred for the modular construction business during its development phase. For the same reasons, for 9M18, other operating expenses increased 24% to S$4.9 million.

Finance Costs

Finance costs were higher at S$173,000 in 3Q18 and S$379,000 in 9M18 due largely to higher bank borrowings for the redevelopment of the Hetat factory and office building of the E&C segment.

Share of Associates' Results

Share of loss of associated companies was reported in 3Q18 and 9M18 due largely from the loss registered from the Group's investment in the hydro-power business and from the joint venture with Yokomori which are still at its development phase.

Financial Position and Cash Flow Analysis

Non-current assets increased S$5.1 million from S$145.3 million as at 31 December 2017 to S$150.4 million as at 30 September 2018. This was mainly due to purchase of a piece of land (S$6.4 million) for modular construction development purpose in Gold Coast, Australia; increase in fixed assets of S$3.6 million; decrease in value of Associate companies from dividends received and capital reduction; increase in other receivable of $1.5 million from prepaid development costs of the Bangladesh and Vietnam solar projects offset by the 9M18 depreciation expense of fixed assets of S$3.8 million.

Current assets decreased S$14.7 million from S$108.2 million as at 31 December 2017 to S$93.5 million as at 30 September 2018. This was mainly due to lower cash and cash equivalents of S$11.6 million for the purchase of the land (S$6.4 million) as mentioned above and cash used for working capital needs.

Current liabilities of the Group decreased S$12.8 million from S$39.8 million as at 31 December 2017 to S$27 million as at 30 September 2018. This was mainly due to:

  1. Settlement of trade payables and accruals of S$0.9 million largely from the E&C segment;
  2. Decrease in other payables of S$2.8 million relating largely to the non-controlling shareholder interests in the Bangladesh solar project has been adjusted following the acquisition of additional 10% equity interests by the Group from the non-controlling shareholder in 2018
  3. Reclassification of S$10 million of term loan to non-current liabilities following the transfer of construction loan to a term loan by the bank following the completion of the redevelopment of the Hetat factory and office building.

Non-current liabilities of the Group increased S$11.4 million from S$7.5 million as at 31 December 2017 to S$18.9 million as at 30 September 2018 due mainly to the reclassification of term loan from current liabilities as explained above.

Shareholders' equity decreased to S$197.9 million as at 30 September 2018 from S$203.3 million as at 31 December 2017. The decrease was largely attributed to the loss for the Group in the nine months and the dividends paid during the year.

Commentary

The Group is expected to continue to incur a loss for 4Q18 and for FY 2018.

For the Engineering & Construction segment (E&C), the Cosa Hotel project had completed its installation program for 88 rooms in August over 6 days period and is on course to deliver the turnkey project in 1H19. The delay of the delivery from 4Q18 to 1H19 is attributed to the building consent application with the New Zealand building council took longer than expected (being an unconventional construction methodology and a first modular hotel in Christchurch). The contribution from Cosa Hotel, now expected to be only marginal due to the delays and holding costs as mentioned above will be recognized in 1H19 upon the certificate of completion issued being a design and build turnkey project. With the work in progress on other projects on hand and in the pipeline, we expect to see improvement in results for the E&C segment that is attributable to the modular construction business from FY 2019.

For the Group's solar energy segment, the momentum of securing new orders for roof-top solar projects in Singapore has gained paced and we remain cautiously optimistic that this segment will be profitable for the Group in FY 2018. For the 50MW Bangladesh solar farm project which had face delays due to outstanding land issues, regulatory approvals, delay in obtaining financing and inclement weather conditions as announced on 23 October 2018, the Group will continue to focus on securing the project extension for the Commercial Operation Date with the relevant authorities.

For the Group's Corrosion Prevention (CP) business, with some confidence seen returning to the marine and offshore sectors boosted by the gradual recovery of oil prices, we remain cautiously optimistic that our CP business will improve over last year. The Group will continue its cost rationalisation exercise and enhance productivity to maintain an appropriate and efficient cost structure while it focuses on expanding and diversifying its customer base.


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