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Full Year Financial Statements and Dividend Announcement for the financial year ended 31 December 2017

Financials Archive

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Profit & Loss

Profit & Loss



Comprehensive Income

Comprehensive Income



Balance Sheets

Balance Sheet

Review of Performance


Review of Income Statement

The Group recorded revenue of S$117.4 million for the financial year ended 31 December 2017 ("FY2017"), a decrease of S$11.6 million, or 9.0% as compared to S$129.0 million in the financial year ended 31 December 2016 ("FY2016"). The decrease in revenue was due mainly to absence of income from a number of larger projects in Aircon division in FY2017 as a substantial part of works was completed in FY2016. Revenue from the Paint segment and Investment segment was relatively stable for FY2017 as compared to FY2016.

Gross profit margins improved by 2.4 percentage points from 11.4% in FY2016 to 13.8% in FY2017. The Group's Aircon division had secured higher margin projects in FY2017 as compared to FY2016.

Other income decreased by S$1.1 million or 65.0% to S$0.6 million. Other income in FY2016 related mainly to reversal of payables in Cambodia, government grants and gain on disposal of motor vehicles which did not recur in FY2017.

Administrative expenses increased by S$1.8 million or 12.1% to S$17.1 million due mainly to higher legal and professional fees relating to the corporate exercises, claims and litigation that the Group was involved in. Higher staff related expenses and depreciation from the newly acquired property at 87 Defu Lane 10 also contributed to the increase in administrative expenses.

Other expenses decreased by S$6.4 million or 62.6% to S$3.9 million. In FY2016, the Group made a S$2.0 million provision for onerous contract in relation to the non-cancellable sales and leaseback transaction for its Natural Cool Lifestyle Hub building under the Investment segment, S$1.6 million impairment of goodwill in the Paint segment, S$3.8 million impairment in the shares of an available-forsale investment ("AFS"), HMK Energy Pte Ltd, and S$1.3 million of net change in fair value of zerocoupon convertible bonds ("CB"). The decrease of other expenses in FY2017 was mainly due to the nonrecurrence of impairment of goodwill in the Paint segment and impairment in AFS, lower provision of onerous contract and lower net change in fair value of CB. The decrease was partially offset by impairment loss on intangible assets under Paint Division, higher impairment loss on property, plant and equipment amounting to S$1.9 million mainly arising from the planned sale of 38 Lok Yang Way as these assets' recoverable amounts were below book values, and higher allowance for inventory obsolescence due to slow moving inventory under Paint and Aircon divisions.

Income tax credit was due mainly to reversal of deferred tax liabilities as the property at 38 Lok Yang Way was reclassified to asset held for sale in FY2017.

Arising from the above, the Group reported a loss after income tax of S$5.4 million in FY2017.

Review of Statements of Financial Position

Property, plant and equipment increased by S$12.6 million to S$34.1 million as at 31 December 2017 due mainly to purchase of a property located at 87 Defu Lane 10. The increase was offset by an impairment loss of S$1.8 million and a reclassification of the property and the related plant and equipment at 38 Lok Yang Way, which is expected to be sold in 2018, to asset held for sale.

Trade and other receivables increased by S$2.0 million to S$21.5 million as at 31 December 2017 due mainly to higher Aircon sales towards the end of FY2017 as compared to 31 December 2016. The increase was also due to GST refund receivable on the recently acquired property at 87 Defu Lane 10.

Trade and other payables decreased by S$1.8 million to S$35.0 million as at 31 December 2017 due mainly to lower unearned revenue from customers of the Aircon division.

Loans and borrowings (comprising current and non-current) increased by S$11.7 million to S$24.8 million due mainly to the loan drawn down for the purchase of 87 Defu Lane 10, partially offset by early settlement of bank loans for properties at 42 Toh Guan Road East. Bank loan secured on the asset held for sale (property at 38 Lok Yang Way) has also been reclassified and presented as a separate line item as "loan associated with asset held for sale".

Provisions (comprising current and non-current) increased by S$1.6 million to S$3.6 million due mainly to provision made on reinstatement of the Group's leased Natural Cool Lifestyle Hub building located at 29 Tai Seng Avenue and other provisions.

Review of Statement of Cash Flows

In FY2017, the Group recorded net cash outflow of S$1.8 million before changes in working capital.

Our net working capital outflow was due mainly to increase in trade and other receivables of S$1.8 million comprising S$1.2 million of GST refund receivable on our recently acquired 87 Defu Lane 10 and higher sales towards the end of FY2017 not due for collection as at 31 December 2017 and decrease in trade and others payables of S$0.8 million from lower unearned revenue from customers of the Aircon division.

The Group recorded net cash used in investing activities of S$20.1 million in FY2017 mainly due to the purchase of the property at 87 Defu Lane 10.

The Group recorded net cash generated from financing activities of S$11.0 million in FY2017 due mainly to the proceeds from a property loan to finance the purchase of the property at 87 Defu Lane 10.



Commentary

The Board of Directors of the Company expects the Group's operating environment and conditions to be challenging for the next 12 months. The Group will continue to enhance its efforts to promote sales and margins by improving operational efficiency and rationalising cost structure in order to enhance our competitiveness.