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Full Year Financial Statements For The Year Ended 31 May 2018

Financials Archive

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Profit and Loss

Consolidated Statement of Comprehensive Income

Balance Sheet

Review of Performance

Income Statement

Review of the performance

INCOME STATEMENT

Review for 4Q FY17 vs 4Q FY16

Revenue

For the financial year ended 31 May 2018 (“FY18”), the Group’s revenue increased by 27.3% year-on-year to S$71.5 million, up from S$56.1 million in financial year ended 31 May 2017 ("FY17"). The increase was attributed to higher revenue contribution from its ready-mix concrete manufacturing plant, Wuzhou Xing Jian Readymix Co., Ltd ("Wuzhou Xing Jian") and the full year contribution from its port operations service provider, TNS Ocean Lines (S) Pte Ltd ("TNS"), which was acquired at end of the 2nd quarter of FY17. The increase was partially offset by the decrease in storage and handling revenue from the warehousing & logistics segment amidst intense competition in the industry.

Cost of sales

Cost of sales increased by 31.2% from S$44.7 million in FY17 to S$58.7 million in FY18 on the back of higher operational expenses. The increase mainly came in tandem with higher revenue from GKE Express Logistics Pte Ltd and Wuzhou Xing Jian as it increase its production.

Gross Profit

Gross profit increased by 12.1% from S$11.4 million in FY17 to S$12.8 million in FY18. The Group's gross margin declined from 19.6% in FY17 to 17.7% in FY18, mainly due to lower gross margin from the third party logistics segment due to increase in depreciation of property, plant and equipment but is offset by improved gross margin from Wuzhou Xing Jian.

Other Income

Other income increased by 46.8% from S$1.1 million in FY17 to S$1.6 million in FY18. This was mainly due to gain on disposal of property, plant and equipment, net exchange gain, government grants and insurance claims.

Marketing and Distribution Expenses

Marketing and distribution expenses declined by 17.5% to S$0.2 million in FY18, down from S$0.3 million in FY17. This was mainly due to lower expenses incurred on marketing from Wuzhou Xing Jian and TNS.

Administrative Expenses

Administrative expenses increased by 13.8% to S$13.6 million in FY18 from S$12.0 million in FY17. This was mainly due to the amortisation of intangible assets, provision for compensation and increase in staff cost due to acquisition of TNS.

Finance Costs

Finance cost increased by 26.5% to S$1.9 million in FY18 from S$1.5 million in FY17. The increase was mainly due to the financing cost incurred for loans taken for the construction of 39 Benoi Road property and borrowings cost for working capital requirement at Wuzhou Xing Jian. The increase was partially offset by lower interest expense arising from the refinancing of the loan for a property.

Other Expenses

There were no other expenses in FY18 as net foreign exchange gain in FY18 was classified as other income. Net exchange gain of S$0.2 million in FY18 compared to net exchange loss of S$0.3 million in FY17.

Share of Results of Associate

The Group reported a loss of S$337,000 from its share of results of associate as compared to gain of S$7,000 in FY17. This was due to lower margin from the storage and shipment of metals and lower exchange gain.

Loss from discontinued operation

The discontinued operation recorded a loss of S$7.5 million in FY18 compare to a loss of S$41,000 in FY17. The increase in the loss was mainly due to the share of loss of $2.7 million from the Ocean Latitude Limited due to depressed chartering rate for its 83,000m3 liquefied gas carrier vessel and the loss of $4.8 million from the divestment of the Group's 50% stake in Ocean Latitude Limited, which holds the Gas Aries, liquefied gas carrier vessel.

Tax expense

Tax expenses increased compare to last year due to the reversal of over provision in respect of prior years tax expenses and higher deferred tax credit in FY17. Tax expenses in FY18 were derived from profitable subsidiaries.

Loss for the year attributable to owners of the Company

Taking into account of the above, the Group recorded a net loss attributable to owners of the Company of S$10.6 million in FY18, compared with a net loss attributable to owners of the Company of S$2.3 million in FY17. The net loss was mainly due to the loss on discontinued operation of S$7.5 million, amortisation of customer relationships of S$1.2 million and losses from third party logistics segment which was partially offset by the increase in profit from the infrastructural logistics segment.

Other comprehensive income

Other comprehensive income for foreign currency translation and revaluation gain on property, plant and equipment was a result of the translation of the financial statement of the foreign subsidiary and foreign associates, and revaluation gain from 39 Benoi Road property.

Review for 4Q FY2018 vs 4Q FY2017

Revenue

The Group's revenue grew 10.7% to S$18.6 million for the fourth quarter ended 31 May 2018 ("4Q FY18") from S$16.8 million for the fourth quarter ended 31 May 2017 ("4Q FY17"). The increase was mainly driven by higher revenue contributions from its readymix concrete manufacturing plant, Wuzhou Xing Jian, as it ramped up production progressively, coupled with an increase in storage, handling and transportation revenue from the third party logistics segment. The increase is partially offset by lower revenue from our port operation.

Cost of sales

Cost of sales increased by 15.7% from S$13.2 million in 4Q FY17 to S$15.2 million in 4Q FY18. The increase is in tandem with the increase in revenue coupled with an increase in depreciation due to the readiness of 39 Benoi Road property.

Gross Profit

The Group's gross profit decreased by 7.0 % from S$3.7 million in 4Q FY17 to $3.5 million in 4Q FY18 which was mainly due to lower revenue contribution from TNS. The composite gross margin decreased from 22.1% in 4Q FY17 to 18.5% in 4Q FY18. The decrease mainly due to lower gross margin from third party logistics segment offset by improvement in gross margin from Wuzhou Xing Jian.

Other Income

Other income increased slightly from S$0.6 million in 4Q FY17 to S$0.8 million in 4Q FY18. The increase was mainly due to increased government grants and net exchange gain.

Marketing and Distribution Expenses

Marketing and distribution expenses decreased by S$90,000 to S$57,000 in 4Q FY18, mainly due to lower expenses on marketing for Wuzhou Xing Jian and TNS.

Administrative Expenses

Administrative expenses decreased by 14.3% from S$4.3 million in 4Q FY17 to S$3.7 million in 4Q FY18. This was mainly due to lower amortisation of intangible assets - customer relationship.

Finance Costs

Finance costs increased by 58.2% from S$0.4 million in 4Q FY17 to S$0.6 million in 4Q FY18. The increase was mainly due to the loans taken for the construction of 39 Benoi Road property during the year.

Other Expenses

There were no other expenses in 4Q FY18 as it was net foreign exchange gain in 4Q FY18 and was classified as other income. Net exchange gain in 4Q FY18 was S$0.1 million compare to net exchange loss in 4Q FY17 was S$0.1 million

Share of Results of Associate

The share of loss from associates increased mainly due to a decrease in the revenue for storage and shipment of metals.

Loss from discontinued operation

Loss from discontinued operation due to the divestment of Ocean Latitude, increased to S$0.2 million in 4Q FY18 compared to S$0.1 million in 4Q FY17 due to the lower chartering rates secured in 4Q FY18 compared to 4Q FY17.

Tax expenses

Tax expenses increased compare to last year same quarter due to the reversal of over provision of prior years tax expenses and higher deferred tax credit in 4Q FY17. Tax expenses in 4Q FY18 were derived from profitable subsidiaries.

Loss attributable to owners of the Company

As a result of the above, the Group recorded a net loss attributable to owners of the Company of $0.8 million in 4Q FY18 as compared with a net loss of $0.9 million in 4Q FY17. The decrease in loss was due to reduction in administrative expenses which was partially offset by lower gross profit, increase in tax expenses and higher share of loss of joint venture.

Other comprehensive income

Other comprehensive income for foreign currency translation and revaluation gain on property, plant and equipment was a result of the translation of the financial statement of the foreign subsidiary & foreign associates and revaluation gain from 39 Benoi Road property.

Statement of Financial Position

Non-current assets increased by S$15.6 million or 11.4% from S$137.3 million as at 31 May 2017 to S$152.8 million as at 31 May 2018. This was largely due to the increase in property, plant and equipment arising from the completion of the 39 Benoi Road property, revaluation of 39 Benoi Road property, and the purchase of fixed assets for the Singapore warehouse and drumming operation, and for Wuzhou Xing Jian readymix concrete manufacturing plant in China. The increase was partially offset by the decrease in investment in joint venture by S$9.2 million due to the divestment of joint venture, Ocean latitude Limited, and the amortisation of land use rights and intangible assets.

Current assets increased by $6.1 million or 18.4% from S$32.8 million as at 31 May 2017 to S$38.9 million as at 31 May 2018. The increase mainly due to the increase in inventories from Wuzhou Xing Jian in China, trade and other receivables resulting from (i) higher trade receivables from Wuzhou Xing Jian as a result of higher revenue, and (ii) loan receivable of S$1.4 million due to the Group from Gas Aries Limited, a subsidiary of Ocean Latitude Limited, and the increase in cash and cash equivalents from S$10.6 million as at 31 May 2017 to S$12.6 million as at 31 May 2018 mainly due to sale proceeds from the disposal of 50% shares in Ocean Latitude Limited.

Non-current liabilities increased by S$7.2 million or 13.3% from S$53.8 million as at 31 May 2017 to S$61.0 million as at 31 May 2018. This was due to (i) the increase in other liabilities due to increase in deferred income for the link bridge acess right, (ii) the increase in borrowings to finance the construction of 39 Benoi Road property, and (iii) the increase in deferred tax liabilities mainly due to the revaluation gain of 39 Benoi Road property.

Current liabilities increased by S$14.4 million or 51.6% from S$28.0 million as at 31 May 2017 to S$42.4 million as at 31 May 2018. This increase was mainly due to (i) the increase in trade and other payables mainly from Wuzhou Xing Jian for purchase of raw material, and from newly commenced G-Chem Logistics Pte Ltd, and (ii) increase in other liabilities due to the accrual for the construction of the 39 Benoi Road property, and (iii) the increase in current borrowings due to the reclassification of a non-current term loan due for refinancing within the next twelve months, and additional loans for working capital purposes in the Group’s subsidiaries in Singapore. This was offset by a decrease in finance lease due to its repayment, and decrease in tax payable as taxes were paid and there was lower tax provision for FY2018.

Shareholder's equity decreased from S$83.1 million as at 31 May 2017 to S$82.7 million as at 31 May 2018. The decrease was mainly due to the loss for the financial year, which was partially offset by the increase in other reserves due to revaluation reserves from the revaluation gain of 39 Benoi road property.

Statement of Cash Flows

FY2018 vs FY2017

The Group's net cash generated from operating activities in FY18 was S$6.0 million. This comprised of positive operating cash flows before changes in working capital of S$8.6 million, adjusted by a decrease in net working capital flow of S$137,000 and interest received and income tax paid of S$29,000 and S$2.5 million, respectively.

Net cash used in investing activities was S$18.1 million in FY18. This was mainly due to the cash outlay for the redevelopment of the 39 Benoi Road property and the purchase of fixed assets of S$20.0 million. This was partially offset by proceeds from the divestment in shareholding of joint venture, Ocean Latitude Limited S$1.5 million and proceeds from the disposal of fixed assets of S$0.5 million.

Net cash generated from financing activities was S$14.1 million in FY18. This was mainly due to proceeds from bank borrowings of S$22.4 million for the construction of the 39 Benoi Road property, which was partially offset by the the repayment of loans, finance leases and interest expenses.

4Q FY2018 vs 4Q FY2017

The Group’s net cash generated from operating activities for 4Q FY18 was S$5.7 million. This comprised positive operating cash flows before changes in working capital of S$2.9 million, adjusted by an increase in net working capital flow of S$2.9 million, and interest received and income tax paid of S$27,000 and S$0.2 million, respectively.

Net cash used in investing activities of S$0.2 million in 4Q FY18 was mainly due to the cash outlay for the redevelopment of the 39 Benoi Road property and the purchase of equipment and motor vehicles during the quarter offset by proceeds from disvestment in Ocean Latitude Limited.

Net cash generated from financing activities of S$1.2 million in 4Q FY18 was mainly due to the proceeds from bank borrowings for the construction of 39 Benoi Road property and purchase of fixed assets S$3.0 million, which was partially offset by the repayment of loans and finance leases, and interest paid.

Commentary

The Group remains cautious as the global economic and business environment become more volatile and challenging due to the escalation of trade war between US and China. The Group will manage its operating costs and continue to drive synergies among the subsidiaries within its core warehousing & logistics division.