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Financials

Second Quarter Financial Statements For The Period Ended 30 November 2016

Financials Archive

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Profit and Loss

Consolidated Statement of Comprehensive Income

Balance Sheet

Review of Performance

Income Statement

1H FY2017 vs 1H FY2016

The Group recorded an increase in revenue by 37.6% to S$23.3 million for the six months ending 30 November 2016 ("1H FY17") from S$16.9 million in 1H FY16. The increase was mainly attributed to higher revenue contribution from Marquis Services Pte Ltd ("Marquis") and maiden contribution from the infrastructural materials & service segment.

Revenue for infrastructural materials & services segment was contributed by its wholly-owned ready-mix concrete manufacturing plant, Wuzhou Xing Jian Readymix Co., Ltd ("Wuzhou Xing Jian"), which has commenced commercial production in June 2016.

Cost of sales increased by 48.2% from S$12.7 million in 1H FY16 to S$18.9 million in 1H FY17 on the back of additional expenses from the operations of Marquis and Wuzhou Xing Jian as well as higher warehouse rental expenses.

Gross profit increased by 5.7% from S$4.2 million in 1H FY16 to S$4.4 million in 1H FY17. The Group's gross margin declined from 24.8% in 1H FY16 to 19.1% in 1H FY17, mainly due to lower contribution from local warehousing which partially offset the higher gross profit accounted by Marquis.

Other income was lower at S$0.4 million in 1H FY17 as compared to S$1.7 million in 1H FY16. The decline was due to the absence of the one-time gain of S$1.2 million on the disposal of Everflourish and Maoming as well as higher gain on disposal of property, plant and equipment and net exchange gain recorded in 1H FY16.

Marketing and distribution costs increased from $34,000 in 1H FY16 to S$80,000 in 1H FY17. This was mainly due to higher expenses incurred on marketing for Wuzhou Xing Jian and Van Der Horst Shanghai's warehouse.

Administrative expenses increased marginally by 0.9% from S$4.4 million in 1H FY16 to S$4.5 million in 1H FY17. This was mainly due to increase in staff cost with the addition of Marquis and commencement of operations in Wuzhou Xing Jian as well as the amortisation of intangible assets, which was partially offset by cost management in the third-party logistics segment.

Finance costs reduced by 24.3% from S$1.0 million in 1H FY16 to S$0.8 million in 1H FY17. The reduction was mainly due to the repayment of borrowings undertaken for working capital purposes, which was partially offset by interest expenses incurred from the hire purchase for the ready-mix concrete mixer trucks for Wuzhou Xing Jian and the loan for the acquisition of 7 Kwong Min Road property for Marquis.

Other expenses in 1H FY17 was mainly due to net foreign exchange losses .

The share of results of associates recorded a lower loss of S$83,000 in 1H FY17 compared to a loss of S$0.2 million in 1H FY16. This was due to the gradual improvement of the commodities market in the second quarter that lifted the performance of of GKE Metal Logistics Pte Ltd ("GKE Metal").

The share of results of joint venture posted a profit of S$0.6 million 1H FY17 which was attributable to the charter of the liquefied gas carrier vessel, Gas Aries, from the fourth quarter of FY16.

The Group recorded a net loss of S$0.3 million in 1H FY17 from a net profit of S$0.3 million in 1H FY16

Other comprehensive income for foreign currency translation and share of foreign currency translation of associates was a result of translating the financial statements of the foreign subsidiaries and associates financial statement from its functional currencies into Singapore dollars as at the balance sheet date, for the period under review. The movement was mainly due to fluctuations of functional currencies against Singapore dollars.

2Q FY2017 vs 2Q FY2016

The Group's revenue grew 45.3% to S$11.9 million for the second quarter ended 30 November 2016 ("2Q FY17") from S$8.2 million in 2Q FY16, which saw higher revenue contributions from Marquis and Wuzhou Xing Jian.

Cost of sales in 2Q FY17 increased by 62.9% to S$10.1 million from S$6.2 million in 2Q FY16. The significant increase was due to the additional expenses from the operations of Marquis and Wuzhou Xing Jian, and higher warehouse rental expenses.

For 2Q FY17, the Group's gross profit declined by 9.8% to S$1.8 million from S$2.0 million in 2Q FY16. The decline was mainly due to the decrease in gross margin in local warehousing, which was partially offset by the higher gross margin from Marquis.

Other income was lower at S$0.4 million in 2Q FY17 as compared to S$1.4 million in 2Q FY16 mainly due to the absence of the onetime gain on disposal of Everflourish and Maoming of S$1.2 million recorded in 2Q FY16 .

Marketing and distribution costs increased by 115.0% from S$20,000 in 2Q FY16 to S$43,000 in 2Q FY17. This was mainly due to higher expenses incurred on marketing for Wuzhou Xing Jian and Van Der Horst Shanghai.

Administrative expenses decreased by 1.2% to S$2.3 million in 2Q FY17. The decline was attributable to the cost management in the third-party logistics segment despite the increase in staff cost with the addition of Marquis and commencement of operations in Wuzhou Xing Jian as well as the amortisation of intangible assets.

Finance costs decreased by 37.7% to S$0.3 million in 2Q FY17 from S$0.5 million in 2Q FY16. The reduction was mainly due to the repayment of borrowings and lower property loan interest rate as a result of refinancing, which was partially offset by the interest expense on the loan for the acquisition of 7 Kwong Min Road property for Marquis.

On the back of improving commodities market during the financial period, GKE Metal under the share of results of assoicates reversed from a loss of S$0.2 million in 2Q FY16 to a profit of S$42,000 in 2Q FY17.

Due to the global economic slowdown, the chartering contract of the liquefied gas carrier vessel was renewed at a signifcantly lower charter rate in October 2016, resulting in a loss of S$42,000 from its share of results of joint venture in 2Q FY17.

The Group recorded a net loss of S$0.5 million in 2Q FY17 as compared to a net profit of S$0.4 million in 2Q FY16.

Statement of Financial Position

Non-current assets increased by S$9.6 million from S$112.0 million as at 31 May 2016 to S$121.6 million as at 30 November 2016. This was mainly due to (i) the increase in property, plant and equipment arising from the construction of 39 Benoi Road property and the purchase of equipment for the warehouses in Singapore and the ready-mix concrete manufacturing plant in Wuzhou, China, (ii) the increase in intangible assets due to additional goodwill arose from the acquisition TNS Ocean Lines (S) Pte Ltd ("TNS"), now a wholly-owned subsidiary, (iii) the increase in investment in joint venture from its share of profit, and (iv) the increase in available-forsale due to fair value gain on revaluation of investments. The increase was partially offset by the decrease in investment in associates from the dividend received from GKE Metal and its share of losses.

Current assets decreased by S$8.4 million from S$43.7 million as at 31 May 2016 to S$35.3 million as at 30 November 2016. The decline was mainly due to a decrease in cash and cash equivalents from S$30.8 million as at 31 May 2016 to S$16.9 million as at 30 November 2016, which can be attributed to (i) the construction of 39 Benoi Road property, (ii) the purchase of equipment, (iii) the payment of dividends, (iv) the acquisition of TNS, and (v) the repayment of borrowings and finance leases. The decrease was partially offset by the increase in trade and other receivable arose from the acquisition of TNS during the period under review.

Non-current liabilities increased marginally from S$47.1 million as at 31 May 2016 to S$47.2 million as at 30 November 2016. The marginal increase was mainly due to (i) an increase in borrowings to finance the redevelopment of 39 Benoi Road property and (ii) the increase in finance lease liabilities attributed to the hire purchase of equipment in Wuzhou Xing Jian, which was partially offset by the repayment of borrowings and finance lease liabilities.

Current liabilities increased slightly by S$0.2 million from S$18.6 million as at 31 May 2016 to S$18.8 million as at 30 November 2016. The slight increase was mainly due to (i) the increase in trade and other payables arose from the acquisition of TNS and increase in raw materials purchased by Wuzhou Xing JIan, and (ii) the increase in finance lease liabilities attributed to the hire purchases of equipment in Wuzhou Xing Jian and for operations in Singapore, which was offset by (i) the decrease in other liabilities due to payment of bonus accrued in the previous year, and (ii) the repayment of borrowings and finance lease liabilities.

Shareholder's equity increased from S$85.0 million as at 31 May 2016 to S$85.8 million as at 30 November 2016. The increase was mainly due to (i) the issue of new shares and reissue of treasury shares for the acquisition of TNS, and (ii) the increase in other reserves. This was partially offset by the payment of dividends and share buyback.

Statement of Cash Flows

1H FY2017 vs 1H FY2016

During 1H FY17, the Group recorded net cash used in operating activities of S$0.5 million. This comprised positive operating cash flows before changes in working capital of S$3.3 million, adjusted by net working capital outflow was S$31,000 and interest received and income tax paid of S$33,000 and S$0.5 million, respectively.

Net cash used in investing activities was S$5.6 million in 1H FY17. This was mainly due to the cash outlay for (i) the redevelopment of 39 Benoi Road property, (ii) the acquisition of TNS and (iii) the purchase of equipment, which was partially offset by the receipt of a dividend income from associate of S$0.3 million

Net cash used in financing activities was S$7.7 million in 1H FY17. This was mainly due to (i) the payment of dividends of S$3.8 million, (ii) the fixed deposit charged with the bank of S$2.2 million, and (iii) the repayment of loans and finance leases of $2.6 million, which was partially offset by the increase in bank borrowings of S$1.8 million for the redevelopment of 39 Benoi Road property.

2Q FY2017 vs 2Q FY2016
During 2Q FY17, the Group recorded a net cash flows used in operating activities of S$81,000. This comprised positive operating cash flows before changes in working capital of S$1.2 million, adjusted by a decrease in net working capital outflow of S$0.2 million, interest received and income tax paid of S$17,000 and S$0.3 million, respectively.

Net cash used in investing activities of S$2.4 million in 2Q FY17 was mainly due to (i) the cash outlay for the redevelopment of 39 Benoi Road property, (ii) the acquisition of TNS, and (iii) the purchase of equipment.

Net cash used in financing activities of S$5.5 million in 2Q FY17 was mainly attributed to payment of dividends, repayment of loans and finance leases, and interest paid.

Commentary

The Group expects the macro business outlook for 2017 to be subdued against the backdrop of global economic uncertainties. In addition, rising costs, intensifying competition and lacklustre business sentiment are also expected to have an impact on the operating performance of the Group.

On 30 November 2016, the Group completed its acquisition of TNS, an established port operations and logistics service provider. This acquisition is expected to contribute immediate and stable earnings to the Group from 1 December 2016. The redevelopment of 39 Benoi Road warehouse cum office property is also on track and is expected to be completed by end July 2017.

The Group will continue to implement and monitor our twin-growth engines to achieve stable and sustainable earnings growth in the long term.

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