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Financials

Full Year Financial Statements For The Year Ended 31 May 2017

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

The Group recorded a 57.3% year-on-year increase in revenue to S$16.8 million for the fourth quarter ended 31 May 2017 (“4Q FY17”), compared with S$10.7 million in the fourth quarter ended 31 May 2016 (“4Q FY16”). This was mainly due to higher revenue contributions from the Group’s subsidiaries including chemical warehouse operator, Marquis Services Pte Ltd (“Marquis”), ready-mix concrete manufacturing plant, Wuzhou Xing Jian Readymix Co., Ltd (“Wuzhou Xing Jian”), as well as maiden contribution from port operations service provider, TNS Ocean Lines (S) Pte Ltd (“TNS”). This was partially offset by the decrease in revenue from its warehousing and logistics segment as a result of a sudden reduction for storage space by one key customer during the quarter under review.

Cost of sales

Cost of sales increased by 68.9% from S$7.8 million in 4Q FY16 to S$13.1 million in 4Q FY17. The increase was due to additional operational expenses from Marquis, Wuzhou Xing Jian and TNS as well as higher warehouse rental expenses.

Gross Profit and Gross Margin

The Group’s gross profit increased by 26.7% from S$2.9 million in 4Q FY16 to S$3.7 million in 4Q FY17, driven by higher revenue contribution. The composite gross margin declined from 27.4% in 4Q FY16 to 22.1% in 4Q FY17, which was partially negated by lower margin from the warehousing & logistics segment.

Other Income

Other income decreased from S$14.2 million in 4Q FY16 to S$0.6 million in 4Q FY17. The significant decrease was mainly due to the absence of the one-time gain of S$13.7 million from the disposal of warehouse cum office property at 30 Pioneer Road in 4Q FY16.

Marketing and Distribution Expenses

Marketing and distribution expenses increased by S$40,000 to S$90,000 in 4Q FY17, mainly due to additional expenses incurred by Wuzhou Xing Jian and TNS

Administrative Expenses

Administrative expenses decreased by 48.3% from S$8.3 million in 4Q FY16 to S$4.3 million in 4Q FY17. This was mainly due to the absence of impairment loss of S$3.9 million for investment in GKE Metal Logistics Pte Ltd ("GKE Metal") that was recognised in 4Q FY16. The decrease was partially offset by higher staff costs as a result of the acquisition of TNS and ramp up of production in Wuzhou Xing Jian.

Finance Costs

Finance costs decreased by 17.9% from S$0.5 million in 4Q FY16 to S$0.4 million in 4Q FY17. This was mainly due to the repayment of borrowings and lower property loan interest as a result of refinancing, which was partially offset by the interest expense incurred on hire purchase of equipment and motor vehicles for Wuzhou Xing Jian and operations in Singapore and loan for the acquisition of the 7 Kwong Min Road property for Marquis.

Other Expenses

Other expenses increased by 71.0% from S$0.3 million in 4Q FY16 to S$0.6 million in 4Q FY17. This was mainly due to the fair value loss on contingent consideration of S$0.5 million arising from the appreciation of GKE’s share price for 5,000,000 ordinary shares from $0.077 as at the date of acquisition to $0.17 as at 31 May 2017, that was used as the contingent consideration for the acquisition of Marquis. The contingent consideration arrangement is part of the purchase agreement with the previous owner of Marquis that 5,000,000 ordinary shares shall be issued to the previous owner, if Marquis generates a net profit before tax of $2.8 million or greater for the period from 1 December 2015 to 30 November 2017. This was offset by lower foreign exchange loss.

Share of Results of Associate

The Group reported a loss of S$13,000 from its share of results of associate in 4Q FY17, compared to a loss of S$0.2 million in 4Q FY16. This was due to the gradual improvement in the occupancy rate for the storage of metals under GKE Metal.

Share of Results of Joint Venture

The chartering contract for the liquefied gas carrier vessel was renewed at a prevailing lower charter rate, which led to a loss of S$99,000 from its share of results of joint venture in 4Q FY17.

Net Loss 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$0.9 million in 4Q FY17, reversing from a net profit attributable to owners of the Company of S$6.1 million in 4Q FY16.

Other comprehensive loss 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 from their functional currencies into Singapore dollar as at the balance sheet date, for the period under review. The movement was mainly due to fluctuations of functional currencies against the Singapore dollar.

Review for FY17 vs FY16

Revenue

For the financial year ending 31 May 2017 (“FY17”), the Group’s revenue increased by 52.2% year-on-year to S$56.1 million, up from S$36.9 million in FY16. The increase was attributed to higher revenue contributions from Marquis, maiden contributions from Wuzhou Xing Jian and newly acquired TNS, which was partially undermined by lower revenue from its warehousing and logistics segment.

Cost of sales

Cost of sales increased by 64.6% from S$27.2 million in FY16 to S$44.7 million in FY17. The increase was due to additional operational expenses from Marquis, Wuzhou Xing Jian and TNS as well as higher warehouse rental expenses.

Gross Profit and Gross Margin

The Group reported a gross profit of S$11.4 million in FY17, an increase of 17.5%, from S$9.7 million in FY16. The increase was in tandem with the increase in revenue. Composite gross margin, which was partially negated by lower margin from the local warehousing and logistics segment, decreased from 26.3% in FY16 to 20.3% in FY17.

Other Income

For FY17, other income declined by 93.0% to S$1.1 million, down from S$15.7 million in FY16. This was mainly due to the absence of the one-time gains of S$1.2 million from the disposals of Everflourish and Maoming, and S$13.7 million from the disposal of the warehouse cum office property at 30 Pioneer Road.

Marketing and Distribution Expenses

For FY17, marketing and distribution expenses increased by 146.3% to S$0.3 million from S$0.1 million in FY16. The increase was due to marketing expenses incurred by Wuzhou Xing Jian, Van Der Horst’s warehouse in Shanghai, TNS and Marquis, to increase sales.

Administrative Expenses

For FY17, administrative expenses decreased by 19.9% to S$12.0 million, as compared to S$15.0 million in FY16. This was mainly attributable to the absence of impairment loss of S$3.9 million for investment in GKE Metal recognised in FY16, and effective cost management in the third-party warehousing and logistics segment, partially offset by the increase in staff cost with the addition of Marquis, TNS, and ramp up of production in Wuzhou Xing Jian as well as amortisation of intangible assets.

Finance Costs

Finance costs amounted to approximately S$1.5 million in FY17, a decrease of 25.6% from S$2.1 million in FY16. The reduction was mainly due to the repayment of borrowings undertaken for working capital purposes, partially offset by the interest expense incurred on hire purchase of equipment and motor vehicles for Wuzhou Xing Jian and operations in Singapore and loan for the acquisition of the 7 Kwong Min Road property for Marquis.

Other Expenses

Other expenses increased by S$0.5 million from S$0.3 million in FY16 to S$0.8 million in FY17. This was mainly due to the fair value loss on contingent consideration of S$0.5 million arising from the appreciation of GKE’s share price for 5,000,000 ordinary shares from $0.077 as at the date of acquisition to $0.17 as at 31 May 2017, that was used as the contingent consideration for the acquisition of Marquis. The contingent consideration arrangement is part of the purchase agreement with the previous owner of Marquis that 5,000,000 ordinary shares shall be issued to the previous owner if Marquis generates a net profit before tax of $2.8 million or greater for the period from 1 December 2015 to 30 November 2017.

Share of Results of Associate

The share of results of associate reversed from a loss of S$0.5 million in FY16 to a profit of S$7,000 in FY17, on the back of improved occupancy for the storage of metals under GKE Metal.

Share of Results of Joint Venture

As a result of the subdued economic recovery, the chartering contract for the liquefied gas carrier vessel was renewed at a significantly lower charter rate, resulting in a loss of S$41,000 from its share of results of joint venture in FY17.

Net Loss 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$2.3 million in FY17, compared with a net profit attributable to owners of the Company of S$5.7 million in FY16.

Other comprehensive loss 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 from their functional currencies into Singapore dollar as at the balance sheet date, for the period under review. The movement was mainly due to fluctuations of functional currencies against the Singapore dollar

Statement of Financial Position

Non-current assets increased by S$25.3 million or 22.6% from S$112.0 million as at 31 May 2016 to S$137.3 million as at 31 May 2017. This was largely due to (i) the increase in property, plant and equipment arising from the redevelopment of the 39 Benoi Road property, revaluation of property at 6 Pioneer Walk, and the purchase of fixed assets for the operations in Singapore and the readymix concrete manufacturing plant in Wuzhou, China, (ii) the increase in intangible assets due to additional goodwill arising from the acquisition TNS. The increase was partially offset by the decrease in investment in associate as a result of the dividend received from GKE Metal and its share of translation losses as well as amortisation for land use rights

Current assets decreased by S$10.8 million or 24.8% from S$43.7 million as at 31 May 2016 to S$32.8 million as at 31 May 2017. The decline was mainly due to the decrease in cash and cash equivalents from S$30.8 million as at 31 May 2016 to S$10.6 million as at 31 May 2017, which were deployed for (i) the redevelopment of the 39 Benoi Road property, (ii) the purchase of fixed assets, (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 receivables resulting from (i) the acquisition of TNS, (ii) the commencement of operations in Wuzhou Xing Jian, and (iii) higher loan receivables from Gas Aries, subsidiary of its joint venture Ocean Latitude Limited.

Non-current liabilities increased by S$8.0 million or 17.1% from S$47.1 million as at 31 May 2016 to S$55.1 million as at 31 May 2017. This was due to (i) the increase in borrowings to finance the redevelopment of the 39 Benoi Road property and loans undertaken for working capital purposes in Wuzhou Xing Jian, (ii) the increase in other liabilities resulting from higher construction retention for the 39 Benoi Road property, and (iii) the increase in finance lease liabilities for 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 by S$8.1 million or 43.4% from S$18.6 million as at 31 May 2016 to S$26.7 million as at 31 May 2017. This was mainly due to (i) the increase in trade and other payables as a result of the acquisition of TNS, the commencement of operations in Wuzhou Xing Jian, and amount due to the builder on the redevelopment of the 39 Benoi Road property, (ii) the increase in borrowings undertaken for working capital purposes in Wuzhou Xing Jian, and (iii) the increase in finance lease liabilities for the hire purchase of equipment and motor vehicles for the operations in Wuzhou Xing Jian and operations in Singapore.

Shareholder's equity decreased from S$85.0 million as at 31 May 2016 to S$83.1 million as at 31 May 2017. The decrease was mainly due to the payment of dividends and loss for the financial year, which was partially offset by the issuance of new shares and reissuance of treasury shares for the acquisition of TNS.

Statement of Cash Flows

4Q FY2017 vs 4Q FY2016

The Group’s net cash generated from operating activities for 4Q FY17 was S$0.7 million. This comprised positive operating cash flows before changes in working capital of S$2.1 million, adjusted by a decrease in net working capital outflow of S$1.1 million, and interest received and income tax paid of S$30,000 and S$0.4 million, respectively.

Net cash used in investing activities of S$7.7 million in 4Q FY17 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.

Net cash generated from financing activities for 4Q FY17 was S$4.3 million. This was due to the increase in borrowings of S$6.1 million for the redevelopment of the 39 Benoi Road, which was partially offset by the repayment of loans and finance leases, and interest paid.

FY17 vs FY16

The Group's net cash generated from operating activities in FY17 was S$4.7 million. This comprised of positive operating cash flows before changes in working capital of S$7.2 million, adjusted by net working capital outflow of S$6.0 million and interest received and income tax paid of S$76,000 and S$1.4 million, respectively.

Net cash used in investing activities was S$24.9 million in FY17, mainly due to the cash outlay for (i) the redevelopment of the 39 Benoi Road property, (ii) the acquisition of TNS and (iii) the purchase of fixed assets. This was partially offset by dividend income from associate of S$0.3 million and proceeds from the disposal of fixed assets of S$0.2 million.

Net cash used in financing activities was S$21,000 in FY17. This was mainly due to (i) the payment of dividends of S$3.8 million during the financial year, (ii) the increase in fixed deposits charged with the bank of S$2.2 million, and (iii) the repayment of loans and finance leases of $5.8 million, which was partially offset by the increase in bank borrowings of S$13.4 million for the redevelopment of the 39 Benoi Road property and working capital purposes in Wuzhou Xing Jian.

Commentary

The Group remains cautious as the economic recovery in the region is likely to be subdued with challenging business environments.

The redevelopment of the 39 Benoi Road warehouse cum office property is progressing on schedule and is expected to be completed by end August 2017. The warehousing & logistics segment is looking to lower its cost of operations arising from the external leasing of additional storage space during the redevelopment of the 39 Benoi Road property.

The Group will continue to drive synergies among the subsidiaries within its core warehousing & logistics division, and provide its holistic suite of value-added services for supply chain management. It will also continue to monitor its current portfolio to achieve stable and sustainable earnings growth in the long term.

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