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Financials

Third Quarter Financial Statements For The Period Ended 28 February 2018

Financials Archive

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Profit and Loss

Consolidated Statement of Comprehensive Income

A statement of financial position

Review of Performance

Income Statement

9M FY2018 vs 9M FY2017

The Group recorded a 34.4% increase in revenue to S$52.8 million for the nine months ending 28 February 2018 ("9M FY18"), up from S$39.3 million for the nine months ending 28 February 2017 ("9M FY17"). This was mainly due to the full nine months contribution from its port operations service provider, TNS Ocean Lines (S) Pte Ltd ("TNS"), which was acquired at end of the 2nd quarter of FY2017, as well as higher revenue contribution from its ready-mix concrete manufacturing plant, Wuzhou Xing Jian Readymix Co., Ltd ("Wuzhou Xing Jian") on increased production. 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 increased by 37.6% from S$31.6 million in 9M FY17 to S$43.5 million in 9M FY18 on the back of higher operational expenses.

Gross profit increased by 21.3% from S$7.7 million in 9M FY17 to S$9.3 million in 9M FY18. The Group's gross margin declined from 19.6% in 9M FY17 to 17.7% in 9M FY18, mainly due to lower gross margin from the warehousing & logistics segment.

Other income was higher at S$0.8 million in 9M FY18 as compared to S$0.5 million in 9M FY17, due to the gain on disposal of property, plant and equipment, consultancy fees and additional income including government grants and insurance claims.

Marketing and distribution costs decreased 9.4% from S$213,000 in 9M FY17 to S$193,000 in 9M FY18. This was mainly due to lower expenses incurred on marketing for Wuzhou Xing Jian and TNS.

Administrative expenses increased significantly from S$7.6 million in 9M FY17 to S$15.5 million in 9M FY18. This was mainly due to a S$5.6 million provision for impairment loss in the joint venture for the liquefied gas carrier vessel, Ocean Latitude Limited ("Ocean Latitude"), as well as increases in depreciation of property, plant and equipment and amortisation of intangible assets.

Finance costs increased by 15.1% from S$1.1 million in 9M FY17 to S$1.3 million in 9M FY18, mainly due to additional financing cost incurred for loans taken for the construction of 39 Benoi Road property and the increase in interest expense on higher borrowings for working capital purposes at Wuzhou Xing Jian. The increase was partially offset by lower interest expense arising from the refinancing of the loan for a property.

There were no other expenses in 9M FY18 as net foreign exchange gain was classified as other income.

The share of loss from associates, GKE Metal Logistics Pte Ltd ("GKE Metal"), reversed from a profit of S$20,000 in 9M FY17 to a loss of S$0.2 million in 9M FY18. This was due to a decline in gross margins from storage and shipment of metals, and lower exchange gains.

The share of results of joint venture reversed from a profit of S$58,000 in 9M FY17 to a loss of S$1.7 million in 9M FY18. This was due to the protracted slowdown in the oil and gas industry, which resulted in significantly lower chartering rates secured in 9M FY18 compared to that in the previous corresponding period.

Taking into consideration the aforementioned, the Group recorded a net loss attributable to owners of the Company of S$9.8 million in 9M FY18 as compared with a net loss of S$1.4 million in 9M FY17. The net loss was mainly due to the provision for impairment loss amounting to S$5.6 million, share of loss of joint venture amounting to S$1.7 million, amortisation of customer relationships of S$1.0 million, and losses from the warehousing and logistics segment, which was partially offset by the increase in profit from the infrastructual logistics segment.

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 of a property.

3Q FY2018 vs 3Q FY2017

The Group's revenue grew 8.3% to S$17.3 million for the third quarter ended 28 February 2018 ("3Q FY18") from S$16.0 million for the third quarter ended 28 February 2018 ("3Q FY17"). The increase was mainly driven by higher revenue contributions from Wuzhou Xing Jian and GKE Express Logistics Pte Ltd ("GKE Express Logistics"), but partially offset by lower revenue contribution particularly from TNS.

Cost of sales in 3Q FY18 increased by 10.7% to S$14.1 million from S$12.7 million in 3Q FY17. The increase was due to higher operational expenses in line with higher revenue from Wuzhou Xing Jian and GKE Express Logistics.

The Group's gross profit decreased by 1.1% to S$3.2 million in 3Q FY18 from S$3.3 million in 3Q FY17. This was due to lower revenue contribution from TNS. The composite gross margin decreased from 20.4% in 3Q FY17 to 18.6% in 3Q FY18.

Other income arising from interest income, government grants, gain on disposal of fixed assets and net exchange gain, increased from S$136,000 in 3Q FY17 to S$198,000 in 3Q FY18. The increase was mainly due to a net exchange gain of $59,000.

Marketing and distribution costs fell by 48.9% from S$133,000 in 3Q FY17 to S$68,000 in 3Q FY18. This was mainly due to the decrease in marketing expenses incurred by TNS.

Administrative expenses decreased 17.2% from S$3.2 million in 3Q FY17 to S$2.7 million in 3Q FY18. This was mainly due to the reversal of provision for impairment loss on investment in the joint venture of $0.7 million.

Finance costs increased from S$0.4 million in 3Q FY17 to S$0.5 million in 3Q FY18, with additional financing cost incurred for a loan taken for the construction of 39 Benoi Road property.

The share of results of associates, GKE Metal, reversed from a profit of S$103,000 in 3Q FY17 to a loss of S$109,000 in 3Q FY18. This was mainly due to the decrease in gross margins from storage and shipment of metals.

The share of results of joint venture was a loss of S$0.5 million in 3Q FY18 as the chartering rate for the liquefied gas carrier vessel was renewed at a slightly higher chartering rate compared to 3Q FY17.

As a result of the above, the Group recorded a net loss attributable to owners of the Company of S$0.8 million in 3Q FY18 as compared to a net loss of S$0.9 million in 3Q FY17.

Statement of Financial Position

Non-current assets increased S$16.7 million from S$137.3 million as at 31 May 2017 to S$154.0 million as at 28 February 2018. The increase was mainly due to (i) an increase in property, plant and equipment arising from the completion of the 39 Benoi Road property, and (ii) the purchase of fixed assets for the operations in Wuzhou Xing Jian in China and for the warehousing & logistics division in Singapore. The increase was partially offset by (i) the decrease in investment in joint venture due to the impairment loss of S$5.6 million and the share of loss for the period under review, and (ii) the decrease in land use rights and intangible assets due to amortisation.

Current assets decreased S$1.3 million from S$32.8 million as at 31 May 2017 to S$31.5 million as at 28 February 2018. This was mainly due to the decline in cash and cash equivalents from S$10.6 million as at 31 May 2017 to S$5.9 million as at 28 Febraury 2018, which was used for the repayment of borrowings upon the completion of the redevelopment of 39 Benoi Road property and the purchase of fixed assets. The decrease was offset by the increase in trade and other receivables resulting from (i) higher trade receivables from Wuzhou Xing Jian due to higher revenue, and (ii) an additional loan of S$1.4 million due to the Group from Gas Aries Limited ("Gas Aries"), a subsidiary of Ocean Latitude.

Non-current liabilities increased from S$53.8 million as at 31 May 2017 to S$57.5 million as at 28 February 2018. The increase was mainly due to additional loans for the construction of 39 Benoi Road property and additional finance leases for purchase of fixed assets. This increase was partially offset by the reclassification of the final installment of a term loan to current borrowings, as well as the repayment of borrowings and purchase of fixed assets.

Current liabilities increased S$18.0 million from S$28.0 million as at 31 May 2017 to S$46.0 million as at 28 February 2018. The increase was mainly due to (i) the reclassification of a non-current term loan due for renewal within the next twelve months, and additional loans for working capital purposes in the Group’s subsidiaries in Singapore and Wuzhou Xing Jian, and (ii) increase in other liabilities due to accrual for the construction of 39 Benoi Road property. This was offset by a decrease in tax payable as taxes were paid.

Shareholder's equity decreased from S$88.3 million as at 31 May 2017 to S$82.1 million as at 28 February 2018. The decrease was mainly due to the losses for the period under review.

Statement of Cash Flows

9M FY2018 vs 9M FY2017

During 9M FY18, the Group's net cash generated from operating activities was S$0.3 million. This comprised positive operating cash flows before changes in working capital of S$5.7 million, adjusted by net working capital outflow of S$3.1 million and income tax paid of S$2.3 million.

Net cash used in investing activities was S$17.9 million in 9M FY18. This was mainly due to the cash outlay for the redevelopment of 39 Benoi Road property, and the purchase of fixed assets of S$18.3 million during the financial period under review.

Net cash generated from financing activities was S$12.9 million in 9M FY18. This was mainly due to the proceeds from bank borrowings of S$19.5 million for the completion of 39 Benoi Road property, working capital purposes in Wuzhou Xing Jian and Gas Aries, which was partially offset by the repayment of loans, finance leases and interest expenses.

3Q FY2018 vs 3Q FY2017

The Group's net cash used in operating activities for 3Q FY18 was S$5.4 million. This comprised positive operating cash flows before changes in working capital of S$2.4 million, adjusted by net working capital outflow of S$5.9 million and income tax paid S$1.9 million.

Net cash used in investing activities of S$2.2 million in 3Q FY18 was mainly due to the cash outlay for the redevelopment of 39 Benoi Road property and the purchase of fixed assets.

Net cash generated from financing activities of S$7.3 million in 3Q FY18 was mainly due to the proceeds from bank borrowings of $9.8 million for the completion of 39 Benoi Road property, working capital purposes in Wuzhou Xing Jian and Gas Aries, which was partially offset by the repayment of loans and finance leases, and interest paid.

Commentary

The construction of the vehicular link to connect the 40-foot container ramp from 39 Benoi Road warehouse property to that of 30 Pioneer Road warehouse property is completed and awaiting for the lodgement of easement by Viva Industrial Real Estate Investment Trust ("VI-REIT"). Upon the lodgement, VI-REIT shall pay the Group S$3 million and share the maintenance and repair costs of the ramp.

The Group has on 6 April 2018 announced the notice of the extraordinary general meeting on 23 April 2018, to seek shareholders’ approval for the proposed divestment of its 50% stake in the joint venture, Ocean Latitude Limited, which holds the liquefied gas carrier vessel.

The Group will continue to rationalise its business operations to focus on driving growth from its core warehousing and logistics business amid the challenging market dynamics in the warehousing and logistics industry.

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