Unaudited Third Quarter Financial Statements Announcement
For The Quarter Ended 31 December 2017
Statement Of Comprehensive Income
3QFY2018 vs 3QFY2017
The Group's revenue in the quarter ended 31 December 2017 ("3QFY2018") increased by 1% to S$122.9 million, compared with revenue posted in the corresponding quarter ended 31 December 2016 ("3QFY2017") of S$121.5 million.
A breakdown of the Group's revenue by business segments is set out below:
Crane Rental revenue increased by 2% to S$31.0 million in 3QFY2018, mainly attributable to higher crane utilisation rates in Malaysia and Australia as a result of new projects undertaken during the period, partially offset by lower activity levels in Batam and Hong Kong, as well as lower rental rate in Singapore.
Tower Crane Rental division posted an increase of 17% in revenue to S$32.1 million in 3QFY2018 mainly attributable to higher tonnage rented out from an enlarged fleet.
General Equipment Rental division recorded a healthy 23% increase to S$14.3 million in 3QFY2018, mainly due to improved utilisation rate as well as commencement of new projects arising from increased infrastructure spending.
Revenue from Distribution division in 3QFY2018 recorded a decrease of 13% to S$45.5 million mainly due to lower crane equipment sales in Malaysia, Thailand and other overseas markets such as Japan, Middle East, Bangladesh, the Philippines and Europe, partially offset by higher sales in Australia. Revenue in 3QFY2017 had included sales of excavators in Vietnam and parts in the Asean region, businesses which the Group had exited in June 2017 and September 2017 respectively.
Gross profit improved 8% to S$34.1 million in 3QFY2018 on the back of improved margins from all divisions in Australia and stable margin from the Tower Crane Rental division, partially eroded by lower margins from the Crane Rental and Distribution divisions in the ASEAN region.
The Group's other operating income in 3QFY2018 amounted to S$2.7 million, compared to S$16.3 million in 3QFY2017 which had included one-off items on recovery of receivables amounting to S$6.5 million under guarantee and a gain of S$5.2 million on the disposal of a property in Australia.
The Group's total operating costs decreased by 18% to S$33.3 million in 3QFY2018 due primarily to savings in manpower costs and lower provision for doubtful debt, partially offset by foreign exchange losses of S$1.1 million compared with a gain of S$4.6 million in 3QFY2017. In addition, 3QFY2017's operating costs included impairment losses of S$1.2 million.
Finance costs in 3QFY2018 of S$5.2 million was slightly lower than 3QFY2017 primarily due to the repayment of loans, partially offset by higher interest rates.
The Group recorded a pre-tax loss of S$1.2 million in 3QFY2018 compared with S$2.9 million profit in 3QFY2017 as a result of weak performance of the Distribution division in the Asean region, lower gross profit of the Crane Rental division in the Asean region, lower other operating income, foreign exchange losses, lower share of profit from associates and joint ventures, partially compensated by an improvement in gross profit of divisions in Australia and China and savings in operating costs.
Loss attributable to shareholders in 3QFY2018 was S$2.4 million compared with a net attributable profit of S$0.2 million posted in 3QFY2017.
9MFY2018 vs 9MFY2017
The Group's revenue in the 9 months ended 31 December 2017 ("9MFY2018") increased by 5% to S$365.5 million, compared with revenue posted in the corresponding 9 months ended 31 December 2016 ("9MFY2017") of S$348.1 million.
A breakdown of the Group's revenue by business segments is set out below:
Crane Rental 9MFY2018 revenue fell by 7% to S$94.4 million compare to 9MFY2017, mainly due to lower rental rate in Singapore, lower activity levels in Batam and Hong Kong, partially compensated by higher utilisation rates in Malaysia and Australia.
Tower Crane Rental division posted 12% increase in revenue to S$86.8 million in 9MFY2018 mainly attributable to higher tonnage rented out from an enlarged fleet.
General Equipment Rental division recorded a healthy 27% increase to S$42.9 million in 9MFY2018, mainly due to improved utilisation rate as well as commencement of new projects arising from increased infrastructure spending.
Revenue from Distribution division in 9MFY2018 recorded an increase of 5% to S$141.5 million mainly due to higher equipment and parts sales in Australia and Singapore, partially offset by lower demand for cranes in Thailand and Malaysia and other overseas markets such as Japan, Middle East, Bangladesh, the Philippines and Europe. 9MFY2017 also included sales of excavators in Vietnam and parts in the Asean region, businesses which the Group had exited in June 2017 and September 2017 respectively.
While gross profit in 9MFY2018 remained comparable, gross profit margin declined. Lower profit margins were recorded by the Crane Rental and Distribution divisions of the Asean Group, as well as the Tower Crane Rental division. These were compensated by improved margins from all business divisions in Australia.
The Group's other operating income in 9MFY2018 amounted to S$10.0 million, compared to 9MFY2017's S$24.9 million which had included one-off items on recovery of receivables amounting to S$6.5 million under guarantee and a gain of S$5.2 million on disposal of a property in Australia. In addition, lower grant income was received in 9MFY2018 compared to 9MFY2017.
The Group's total operating costs fell 10% in 9MFY2018 as a result of savings in manpower, transport and insurance costs, as well as lower impairment charges and provision for doubtful debt, partially offset by a legal claim and higher repair and maintenance costs.
Finance costs in 9MFY2018 of S$16.0 million were slightly lower than 9MFY2017 primarily due to the repayment of loans, partially offset by higher interest rates.
In 9MFY2018, the Group's pre-tax loss was S$7.2 million compared to 9MFY2017's S$4.5 million pre-tax loss as a result of lower other operating income partially compensated by lower operating costs and higher share of profits from associates and joint ventures.
Loss attributable to shareholders in 9MFY2018 was S$10.3 million compared with net attributable loss of S$8.8 million in 9MFY2017.
(as at 31 December 2017 vs 31 March 2017)
- The decrease of S$46.4 million in the Group's net carrying amount of property, plant and equipment was mainly attributable to the disposals of property, plant and equipment, depreciation charges, partially offset by the additions of property, plant and equipment and transfers from inventories.
- Equipment with a net book value of S$1.2 million previously reclassified as "Assets held for sale" was subsequently disposed for a cash consideration of approximately S$1.7 million.
- Inventories increased by approximately S$1.3 million due to additions of inventories in Australia partially offset by prudent inventory purchases as well as the disposal of subsidiaries.
- Trade and other receivables increased by approximately S$18.2 million largely due to higher tax recoverable, advances to suppliers, related companies' receivables and amount owing by a joint venture partially offset by lower sundry debtors.
- Trade and other payables increased by S$16.6 million largely due to purchase of inventories and equipment.
- Total financial liabilities decreased by S$34.9 million mainly due to net debt repayment.
- Net gearing as at 31 December 2017 was 0.54 times (31 March 2017: 0.57 times).
As at 31 December 2017, the Group recorded cash and cash equivalents of S$111.6 million of which S$21.2 million was earmarked for certain banking facilities. The net increase of S$5.5 million in cash and cash equivalents during 3QFY2018 resulted mainly from proceeds from disposal of property, plant and equipment and net cash inflow from operating activities, partially offset by the net repayment of bank loans, finance lease obligations and interests and purchases of property, plant and equipment and intangible assets.
Overall, whilst the business climate for the crane rental market and other sectors in which the Group operates in the People's Republic of China and Australia is positive, there may be pockets of weaknesses arising from challenging market conditions in certain parts of the ASEAN region and newly announced environmental regulations affecting the Beijing area.
For the Crane Rental Division, while market sentiments are improving in Australia, market weakness and competitive pricing pressures are expected to continue in certain parts of the ASEAN region.
As for the Tower Crane Rental Division in China, there is a strong pipeline of committed projects in the building, infrastructure, transport and power generation sectors.
Further, infrastructure spending in Australia is increasing, which the General Equipment Rental Division hopes to take advantage of.
As for the Distribution Division, demand in Australia is improving, though continued weakness in the heavy equipment market is expected to continue in the ASEAN region.
Notwithstanding the above, the Group will continue its fleet rationalisation activities. The Group will also continue to take advantage of its strong China presence to explore opportunities in China's Belt and Road Initiative.
Other Matters On 11 January 2018, Oversea-Chinese Banking Corporation Limited ("OCBC Bank") made an announcement (the "Pre- Conditional Offer Announcement"), for and on behalf of THSC Investments Pte. Ltd. (the "Offeror"), that subject to and contingent upon the satisfaction of the Pre-Conditions (as defined in the Pre-Conditional Offer Announcement), the Offeror intends to make a voluntary conditional cash offer (the "Offer") for all the issued and paid-up ordinary shares (the "Shares") in the capital of the Company, other than those Shares already held by the Company as treasury shares and those Shares already held, directly or indirectly, by the Offeror as at the date of the Offer. The Offeror is owned by Standard Chartered Private Equity (Singapore) Pte. Ltd. ("SCPE") and TH60 Investments Pte. Ltd. ("TH60").
The Offer will not be made unless and until all the Pre-Conditions have been satisfied on or before 5.00 p.m. on 11 July 2018, being the date falling six months from the date of the Pre-Conditional Offer Announcement, or such other date as SCPE and TH60 may mutually agree in writing in consultation with the Securities Industry Council of Singapore.
One of the Pre-Conditions to the Offer is the Offeror being informed in writing by or on behalf of the Australian Competition and Consumer Commission (the "ACCC") that the ACCC will not oppose the Offeror acquiring the equity securities in the Company (the "ACCC Clearance Condition"). On 25 January 2018, OCBC Bank announced, for and on behalf of the Offeror, that the ACCC Clearance Condition has been satisfied (the "Update Announcement").
Please refer to the Pre-Conditional Offer Announcement and the Update Announcement, copies of which are available on the website of the Singapore Exchange Securities Trading Limited at http://www.sgx.com, for further information on the Offer.