Unaudited Second Quarter Financial Statements Announcement
For The Quarter Ended 30 September 2017
Statement Of Comprehensive Income
The Group's revenue in the quarter and half year ended 30 September 2017 ("2QFY2018" and "1HFY2018" respectively) increased by 13% and 7% to S$124.3 million and S$242.6 million, compared with revenue posted in the corresponding quarter and half year ended 30 September 2016 ("2QFY2017" and "1HFY2017" respectively) of S$109.8 million and S$226.6 million.
A breakdown of the Group's revenue by business segments is set out below:
Crane Rental revenue fell by 6% and 12% to S$32.0 million and S$63.4 million in 2QFY2018 and 1HFY2018 respectively, mainly due to lower rental rate in Singapore, lower activity levels in Batam and the completion of projects in Hong Kong, mitigated by higher crane utilisation rates in Malaysia and Australia.
Tower Crane Rental division posted an 11% and 9% increase in revenue to S$28.2 million and S$54.7 million in 2QFY2018 and 1HFY2018 respectively, mainly attributable to higher tonnage rented out from an enlarged fleet.
General Equipment Rental division recorded a healthy 34% and 30% increase to S$14.6 million and S$28.6 million respectively in 2QFY2018 and 1HFY2018 respectively, mainly due to improved utilisation rate as well as commencement of new projects arising from increased infrastructure spending.
Revenue from Distribution division in 1QFY2018 and 1HFY2018 also recorded increases of 25% and 16% to S$49.4 million and S$96.0 million respectively, mainly due to higher equipment and parts sales in Australia, partially offset by lower demand for cranes in Thailand, Vietnam and other overseas markets such as Middle East, the Philippines and Bangladesh.
Gross profit improved 4% to S$35.7 million in 2QFY2018 on the back of better margins from the Crane Rental and General Equipment Rental 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, as well as Distribution division in Australia. On the other hand, gross profit in 1HFY2018 declined 4% to S$66.1 million due to lower profit margins recorded by all divisions with the exception of the Crane Rental and General Equipment Rental divisions in Australia.
While the Group's other operating income in 2QFY2018 of S$3.5 million was comparable to 2QFY2017, the decrease of 15% to S$7.3 million in 1HFY2018 was mainly attributable to lower grant income received in 1QFY2018.
The Group's total operating costs increased by 4% to S$37.0 million in 2QFY2018 due primarily to foreign exchange losses of S$0.9 million compared with a gain of S$2.1 million in 2QFY2017 as well as the accrual for legal claim of S$1.8 million, partially mitigated by savings in manpower costs and the lack of impairment losses. On the other hand, total operating costs fell 6% in 1HFY2018 as savings in manpower and insurance costs as well as the lack of impairment charges were partially offset by the accrual for legal claim and higher repair and maintenance costs.
Finance costs in 2QFY2018 and 1HFY2018 of S$5.4 million and S$10.8 million were comparable to 2QFY2017 and 1HFY2017 respectively as the effect of loan repayment was offset by higher interest rates compared with the same period a year earlier.
The Group recorded a pre-tax loss of S$2.7 million in 2QFY2018 compared with S$3.5 million in 2QFY2017 as a result of an improvement in gross profit and share of profit from associates and joint ventures, partially eroded by higher operating costs. In 1HFY2018, pre-tax loss was S$6.0 million compared with S$7.3 million as lower gross profit for the period under review were compensated by lower operating costs and higher share of profits from associates and joint ventures.
Loss attributable to shareholders in 2QFY2018 and 1HFY2018 narrowed to S$2.8 million and S$7.9 million from S$5.4 million and S$9.0 million, respectively, compared with previous corresponding periods.
(as at 30 September 2017 vs 31 March 2017)
- The decrease of S$28.6 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.
- 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 decreased by approximately S$6.4 million due to net disposals of inventory in Singapore and Australia and prudent inventory management, as well as disposal of subsidiaries.
- Trade and other receivables increased by approximately S$9.4 million largely due to higher tax recoverable, advances to suppliers and sundry debtors and amount owing by a joint venture offset by lower trade receivables.
- Trade and other payables increased by S$2.3 million largely due to purchase of inventories and equipment.
- Total financial liabilities decreased by S$29.3 million mainly due to net repayment.
- Net gearing as at 30 September 2017 was 0.55 times (31 March 2017: 0.57 times).
As at 30 September 2017, the Group recorded cash and cash equivalents of S$107.2 million of which S$21.6 million was earmarked for certain banking facilities. The net decrease of S$9.9 million in cash and cash equivalents during 2QFY2018 resulted mainly from the net repayment of bank loans, finance lease obligations and interest, partially offset by proceeds from the disposal of property, plant and equipment and net cash inflow from operating activities.
Whilst the Group expects steady growth of its tower crane rental business in the People's Republic of China and an improvement in the performance of its businesses in Australia, pockets of weaknesses arising from challenging market conditions in certain parts of the ASEAN region and newly announced environmental regulations affecting the Beijing area may impact the Group's overall performance.
The Crane Rental Division is expected to benefit from improving market sentiments in Australia, however, market weakness and competitive pricing pressures are expected to continue in certain parts of the ASEAN region.
The Tower Crane Rental Division in China is expected to perform satisfactorily on the back of a strong pipeline of committed projects in the building, infrastructure, transport and power generation sectors.
The increase in infrastructure spending in Australia is expected to lift revenues from the General Equipment Rental Division.
Whilst the Distribution Division will benefit from improved demand in Australia, 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.