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Financial Statements and Dividend Announcement for Year Ended 31 December 201 7

Financials Archive

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Statement of Comprehensive Income

Financials

Balance Sheet

Financials

Review of Performance

  • Review of Performance

    Results for 4Q2017 versus 4Q2016

    Revenue and Gross Profit

    The Group's revenue increased 17% from S$35.8 million in the quarter ended 31 December 2016 (4Q2016) to S$42.0 million in the quarter ended 31 December 2017 (4Q2017). This was driven by a 37% increase in average selling price which more than compensated a 14% reduction in sales volume, caused mainly by lower export sales as compared to 4Q2016.

    The Group recorded gross profit of S$2.8 million in 4Q2017 compared to S$1.9 million in 4Q2016. The gross profit margin improved to 6.7% in 4Q2017 comared with 5.3% for 4Q2016, mainly due to higher average selling price.

    Other Operating Income

    Other operating income decreased to S$2.2 million in 4Q2017 from S$2.9 million in 4Q2016. The decrease was mainly attributed to the decline in warehousing and rental income of S$0.3 million and absence of foreign exchange gain of S$0.6 million in 4Q2017, which partially offset the increase in other income of S$0.2 million.

    Distribution, Administrative, Other Operating and Finance Expenses

    The Group's distribution expenses increased by S$0.2 million in 4Q2017 due to higher demand for out-sourced logistics services to support the increase in local sales volume.

    Administrative expenses increased by 22% from S$2.0 million in 4Q2016 to S$2.4 million in 4Q2017, mainly due to the increase in professional fee and staff cost amounting to S$0.4 million.

    There were no significant changes in other operating expenses and finance costs in 4Q2017 compared to previous corresponding quarter.

    Profitability

    The Group posted a net profit after tax of S$0.09 million in 4Q2017 compared to a net profit after tax of S$0.8 million in 4Q2016 due to reasons afore-mentioned and the absence of share of profits from associates of S$0.5 million.

    Results for FY2017 versus FY2016

    Revenue and Gross Profit

    The Group achieved revenue of S$162.6 million in FY2017 as compared to S$108.5 million in FY2016, contributed by 12% increase in sales volume and 34% increase in average selling price in FY2017 in line with the increase in international steel prices.

    Gross profit increased to S$9.7 million in FY2017 from S$6.0 million in FY2016, driven by higher revenue registered in FY2017 and slight improvement in gross profit margin for the current financial year.

    Other Operating Income

    Other operating income decreased 12% from S$9.9 million in FY2016 to S$8.7 million in FY2017. This was mainly due to lower warehousing and rental income, reduced gain from disposal of fixed assets and other miscellaneous income amounting to S$1.6 million. These reductions were partially offset by the fair value gain on forward currency contracts of S$0.4million.

    Distribution, Administrative, Other Operating and Finance Expenses

    The Group's distribution expenses went up to S$0.6 million in FY2017 from S$0.2 million in FY2016, in tandem with the increase in sales volume.

    Administrative expenses increased by 6% from S$8.1 million in FY2016 to S$8.6 million in FY2017, mainly due to increase in headcount and staff costs.

    Other operating expenses increased from S$9.0 million in FY2016 to S$21.2 million in FY2017, primarily due to expenses incurred in relation to the following extraordinary items:

    1. On 9 September 2017, the Company announced that it had entered into a conditional agreement with Esteel Enterprise Pte. Ltd. (“Purchaser”) to dispose of all the 42,145,518 ordinary shares held by its subsidiary, HG Metal Pte Ltd, in the issued and paid-up share capital of BRC Asia Limited (“BRC”) at the consideration of S$0.925 per BRC Share. The disposal was duly approved by the Company's shareholders at the extraordinary general meeting (“EGM”) held on 25 October 2017. In view of the disposal, the Group recognised an impairment loss of S$10.0 million in FY2017 in respect of the remaining carrying value of its investment in BRC and the proceeds from the disposal of S$38.98 million. Pursuant to the disposal, BRC ceased to be an associated company of the Group.
    2. In line with the disposal of the BRC shares, the currency translation reserve and fair value reserve of S$0.7 million previously recorded in other comprehensive income were reclassified to other operating expenses.
    3. On 4 October 2017, the Company announced that its associated company, Pos-Sea Pte Ltd had initiated a capital reduction exercise to cancel 490,000 shares held by the Company and to return the USD490,000 share capital invested by the Company. The capital reduction was completed on 13 November 2017 and POS-SEA Pte. Ltd. had since then ceased to be an associated company of the Group. The Group recognised an impairment loss of S$0.1 million during FY2017 in respect of the carrying value of the investment in Pos-Sea and the proceeds from the capital reduction.

    The Group made full repayment of certain bank loans in last financial year. This led to the decline in finance expenses in FY2017 as compared to FY2016.

    Profitability

    The Group posted a net loss after tax of S$12.0 million in FY2017 as compared to a net profit after tax of S$0.9 million in FY2016, mainly due to the impairment loss for the disposal of its equity interest in an associated company, BRC and decline in share of profit from associates of S$2.4 million.

  • Balance Sheet

    As at 31 December 2017, the Group's inventory on hand increased to S$17.6 million as compared to S$14.2 million as at 31 December 2016. This was a result of stock replenishments to support the increase in business volume in FY2017.

    Trade and other receivables increased to S$44.3 million as at 31 December 2017 as compared to S$34.8 million as at 31 December 2016 in line with increase in sales activities of FY2017.

    Trade and other payables increased to S$14.5 million as at 31 December 2017 compared to S$14.0 million as at 31 December 2016.

    There were no outstanding bank borrowings as at 31 December 2017.

  • Statement of Cash Flows

    The net cash flows used in operating activities was S$13.6 million in FY2017 as compared to net cash flows used in operating activities of S$8.6 million in FY2016. This was mainly attributable to the increase in trade and other receivables and inventories of S$10.0 million and S$4.1 million respectively, offset by increase in trade and other payables of S$0.6 million.

    Net cash flows generated from investing activities for FY2017 was S$27.9 million, mainly derived from proceeds from disposal of shares in associates of S$39.7 million after offsetting fixed deposit pledged with banks of S$12.5 million.

    Net cash flows used in financing activities for FY2017 was S$16.4 million, primarily for cash distribution to shareholders of S$13.4 million, dividend payment of S$0.6 million and net repayment of bank borrowings of S$2.0 million.

    The Group's cash and cash equivalents was S$28.8 million as at 31 December 2017 in comparison to S$30.7 million as at 31 December 2016.

  • Commentary

    Singapore's GDP expanded by 3.6% in 2017, mainly fuelled by the uptick in manufacturing segment. Growth however is expected to decelerate in 2018 over the concerns that the trade-driven lift from electronics manufacturing might fizzle out. Thinktank BMI Research forecasts Singapore's real GDP growth to grow at a slower pace of 3% in 2018 largely due to the concerns over weakness in the construction sector.

    Amidst such concerns, the Singapore government is committed to support the construction sector by boosting public sector construction project awards. The Building and Construction Authority (BCA) projected that total value of construction contracts to be awarded in 2018 will be in the range between S$26 billion and S$31 billion, an increase from the S$24.5 billion awarded in 2017. In line with this, the government measures to bring forward certain public sector projects would bring a much needed boost to the sector. Industry players however are cautiously optimistic about the latest BCA forecast as it would take time for the positive outlook to translate to job volume and construction contract awards.

    On the other hand, Singapore's marine and offshore is expected to remain in the initial recovery stage amid rising oil prices in recent months.

    In the light of the afore-mentioned, the Group expects the operating environment for the steel industry to remain challenging. The volatility in US Dollar and international steel prices, intensifying local competition will continue to pose challenges to the businesses of the Group. Notwithstanding the challenges faced, the Group will remain focused in growing its core businesses and will position itself to take advantage of the recovery in demand whenever such opportunities arise.

    The Group will continue to seek growth opportunities, locally or overseas.