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Condensed Interim Financial Statements for the Six Months and Full Year Ended 31 December 2021

Financials Archive
Condensed interim consolidated statement of profit or loss and other comprehensive income

Financials

Condensed interim statements of financial position

Financials

Review of Performance
  • Review of Performance

    Financial performance of the Group (2H2021 vs 2H2020)

    Revenue and Gross Profit

    The Group reported a 55% surge in revenue to S$74.1 million in 2H2021 from S$47.9 million in 2H2020. The revenue growth was driven by increase in average selling price and improvement in sales volume in 2H2021 as compared to same period last year. The overall gross profit margin for 2H2021 improved to 20.5% from 13.5% in 2H2020, contributed mainly by better profit margin attained for local sales in tandem with improved sales volume, increase in current international steel prices and our lower average cost of material on hand. Hence, the Group’s gross profit surged to S$15.2 million in 2H2021 compared to S$6.5 million in 2H2020.

    Other Operating Income

    Other operating income increased from S$1.6 million in 2H2020 to S$1.8 million in 2H2021. This was mainly attributed to a one-time gain on disposal of property, plant and equipment.

    Selling and Distribution, Administrative, Other Operating and Finance Expenses

    Notwithstanding the increase in sales volume, the Group’s selling and distribution expenses in 2H2021 was lower than 2H2020 mainly due to better utilization of internal resources, leading to less out-sourced logistic services.

    Administrative expenses increased by 45% to S$5.6 million in 2H2021 from S$3.9 million in 2H2020. This was mainly resulted from the increase in salary cost and staff headcount in 2H2021 to support volume growth for local sales.

    Other operating expenses increased from S$1.5 million in 2H2020 to S$1.8 million in 2H2021, mainly due to increase in depreciation and repair and maintenance expenses.

    Total finance costs incurred relate mainly to borrowing for trade financing and term loan from banks as well as construction loan and lease for properties redevelopment. Total finance cost incurred in 2H2021 declined slightly compared to 2H2020 mainly due to decrease in interest incurred for leases, trading financing and construction loan following repayment made and lower borrowing cost.

    Profitability

    Profit before tax of S$6.4 million in 2H2021, was S$4.6 million higher Y-O-Y mainly due to improvement in revenue and gross profit margin.

    Taxation expense was higher at S$0.6 million due to increase in taxable profits for the subsidiary companies.

    The Group recorded a net profit after tax of S$5.9 million in 2H2021, compared to a net profit after tax of S$1.8 million in 2H2020.

    Results for FY2021 versus FY2020

    Revenue and Gross Profit

    The Group’s revenue rose 55% to S$142.3 million in FY2021 from S$91.7 million in FY2020. The revenue growth was in tandem with significant surge in international steel price as well as recovery of construction activities in Singapore in 2021 which bolstered the Group business activities. Sales volume growth was lower in 2H2021 in comparison to 1H2021 due to slow down in construction activities amidst the increase in local COVID-19 cases that negatively impacted the progress of construction projects, leading to an overall increase in sales volume of 14.5% for the full financial year on a Y-O-Y basis, which was lower than our initial estimate.

    The Group’s gross profit margin for FY2021 improved to 20.5% as against 12.1% in FY2020 as result of increase in sales volume and lower average cost of material on hand vis-à-vis significant increase in average selling prices that was led by surge in steel prices. Consequently, the Group’s gross profit reached S$29.2 million in FY2021 from S$11.1 million in FY2020.

    Other Operating Income

    Other operating income declined to S$3.5 million in FY2021 from S$4.6 million in FY2020. This was mainly attributed to the reduction in government grant income of S$0.7 million and warehousing and rental income of S$0.2 million as well as the absence of foreign currency exchange gain of S$0.6 million, partially offset by a one-time gain of S$0.4 million from disposal of property, plant and equipment.

    Selling and distribution, Administrative, Other Operating and Finance Costs

    Total selling and distribution cost incurred in FY2021 was 30% lower than FY2020 due to optimization of internal resources to reduce reliance on out-sourced logistics costs.

    Administrative expenses increased by 29% to S$11.2 million in FY2021 from S$8.7 million in FY2020. This was mainly resulted from the increase in salary cost and staff headcount in FY2021 to support the volume growth for local sales.

    There was no significant change in other operating expenses as compared to prior year.

    Total financing cost incurred in FY2021 was kept consistent as last financial year notwithstanding an overall increase in bank borrowings. This was attributed to lower borrowing cost, shorter trade borrowing duration and repayment made for bank loans and lease liabilities.

    Profitability

    Profit before tax increased S$11.1 million Y-O-Y to S$12.4 million in FY2021 mainly due to improvement in revenue and gross profit margin.

    Full year taxation expense was higher at S$1.3 million due to increase in taxable profits for the year.

    The Group made significant improvement in profitability to achieve a net profit after tax of S$11.2 million in FY2021 in comparison to a net profit after tax of S$1.3 million in FY2020.

  • Balance Sheet

    The Group’s non-current assets increased to S$51.3 million as at 31 December 2021 compared to S$49.1 million as at 31 December 2020, primarily due to increase in investment securities.

    Total current assets as at 31 December 2021 increased to S$120.7 million from S$98.0 million as at 31 December 2020 mainly due to increase in inventories, cash and cash equivalents and deposits pledged with banks, partially offset by reduction in investment securities due to maturity of certain investment securities.

    Total liabilities increased to S$57.8 million as at 31 December 2021 as compared to S$43.2 million as at 31 December 2020. This was mainly due to increase in trade and other payables, bank borrowings and increase in provision for property reinstatement cost.

    As at 31 December 2021, the Group’s inventory on hand increased to S$45.8 million from S$28.1 million as at 31 December 2020. This was attributed to stock replenishment to support future sales activities and significant increase in steel prices.

    Trade and other receivables amounted to S$37.5 million as at 31 December 2021 as compared to S$37.7 million as at 31 December 2020.

    Trade and other payables increased to S$21.5 million as at 31 December 2021 from S$13.2 million as at 31 December 2020 due to increase in stock purchases.

    Bank borrowings increased to S$24.9 million as at 31 December 2021 from S$19.8 million as at 31 December 2020 mainly due to increase in trade financing for stock purchases.

  • Statement of Cash Flows

    Second half year

    The net cash flows generated from operating activities was S$10.8 million in 2H2021 mainly due to profit from operating cash flow offset by increase in net working capital to support the revenue growth.

    Net cash flows used in investing activities for 2H2021 was S$1.4 million. This comprised of fixed deposits of S$1.3 million pledged with banks, purchase property, plant and machinery of S$0.7 million and investment securities of S$4.8 million, partially offset by proceed from disposal of property, plant and equipment of S$0.6 million and proceeds from maturity of investment securities of S$4.8 million.

    Net cash flows used in financing activities for 2H2021 was S$3.1 million, mainly due to amount spent on share buy-back of S$0.4 million, net repayment of S$2.2 million in bank borrowings and repayment of lease of S$0.5 million.

    Full year

    The net cash flows generated from operating activities was S$7.8 million in FY2021 mainly due to profit from operating cash flow offset by increase in net working capital to support the revenue growth.

    Net cash flows used in investing activities for FY2021 was S$2.4 million as compared to S$12.9 million in FY2020. The net cash used in investing activities in FY2021was mainly used to pledge fixed deposit of S$1.3 million with banks, purchase property, plant and equipment, ROU assets, Intangible assets of S$2.6 million and investment securities of S$5.8 million, partially offset by proceed from disposal of property, plant and equipment of S$0.8 million and proceeds from maturity of investment securities of S$6.5 million.

    Net cash flows generated from financing activities for FY2021 was S$2.9 million, mainly due to net proceed of S$4.9 million from bank borrowings which were offset by repayment of lease of S$1.0 million, share buy-back of S$0.4 million and dividend payment of S$0.6 million.

    The resulting net cash generated was a surplus of S$8.2 million for FY2021, leading to higher cash and cash equivalents of S$27.9 million as at 31 December 2021 for the Group in comparison to S$19.5 million as at 31 December 2020.

  • Commentary

    Construction demand is expected to grow in 2022. Based on the media release from the Building and Construction Authority (“BCA”) dated 26 January 2022, total construction demand based on contracts that will be awarded in 2022 is projected at between S$27 billion and S$32 billion. This is around the same level recorded in 2019 prior to the COVD-19 pandemic outbreak. According to the BCA’s estimates, the public sector is expected to contribute about 60 per cent of the total construction demand in 2022, or around S$16 billion to S$19 billion. The construction demand for private sector is estimated to reach between S$11 billion and S$13 billion in 2022, which is comparable with the volume in 2021. Meanwhile, the backlog of works affected by the pandemic since 2020 will also support the anticipated growth in 2022.

    The Group has reported healthy financial results in FY2021, driven by recovery of construction activities along with the easing of COVID-19 restrictions and volume delivery for secured projects that were delayed since the start of the pandemic. The lower inventory holding cost vis-à-vis rising steel prices bolstered the overall profit margin, leading to the substantial improvement in financial results. Despite the positive outlook for local construction demand in 2022, the global economy is expected to remain weak and fluid due to the new Omicron COVID-19 variant. Furthermore, elevated inflation in many countries, the ongoing supply chain disruptions as well as high energy prices in 2022 will have certain impact on the economic recovery in 2022.

    Further, with the average inventory holding cost that is expected to creep up over the coming months, the continuing rising steel prices and supply chain disruptions along with manpower crunch issue faced by the industry, will pose significant headwinds in coming months. Meanwhile, the Group’s business in Myanmar remains operational even though at much lower scale due to the ongoing political crisis and COVID-19 pandemic.

    The Group will endeavour to work on expanding its operational capacity and step up its marketing efforts to capture any business opportunities that may arise. Finally, the Group will continue to focus on optimising the use of its resources and working capital, to further bring down its cost.