REVENUE AND GROSS PROFIT
The economic and industry climate that prevailed
throughout the year has had a considerable impact
on the Group’s clients.
The Group’s business continues to be affected by the
decline in global steel prices and subdued demand
for steel products. For the year ended 31 December
2015, the Group’s revenue decreased to S$127.9
million from S$187.9 million in FY2014, due to lower
steel prices and a 19% reduction in sales volume.
The Group’s gross profit declined by 55% from
S$11.3 million in FY2014 to S$5.0 million in view
of lower sales revenue. Gross profit margin saw a
dip from approximately 6.0% to 3.9% due to the
decline of steel prices and efforts to clear slow
moving stocks at lower selling prices and an increase
in export sales with lower gross profit margin.
OTHER OPERATING INCOME
Other operating income increased 60% from S$5.6
million in FY2014 to S$8.9 million in FY2015, mainly
due to increased warehouse rental and services
income.
KEY EXPENSES
Compared to revenue, the Group’s selling and
distribution expenses in FY2015 had declined to
S$0.8 million, from S$1.7 million in FY2014, in line
with the lower Group’s revenue.
Lower headcount and a reduction in other
administrative expenses saw administrative
expenses decrease by 11% from S$10.5 million last
year to S$9.3 million in FY2015.
Other operating expenses also saw a decline to
S$12.3 million in FY2015 from S$25.3 million in
FY2014. This was mainly due to lower provision
for inventory and provision for doubtful debts by
S$7.6 million and S$2.5 million respectively as well
as reduced provision for impairment fixed assets of
S$1.1 million in FY2015 compared to FY2014.
Lower financial expenses were incurred in FY2015
as compared to FY2014 as a result of repayment of
bank borrowings.
NET PROFIT AFTER TAX
The Group recorded a net loss after tax of S$5.6
million in FY2015, compared to a loss of S$16.8
million in FY2014, mainly attributed to lower
revenue and gross profit margin offset by lower
provision made in FY 2015 and lower cost incurred
by the Group.
BALANCE SHEET
As at 31 December 2015, inventory level stood
at S$5.4 million compared with S$28.1 million in
FY2014, as a result of our ongoing efforts to clear
slow moving inventories and also lower purchase
activities during the year.
Trade and receivables stood at S$31.9 million as
at 31 December 2015, as compared to S$35.5
million as at 31 December 2014. This is in line with
the Group’s lower revenue and improved debt
collection.
Trade and other payables saw a dip from S$25.5
million as at 31 December 2014 to S$8.9 million as at
31 December 2015 due to lower purchase volume.
During the year, the Group paid down bank
borrowings using internally generated funds.
Accordingly, total bank borrowing decreased to
S$6.8 million as at 31 December 2015, from S$12.7
million a year ago.
CASH POSITION
In FY2015, net cash inflows generated from
operating activities was S$1.7 million, compared to
S$65.3 million in FY2014. This was mainly attributed
to a decrease in inventories of S$19.4 million and
a decrease in trade and other receivables of S$3.5
million, which was offset by a decrease in trade and
other payables of S$16.6 million.
Net cash flows used in financing activities was
S$6.2 million in FY2015, mainly due to substantial
repayment of the Group’s bank borrowings of S$5.9
million.
The Group maintained healthy cash position of
S$50.5 million as at 31 December 2015 as compared
to S$52.7 million as at 31 December 2014. This
strong cash position will enable the Group to pursue
future growth opportunities when they arise.
08
OPERATING &
FINANCIAL REVIEW
HG METAL MANUFACTURING LIMITED
ANNUAL REPORT 2015