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Financial Statements And Related Announcement - Second Quarter And/ Or Half Yearly Results

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Statement Of Comprehensive Income For The Second Quarter ("2Q2017") And Half Year Ended 31 March 2017 ("1H2017")

Statements of Financial Position

Review on Group's Financial Results

Revenue

6 months ended 31 March 2017 (1H2017) vs 6 months ended 31 March 2016 (1H2016)

The Group's revenue increased by approximately S$1.6 million or 3.1% from approximately S$52.0 million in 1H2016 to approximately S$53.6 million in 1H2017. The increase in revenue was from our Facilities Management Business and Logistics Services Business, partially offset by the decrease in revenue from the Space Optimisation Business in the Industrial Properties.

(a) Space Optimisation Business

Industrial Properties

Revenue derived from Industrial Properties decreased by approximately S$4.7 million or 17.6% from approximately S$26.7 million in 1H2016 to approximately S$22.0 million in 1H2017. The decrease in revenue was mainly due to the expiry of some head leases and movement of tenants arising from renewal of sub-leases.

The average occupancy rate of industrial properties managed by the Group in 1H2017 was approximately 89%.

Commercial Properties

Revenue derived from Commercial Properties remained unchanged at S$11.8 million for 1H2016 and 1H2017.

The average occupancy rate of the Group's commercial properties was approximately 90% in 1H2017.

Residential Properties

Revenue derived from Residential Properties increased by approximately S$0.5 million or 166.7% from approximately S$0.3 million in 1H2016 to approximately S$0.8 million in 1H2017. The increase was mainly due to increase in rental income from our Residential Property in Myanmar.

(b) Facilities Management Business

Revenue derived from our Facilities Management Business increased by approximately S$2.0 million or 33.9% from approximately S$5.9 million in 1H2016 to approximately S$7.9 million in 1H2017. The increase was mainly due to an increase in revenue from security services and car park management services. The increase in revenue from car park management services was due to increase in car park rate of its existing sites and new car parks managed by our Group.

(c) Logistics Services Business

Revenue derived from our Logistics Services Business increased by approximately S$3.8 million or 52.1% from approximately S$7.3 million in 1H2016 to approximately S$11.1 million in 1H2017. The increase in revenue was mainly from our container depot business arising from increase in demand of storage and repairs of leasing containers contributed by slow-down of shipments worldwide and transportation services.

Cost of sales increased by approximately S$1.9 million or 4.9% from approximately S$38.3 million in 1H2016 to approximately S$40.2 million in 1H2017. The increase in cost of sales was mainly due to an increase in upkeep and maintenance costs of approximately S$0.8 million, transportation costs of approximately S$0.7 million, direct labour cost of approximately S$0.3 million and sub-contractor costs of approximately S$0.1 million, in line with the increase in revenue.

In view of the above mentioned, gross profit decreased by approximately S$0.2 million from approximately S$13.6 million in 1H2016 to approximately S$13.4 million in 1H2017.

Other operating income decreased by approximately S$0.3 million or 18.6%, from approximately S$1.6 million in 1H2016 to approximately S$1.3 million in 1H2017. The decrease was mainly due to lower government grant received.

Selling and distribution expenses decreased by approximately S$0.5 million or 46.5% from approximately S$1.1 million in 1H2016 to approximately S$0.6 million in 1H2017. The decrease was mainly due to decrease in agent commission of approximately S$0.5 million.

Administrative expenses increased by approximately S$1.5 million or 16.3% from approximately S$9.5 million in 1H2016 to approximately S$11.0 million in 1H2017. The increase in administrative expenses was mainly due to increase in employee benefit cost of approximately S$1.1 million, professional fees of approximately S$0.2 million and increase in miscellaneous expenses of approximately S$0.4 million. The increase was partially offset by a decrease in depreciation of approximately S$0.2 million.

Other operating expenses increased by approximately S$0.1 million or 283.3% from approximately S$0.1 million in 1H2016 to approximately S$0.2 million in 1H2017.

Finance costs remained relatively unchanged at approximately S$0.3 million in 1H2016 and 1H2017.

Share of results of associates and joint ventures increased by approximately S$3.8 million from approximately S$0.02 million in 1H2016 to S$3.8 million in 1H2017. The increase was mainly due to a non-recurring gain of approximately S$3.8 million representing our proportionate share of the excess of the net fair value of the joint venture's identifiable assets and liabilities over the cost of investment following the finalisation of the purchase price allocation exercise.

Fair value loss on investment properties of approximately S$1.4 million in 1H2017 was mainly due to the decrease in valuation of industrial property in Singapore of approximately S$0.5 million and the decrease in valuation of commercial property in Indonesia of approximately S$0.9 million.

As a result of the aforementioned, the Group's profit before income tax increased by approximately S$0.7 million or 15.7% from approximately S$4.3 million in 1H2016 to approximately S$5.0 million in 1H2017.

Taxation decreased by approximately S$0.3 million from S$0.3 million in 1H2016 to approximately S$0.05 million in 1H2017. The decrease was mainly due to lower taxable profit and higher Group Relief received.

3 months ended 31 March 2017 (2Q2017) vs 3 months ended 31 March 2016 (2Q2016)

The Group's revenue increased by approximately S$1.1 million or 4.3% from approximately S$26.0 million in 2Q2016 to approximately S$27.1 million in 2Q2017. The increase was due to increase in revenue from our Facilities Management Business and Logistics Services Business, partially offset by the decrease in revenue from the Space Optimisation Business in the Industrial Properties.

(a) Space Optimisation Business

Industrial Properties

Revenue derived from Industrial Properties decreased by approximately S$2.4 million or 17.9% from approximately S$13.4 million in 2Q2016 to approximately S$11.0 million in 2Q2017. The decrease in revenue was mainly due to the expiry of some head leases and movement of tenants arising from renewal of sub-leases.

Commercial Properties

Revenue derived from Commercial Properties remained unchanged at S$5.8 million in 2Q2016 and 2Q2017.

Residential Properties

Revenue derived from Residential Properties increased by approximately S$0.5 million or 500.0% from approximately S$0.1 million in 2Q2016 to approximately S$0.6 million in 2Q2017. The increase was mainly due to increase in rental income from our Residential Property in Myanmar.

(b) Facilities Management Business

Revenue derived from our Facilities Management Business increased by approximately S$1.1 million or 36.7% from approximately S$3.0 million in 2Q2016 to approximately S$4.1 million in 2Q2017. The increase was mainly due to an increase in revenue from security services and car park management services. The increase in revenue from car park management services was due to increase in car park rate of its existing sites and new car parks managed by our Group.

(c) Logistics Services Business

Revenue derived from our Logistics Services Business increased by approximately S$1.9 million or 51.4% from approximately S$3.7 million in 2Q2016 to approximately S$5.6 million in 2Q2017. The increase revenue was mainly from our container depot business arising from the increase in demand of storage and repairs of leasing containers contributed by slow-down of shipments worldwide and transportation services.

Cost of sales increased by approximately S$1.3 million or 6.9% from approximately S$18.8 million in 2Q2016 to approximately S$20.1 million in 2Q2017. The increase in cost of sales was mainly due to an increase in upkeep and maintenance costs of approximately S$0.5 million, rental costs of approximately S$0.3 million, transportation costs of approximately S$0.2 million, direct labour cost of approximately S$0.2 million and sub-contractor costs of approximately S$0.1 million, in line with the increase with revenue.

In view of the above mentioned, gross profit decreased by approximately S$0.2 million from approximately S$7.2 million in 2Q2016 to approximately S$7.0 million in 2Q2017.

Other operating income decreased by approximately S$0.6 million or 58.3%, from approximately S$1.0 million in 2Q2016 to approximately S$0.4 million in 2Q2017. The decrease was mainly due to lower government grant received.

Selling and distribution expenses decreased by approximately S$0.2 million or 41.1% from approximately S$0.5 million in 2Q2016 to approximately S$0.3 million in 2Q017. The decrease was mainly due to decrease in agent commission of approximately S$0.2 million.

Administrative expenses increased by approximately S$0.6 million or 11.1% from approximately S$5.1 million in 2Q2016 to approximately S$5.7 million in 2Q2017. The increase in administrative expenses was mainly due to increase in employee benefit cost of approximately S$0.5 million, professional fees of approximately S$0.1 million and miscellaneous expenses of approximately S$0.1 million. The increase was partially offset by a decrease in depreciation of approximately S$0.1 million.

Other operating expenses increased by approximately S$0.1 million or 278.6% from approximately S$0.04 million in 2Q2016 to approximately S$0.1 million in 2Q2017.

Finance costs remained relatively unchanged at approximately S$0.2 million in 2Q2016 and 2Q2017.

Share of results of associates and joint ventures remained unchanged in 2Q2017 as the operating loss of approximately S$0.3 million was offset by an adjustment of approximately S$0.3 million in relation to the acquisition of Four Star Industries Pte. Ltd.

Fair value loss on investment properties of approximately S$1.4 million in 2Q2017 was mainly due to the decrease in valuation of industrial property in Singapore of approximately S$0.5 million and the decrease in valuation of commercial property in Indonesia of approximately S$0.9 million.

As a result of the aforementioned, the Group's profit before income tax decreased by approximately S$2.7 million from approximately S$2.5 million in 2Q2016 to a loss of approximately S$0.2 million in 2Q2017.

Taxation decreased by approximately S$0.2 million mainly due to lower taxable profit and higher Group Relief received.

Review of Statements of Financial Position

Group

Non-current assets

Non-current assets decreased by approximately S$15.3 million from approximately S$72.4 million as at 30 September 2016 to approximately S$57.1 million as at 31 March 2017. The decrease was mainly due to the reclassification of non-current assets of approximately S$20.0 million to current assets held-for-sale. In addition, there was a decrease in valuation of investment properties of approximately S$1.4 million. The decrease was partially offset by an increase in property, plant and equipment and investment properties of approximately S$1.6 million and an increase in investment in joint ventures of approximately S$4.5 million.

Current assets

Current assets increased by approximately S$18.2 million from approximately S$49.1 million as at 30 September 2016 to approximately S$67.3 million as at 31 March 2017. The increase was mainly due to reclassification of non-current asset classified as held-for-sale of approximately S$20.0 million and an increase in trade and other receivables of approximately S$2.0 million. These were partially offset by the decrease in cash and bank balances of approximately S$3.3 million and prepayments of approximately S$0.5 million.

The increase in trade and other receivables of approximately S$2.0 million was mainly due to an increase in trade receivables of approximately S$1.2 million and other receivables of approximately S$0.8 million, largely attributable to the amount due from joint ventures. Cash and bank balances decreased by approximately S$3.3 million was largely due to the payment of dividend of approximately S$1.6 million and advances to joint ventures of approximately S$1.0 million.

Non-current liabilities

Non-current liabilities decreased by approximately S$0.5 million from approximately S$21.2 million as at 30 September 2016 to approximately S$20.7 million as at 31 March 2017. The decrease was mainly due to repayment of bank borrowings of approximately S$0.9 million partially offset by increase in obligations under finance lease of approximately S$0.4 million.

Current liabilities

Current liabilities decreased by approximately S$0.3 million from approximately S$30.9 million as at 30 September 2016 to approximately S$30.6 million as at 31 March 2017. The decrease was mainly due to decrease in trade and other payables of approximately S$0.6 million partially offset by increase in obligations under finance lease of approximately S$0.2 million and bank borrowings of approximately S$0.1 million.

Review of Statement of Cash Flows

1H2017

In 1H2017, the Group recorded net cash generated from operating activities of approximately S$4.0 million, which was a result of operating cash flows before changes in working capital of S$5.8 million and net working capital outflow of approximately S$1.4 million, adjusted for income tax paid of approximately S$0.1 million and net interest expense paid of approximately S$0.3 million. The Group's working capital outflows were mainly due to an increase in operating receivables of approximately S$0.6 million and a decrease in operating payables of approximately S$0.8 million.

Net cash used in investing activities amounted to approximately S$4.1 million, which was mainly due to the acquisition of property, plant and equipment of approximately S$2.1 million, addition of investment properties of approximately S$1.0 million and advances to joint ventures of approximately S$1.0 million.

Net cash used in financing activities amounted to approximately S$3.2 million, which was due to the repayment of obligations under finance lease of approximately S$0.8 million, repayment of bank borrowings of approximately S$0.8 million and dividend payment of approximately S$1.6 million.

As a result of the above, the cash and cash equivalents decreased by approximately S$3.3 million, amounting to S$16.6 million as at 31 March 2017.

1H2017

In 2Q2017, the Group recorded net cash generated from operating activities of approximately S$0.6 million, which was a result of operating cash flows before changes in working capital of S$2.7 million and net working capital outflow of approximately S$1.9 million, adjusted for net interest expense paid of approximately S$0.2 million. The Group's working capital outflows were mainly due to a decrease in operating payables of approximately S$2.0 million partially offset by decrease in operating receivables of approximately S$0.1 million.

Net cash used in investing activities amounted to approximately S$2.5 million, which was mainly due to the acquisition of property, plant and equipment of approximately S$1.5 million and advances to joint ventures of approximately S$1.0 million.

Net cash used in financing activities amounted to approximately S$2.4 million, which was due to the repayment of obligations under finance lease of approximately S$0.4 million, repayment of bank borrowings of approximately S$0.4 million and dividend paid of approximately S$1.6 million.

As a result of the above, the cash and cash equivalents decreased by approximately S$4.3 million, amounting to S$16.6 million as at 31 March 2017.

Commentary

In its twice yearly Macroeconomic Review released on 25 October 2016, the Monetary Authority of Singapore said the global economy was expected to expand at a "steady but mediocre pace" in 2017 and on the back of this, demand would remain uneven across Singapore's key export markets.

Singapore's small, trade-dependent economy is currently going through a cyclical downturn as trade-related sectors struggle and this has in turn led to a weakening in the performance of Singapore's property rental market across all segments.

As such, we expect demand to remain lacklustre, while the oversupply of commercial and industrial spaces will cause further downward pressure on rents. However, we expect the performance of our Facilities Management Services business and Logistics Services business to remain stable.

On 5 May 2017, the Company announced it was seeking a proposed dual primary listing of its ordinary shares on the Main Board of The Stock Exchange of Hong Kong Limited. The Board believes that having a primary listing status in both Singapore and Hong Kong is beneficial to the Group as this gives it ready access to these different equity markets in the Asia Pacific region as and when opportunities arise and it is also an excellent opportunity for the Group to further enhance its profile as it seeks to further expand regionally.