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Financial Statements And Related Announcement - Full Yearly Results

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Statement Of Comprehensive Income For The Fourth Quarter ("4Q2017") And Full Year Ended 30 September 2017 ("FY2017")

Statements of Financial Position

Review on Group's Financial Results

Revenue

Full Year ended 30 September 2017 (FY2017) vs Full Year ended 30 September 2016 (FY2016)

The Group's revenue increased by approximately S$1.6 million to approximately S$106.3 million in FY2017 due to increase in revenue from our Facilities Management Business and Logistics Services Business partially offset by the decrease in revenue from the Industrial Properties and Commercial Properties.

(a) Space Optimisation Business

Industrial Properties

Revenue derived from Industrial Properties decreased by 16.9% to approximately S$43.2 million in FY2017 mainly due to the expiry of some head leases, movement of tenants and lower rental rates arising from expiry and renewal of sub-leases.

The average occupancy rate of industrial properties managed by the Group in FY2017 was approximately 88%.

Commercial Properties

Revenue derived from Commercial Properties decreased by 2.1% to approximately S$23.2 million in FY2017 mainly due to the movement of tenants and lower rental rates arising from expiry and renewal of sub-leases.

The average occupancy rate of the Group's commercial properties was approximately 91% in FY2017.

Residential Properties

Revenue derived from Residential Properties increased by 55.6% to approximately S$1.4 million in FY2017 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 38.4% to approximately S$17.3 million in FY2017, mainly due to an increase in demand from security services and car park management services (in the form of management of new car parks), and increase in car park rate of existing car parks managed by our Group.

(c) Logistics Services Business

Revenue derived from our Logistics Services Business increased by 35.9% to approximately S$21.2 million in FY2017, mainly from the increase in transportation services and increase in demand of storage and repairs of leasing containers which in turn was the result of the slow-down of shipments worldwide.

Cost of sales increased by 4.3% to approximately S$80.5 million in FY2017, mainly due to an increase in upkeep and maintenance costs of approximately S$1.3 million, rental costs of approximately S$0.4 million, transportation cost of approximately S$0.9 million and direct labour costs of approximately S$0.6 million.

In view of the above mentioned, gross profit decreased by approximately S$1.7 million from approximately S$27.5 million in FY2016 to approximately S$25.8 million in FY2017.

Other income decreased by 15.7% to approximately S$2.5 million in FY2017 mainly due to a decrease in foreign exchange gain of approximately S$0.3 million and miscellaneous income of approximately S$0.2 million.

Other losses decreased by 29.6% to approximately S$0.2 million in FY2017 mainly due to decrease in impairment loss on trade and other receivables of approximately S$0.2 million.

Selling and distribution expenses decreased by 28.0% to approximately S$1.3 million in FY2017 mainly due to decrease in agent commission of approximately S$0.4 million and marketing expenses of approximately S$0.1 million.

Administrative expenses increased by 20.1% to approximately S$24.4 million in FY2017 mainly due to (i) expenses of approximately S$3.0 million in relation to dual primary listing on the Main Board of The Stock Exchange of Hong Kong Limited incurred in FY2017; (ii) increase in employee benefit cost of approximately S$0.7 million; (iii) increase in insurance fees of approximately S$0.1 million; (iv) increase in professional fees of approximately S$0.2 million; (v) increase in miscellaneous expenses of approximately S$0.2 million; and (vi) foreign exchange loss of approximately S$0.3 million. These were partially offset by a decrease in depreciation of approximately S$0.5 million.

Finance cost remained relatively unchanged at approximately S$0.6 million in FY2016 and FY2017.

Share of results of associates and joint ventures decreased by approximately S$3.3 million from approximately S$6.7 million in FY2016 to approximately S$3.4 million in FY2017 mainly due to fair value gain on investment properties of approximately S$7.1 million recognised in FY2016. In FY2017, the Group recognised a non-recurring gain of approximately S$3.8 million representing our proportionate share of the excess 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$1.9 million in FY2017 was mainly due to the decrease in valuation of industrial properties in Singapore and a commercial property in Indonesia. The fair value gain of approximately S$2.1 million recognised in FY2016 was due to the increase in valuation of industrial properties in Singapore.

As a result of the aforementioned, the Group's profit before income tax decreased by approximately S$13.1 million or 80.6% from approximately S$16.2 million in FY2016 to approximately S$3.1 million in FY2017.

Income tax expense decreased by approximately S$0.7 million or 66.5% from approximately S$1.1 million in FY2016 to approximately S$0.4 million in FY2017. The decrease was mainly due to lower taxable profits, higher utilisation of the Group's tax relief and lower deferred tax expense as compared to FY2016.

Review of Statements of Financial Position

Non-current assets

Non-current assets increased by approximately S$5.5 million to approximately S$77.9 million as at 30 September 2017, mainly due an increase in investment in joint ventures of approximately S$4.0 million and increase in investment properties and property, plant and equipment of approximately S$3.1 million. These were partially offset by a decrease in valuation of the Group's properties of approximately S$1.9 million.

Current assets

Current assets decreased by approximately S$2.7 million to approximately S$46.4 million as at 30 September 2017, mainly due to decrease in prepayments of approximately S$0.5 million and cash and bank balances of approximately S$6.7 million largely due to the payment of dividend of approximately S$1.6 million and expenses for the Company's dual primary listing of approximately S$3.0 million. These were partially offset by an increase in trade and other receivables of approximately S$0.4 million, loans to joint ventures of approximately S$3.5 million and increase in fixed deposits of approximately S$0.6 million.

Non-current liabilities

Non-current liabilities decreased by approximately S$1.0 million to approximately S$20.2 million as at 30 September 2017, mainly due to repayment of bank borrowings of approximately S$1.7 million and reduction of provision for reinstatement costs of approximately S$0.2 million partially offset by an increase in finance lease liabilities of approximately S$1.0 million.

Current liabilities

Current liabilities increased by approximately S$2.2 million to approximately S$33.1 million as at 30 September 2017, mainly due to proceeds received from bank borrowings of approximately S$3.0 million, increase in finance lease liabilities of approximately S$0.4 million and increase in provision for reinstatement costs of approximately S$0.2 million partially offset by decrease in trade and other payables of approximately S$1.4 million.

Review of Statement of Cash Flows

In FY2017, the Group recorded net cash generated from operating activities of approximately S$8.0 million, which was a result of operating profit before changes in working capital of S$11.0 million, increase in operating receivables of approximately S$0.1 million and decrease in operating payables of approximately S$1.6 million, adjusted for income tax paid of approximately S$0.7 million and net interest expense paid of approximately S$0.6 million.

Net cash used in investing activities amounted to approximately S$9.3 million, which was mainly due to the acquisition of property, plant and equipment of approximately S$5.0 million, addition of investment properties of approximately S$1.0 million, advances to joint ventures of approximately S$3.2 million and purchase of available for sale financial assets of approximately S$0.1 million.

Net cash used in financing activities amounted to approximately S$3.8 million, which was due to repayment of finance lease of approximately S$1.7 million, repayment of bank borrowings of approximately S$1.7 million, Dual Listing expenses payment of approximately S$2.8 million and dividend payment of approximately S$1.6 million. These were partially offset by uplift of deposits of approximately S$1.0 million and proceeds received from bank borrowings of approximately S$3.0 million.

As a result of the above, cash and cash equivalents decreased by approximately S$5.0 million, amounting to S$14.9 million as at 30 September 2017.

Commentary

Singapore's economy grew by 4.6% in the third quarter of 2017 based on advance estimates of gross domestic product (GDP) growth by the Ministry of Trade and Industry (MTI) as reported on 13 October 20171.

Statistics from the Urban Redevelopment Authority (URA) also revealed that average office rents rose by 2.4% in the third quarter of 2017 but cited an increase in net amount of leasable office space by 91,000 sqm2. Cushman & Wakefield's (C&W) consultants predicts rentals to further appreciate a further 3 – 5% in the fourth quarter of 2017 as tenants seek early renewals and more relocations2. This situation bodes well for our Space Optimisation business which leases out commercial properties.

Based on International Monetary Fund (IMF) estimates, GDP growth in Myanmar for 2017 is now expected to come in at 6.3%, citing an unfinished political transformation, overall manufacturing slowdown and delays in construction permitting3. Our Group expects the demand for our GreenHub branded SOHO-style serviced residence in Myanmar to remain healthy as its economy continues to develop.

Our Group will continue to look for new properties and opportunities to grow and expand our Space Optimisation business in the countries and regions that we currently have presence in and into other countries and regions with particular focus in Asian countries including the PRC and Cambodia.

Our Group expects the Facilities Management businesses to expand further as we seek to secure more carparks under management and to increase the car park rate of existing car parks. In addition, our Group believes the demand for integrated facility management and security services would grow further as companies and agencies seek to outsource such services to save costs and increase efficiency.

Our Logistics Services business has proven resilient in a tough shipping and transportation market as our Group focuses on shorter turnaround times to help customers save costs. Our Group is optimistic on the demand for container storage and container repair services and transportation services.

Our Group has signed a non-legal binding letter of intent to acquire a property in Singapore to operate our own ISO tank depot. We are also in discussion with a global shipping group to establish a joint venture to offer container depot services in Singapore.

In Thailand, we also intend to operate a second container depot in the vicinity of Bangkok.

Shareholders should note that upon successful dual listing on the Main Board of The Stock Exchange of Hong Kong Limited, there will be a further listing expenses of approximately S$2.4 million to be paid.

  1. Singapore economy grows 4.6% in Q3; beats expectations, Business Times, 13 October 2017
  2. Q3 office rents back in growth mode, reversing long downtrend, Business Times, 28 October 2017
  3. IMF Visits Myanmar for Annual Economic Checkup, Reuters, 4 November 2017