Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Corporate Information
Financial Information
Governance & Sustainability
Newsroom
Stock Information
Webcasting
Information Request

Financials

Email This Print This

Financial Statements And Related Announcement - Third Quarter Results

Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Income Statement

n.m. – not meaningful

Consolidated Statement of comprehensive income

n.m. – not meaningful

Statements of Financial Position

Review of Performance

Our Business

OKP Holdings Limited is a home-grown infrastructure and civil engineering company in the region. We specialise in the construction of urban and arterial roads, expressways, vehicular bridges, flyovers, airport infrastructure and oil and gas related infrastructure for petrochemical plants and oil storage terminals as well as the maintenance of roads and roads related facilities and building construction-related works. We tender for both public and private civil engineering and infrastructure construction projects. We have expanded our core business to include property development and investment.

We have three core business segments: Construction, Maintenance and Rental income from investment properties.

Income Statement Review (Nine months ended 30 September 2018 vs nine months ended 30 September 2017)

Revenue

Our Group reported a 21.1% or $19.2 million decrease in revenue to $72.1 million in the nine months ended 30 September 2018 as compared to $91.3 million in the nine months ended 30 September 2017. The decrease was due mainly to a 42.5% decrease in revenue from the construction segment to $34.9 million, partially offset by (i) a 13.1% increase in revenue from the maintenance segment to $34.5 million and (ii) a 1,634.8% increase in rental income.

The decrease in revenue from the construction segment was largely attributable to (1) a lower percentage of revenue recognised from a few construction projects which were reaching completion, (2) a lower percentage of revenue recognised from a few newlyawarded construction projects as well as no revenue generated from a construction project at the Pan-Island Expressway exit to Tampines Expressway during the nine months ended 30 September 2018.

The growth in revenue from the maintenance segment was due mainly to the higher percentage of revenue recognised from a few major maintenance projects which were in full swing in the nine months ended 30 September 2018.

The increase in rental income generated from investment properties was due mainly to rental income generated from the newly purchased property at 6-8 Bennett Street, East Perth, Western Australia during the second quarter ended 30 June 2018.

Both the construction and maintenance segments are the major contributors to our Group's revenue. On a segmental basis, construction, maintenance and rental income accounted for 48.4% (30 September 2017: 66.4%), 47.9% (30 September 2017: 33.4%) and 3.7% (30 September 2017: 0.2%) of our Group's revenue respectively for the nine months ended 30 September 2018.

Cost of sales

Our cost of sales decreased by 17.9% or $13.4 million from $74.6 million for the nine months ended 30 September 2017 to $61.2 million for the nine months ended 30 September 2018. The decrease in cost of sales was due mainly to:

  1. the decrease in sub-contracting costs which were mainly costs incurred for specialised works such as bored piling, asphalt works, mechanical and electrical works, soil-testing, landscaping and metalworks which are usually sub-contracted to external parties;

  2. the decrease in the cost of construction materials due to lesser utilisation of materials; and

  3. the decrease in labour costs,

  4. which were partially offset by:

  5. an accrual of additional cost arising from a construction project at the Pan-Island Expressway exit to Tampines Expressway following the mutual termination of the project between the client and our subsidiary corporation; and

  6. the increase in depreciation of property, plant and machinery and right-of-use assets,

  7. during the nine months ended 30 September 2018.

Gross profit and gross profit margin

Our gross profit for the nine months ended 30 September 2018 decreased by 35.0% or $5.8 million from $16.7 million for the nine months ended 30 September 2017 to $10.9 million for the nine months ended 30 September 2018.

Our gross profit margin decreased from 18.3% for the nine months ended 30 September 2017 to 15.1% for the nine months ended 30 September 2018.

The lower gross profit margin was largely attributable to lower profit margins for some current construction projects as a result of a more competitive pricing environment.

Other income

Other income increased by $0.5 million or 66.7% from $0.8 million for the nine months ended 30 September 2017 to $1.3 million for the nine months ended 30 September 2018. The increase was largely attributable to:

  1. an increase in government grants of $0.3 million received which comprised wage credit payouts received from the Inland Revenue Authority of Singapore (Temporary Employment Credit) and Ministry of Manpower (Special Employment Credit) and incentives received from the Building and Construction Authority for technology adoption and capability development;

  2. a gain on disposal of property, plant and equipment of $0.1 million; and

  3. an increase in interest income received of $0.1 million due to higher interest earned from bank deposits,

  4. during the nine months ended 30 September 2018.

Other losses

The increase in other losses of $0.2 million was due mainly to loss in foreign exchange resulting from the weakening of the Australian dollar against the Singapore dollar in the nine months ended 30 September 2018.

Administrative expenses

Administrative expenses decreased by $1.0 million or 13.5% from $7.4 million for the nine months ended 30 September 2017 to $6.4 million for the nine months ended 30 September 2018. The decrease was largely due to lower directors' remuneration (including profit sharing) accrued as a result of the lower profit generated by the Group for the nine months ended 30 September 2018.

Finance expenses

Finance expenses increased by $0.5 million or 944.8% from $58,000 for the nine months ended 30 September 2017 to $0.6 million for the nine months ended 30 September 2018. The increase was due to:

  1. interest from lease liabilities of $21,000 as a result of implementation of SFRS(I) 16; and

  2. interest expenses of $0.5 million incurred on a bank term loan for the purchase of an investment property at 6-8 Bennett Street, East Perth, Western Australia.

Share of results of associated companies and joint ventures

  1. Share of profits of associated companies
    The $0.6 million decrease in the share of profit of associated companies in the nine months ended 30 September 2018 was due mainly to the decrease in share of profit from our associated company, United Singapore Builders Pte Ltd.

  2. Share of profits of joint ventures
    The share of profit of joint ventures decreased by $1.9 million due mainly to the decrease in share of profit of $1.8 million from Lakehomes Pte Ltd, the developer for the LakeLife Executive Condominium, based on the recognition of profits from the few remaining units of the development which were ready for handover during the nine months ended 30 September 2018.

Profit before income tax

Profit before income tax decreased by $7.5 million or 60.6% from $12.4 million for the nine months ended 30 September 2017 to $4.9 million for the nine months ended 30 September 2018. The decrease was due mainly to (1) the decrease in gross profit of $5.8 million, (2) the increase in other losses of $0.2 million, (3) the increase in finance expenses of $0.5 million and (4) the decrease in share of profit of associated companies and joint ventures of $2.5 million. The decrease was partially offset by (1) the decrease in administrative expenses of $1.0 million and (2) the increase in other income of $0.5 million, as explained above.

Income tax expense

Income tax expense decreased by $1.0 million or 57.1% from $1.7 million in the nine months ended 30 September 2017 to $0.7 million in the nine months ended 30 September 2018 due mainly to lower profit before income tax, as explained above.

The effective tax rates for the nine months ended 30 September 2018 and nine months ended 30 September 2017 were 14.9% and 13.7% respectively.

The effective tax rate for the nine months ended 30 September 2018 was lower than the statutory tax rate of 17.0% due mainly to (1) statutory stepped income tax exemption, and (2) a tax rebate of 20% on the corporate tax payable.

The effective tax rate for the nine months ended 30 September 2017 was lower than the statutory tax rate of 17.0% due mainly to (1) the profit before income tax comprising share of profit of associated companies and joint ventures of $2.6 million, which was already taxed at the associated company and joint venture levels, (2) statutory stepped income tax exemption, and (3) a tax rebate of 40% on the corporate tax payable.

Non-controlling interests

Non-controlling interests of $0.4 million was due to contributions from our subsidiary corporation, Raffles Prestige Capital Pte Ltd, in the nine months ended 30 September 2018.

Net profit

Overall, net profit decreased by $6.5 million or 61.2%, from $10.7 million for the nine months ended 30 September 2017 to $4.2 million for the nine months ended 30 September 2018, following the decrease in profit before income tax of $7.5 million which was partially offset by the decrease in income tax expense of $1.0 million, as explained above.

Our net profit margin decreased from 11.8% for the nine months ended 30 September 2017 to 5.5% for the nine months ended 30 September 2018.

Income Statement Review (Third Quarter ended 30 September 2018 vs Third Quarter ended 30 September 2017)

Revenue

Our Group registered revenue of $21.7 million in the third quarter ended 30 September 2018 as compared to $27.1 million in the third quarter ended 30 September 2017. The decrease in revenue from both the construction and maintenance segments was partially offset by an increase in rental income.

The decrease in revenue from the construction segment was largely attributable to a lower percentage of revenue recognised from (1) a few construction projects which were reaching completion and (2) a newly-awarded construction project during the third quarter ended 30 September 2018.

The decrease in revenue from the maintenance segment was largely attributable to a lower percentage of revenue recognised from (1) a few maintenance projects which were reaching completion and (2) a few newly-awarded maintenance projects during the third quarter ended 30 September 2018.

The increase in rental income generated from investment properties was due mainly to rental income from the newly purchased property at 6-8 Bennett Street, East Perth, Western Australia during the third quarter ended 30 September 2018.

Cost of sales

Our cost of sales decreased by 25.3% or $6.2 million from $24.5 million for the third quarter ended 30 September 2017 to $18.3 million for the third quarter ended 30 September 2018. The decrease in cost of sales was due mainly to:

  1. the decrease in sub-contracting costs which were mainly costs incurred for specialised works such as bored piling, asphalt works, mechanical and electrical works, soil-testing, landscaping and metalworks which are usually sub-contracted to external parties;

  2. the decrease in the cost of construction materials due to lesser utilisation of materials; and

  3. the decrease in labour costs,

  4. during the third quarter ended 30 September 2018.

Gross profit and gross profit margin

Our gross profit increased by $0.7 million or 28.3% from $2.7 million for the third quarter ended 30 September 2017 to $3.4 million for the third quarter ended 30 September 2018.

Our gross profit margin increased from 9.8% for the third quarter ended 30 September 2017 to 15.8% for the third quarter ended 30 September 2018.

The higher gross profit and gross profit margin for the third quarter ended 30 September 2018 as compared to the third quarter ended 30 September 2017 were largely attributable to a few maintenance projects which had commanded better gross profit and were nearing completion.

Other income

Other income remained at $0.3 million for the third quarter ended 30 September 2018 and 30 September 2017.

Other losses

Other losses of $0.1 million was due mainly to loss in foreign exchange resulting from the weakening of the Australian dollar against the Singapore dollar in the third quarter ended 30 September 2018.

Administrative expenses

Administrative expenses remained at $2.0 million for the third quarter ended 30 September 2018 and 30 September 2017.

Finance expenses

Finance expenses increased by $0.3 million due mainly to:

  1. interest expenses incurred on a bank term loan for the purchase of an investment property at 6-8 Bennett Street, East Perth, Western Australia; and

  2. interest from lease liabilities of $7,000 as a result of implementation of SFRS(I) 16,
  3. during the third quarter ended 30 September 2018.

Share of results of associated companies and joint ventures

The $0.2 million decrease in the share of profits of investments in the third quarter ended 30 September 2018 was due mainly to some associated companies and joint ventures recognising lower profits as their projects have reached substantial completion during the third quarter ended 30 September 2018.

Profit before income tax

Profit before income tax increased by $0.1 million or 10.9% from $1.1 million in the third quarter ended 30 September 2017 to $1.2 million in the third quarter ended 30 September 2018. The increase was due mainly to the increase in gross profit of $0.7 million. The increase was partially offset by (1) the decrease in share of results of investments of $0.2 million, (2) the increase in other losses of $0.1 million and (3) the increase in finance expenses of $0.3 million, as explained above.

Income tax expense

Income tax expense for the third quarter ended 30 September 2018 decreased by $0.2 million or 46.4% from $0.4 million for the third quarter ended 30 September 2017 to $0.2 million for the third quarter ended 30 September 2018.

The effective tax rates for the third quarter ended 30 September 2018 and third quarter ended 30 September 2017 were 16.5% and 34.1% respectively.

The effective tax rate for the third quarter ended 30 September 2018 was lower than the statutory tax rate of 17.0% due mainly to (1) statutory stepped income tax exemption and (2) a tax rebate of 20% on the corporate tax payable.

The effective tax rate for the third quarter ended 30 September 2017 was higher than the statutory tax rate of 17.0% due mainly to certain non-deductible items added back for tax purposes.

Non-controlling interests

Non-controlling interests of $0.2 million was due to contributions from our subsidiary corporation, Raffles Prestige Capital Pte Ltd, in the third quarter ended 30 September 2018.

Net profit

Overall, for the third quarter ended 30 September 2018, net profit increased by $0.3 million or 40.6% to $1.0 million as compared to $0.7 million for the third quarter ended 30 September 2017, following the increase in profit before income tax of $0.1 million, coupled with the decrease in income tax expense of $0.2 million, as explained above.

Our net profit margin increased from 2.7% for the third quarter ended 30 September 2017 to 4.8% for the third quarter ended 30 September 2018.

Commentary

Economic outlook

According to the Ministry of Trade and Industry (“MTI”) advance estimates, Singapore's economy expanded by 2.6% on a year-on-year (“y-o-y”) basis in the third quarter of 2018, moderating from the 4.1% growth in the previous quarter.

Industry outlook

The construction sector contracted by 3.1% on a y-o-y basis in the third quarter, weighed down primarily by the weakness in public sector construction projects, compared to the 4.2% decline in the previous quarter. On a quarter-on-quarter seasonally-adjusted annualised basis, the sector contracted by 1.7%, a turnaround from the contraction of 14.5% in the second quarter.

According to the mid-year forecast and actual construction demand data released by the Building and Construction Authority (“BCA”) in August 2018, the total value of construction projects for the first eight months of 2018 reached $18.7 billion, out of which $11.0 billion, or almost 60.0%, was made up of public sector projects.

Over the medium term, BCA expects the construction demand to steadily improve, with a projection of between $26.0 billion and $33.0 billion per year for the period of 2019 to 2020, and could pick up to between $28.0 billion and $35.0 billion annually for the period of 2021 to 2022.

With regard to the private residential property segment, Urban Redevelopment Authority's (“URA”) third quarter of 2018 real estate statistics reflected an increase of 0.5% in private residential property prices for the July to September period. The slowdown as compared to a 3.4% increase in 2Q 2018 was after the announcement of the property cooling measures implemented on 6 July 2018.

Company Outlook and Order Book Update

On the property development front, the Group announced on 7 February 2018 the acquisition of a land parcel at Chong Kuo Road through a joint tender submitted by its wholly-owned subsidiary, OKP Land Pte. Ltd. (“OKP Land”), together with Lian Soon Holdings Pte. Ltd. (“Lian Soon”), which was duly accepted by URA for $43.9 million.

OKP Land has entered into a joint venture with Lian Soon and other parties to develop a residential condominium of 84 units on the 4,288.9-square metre land parcel, which has a leasehold tenure of 99 years.

In addition, on 20 August 2018, the Group clinched the collective sale of 71-85 Phoenix Avenue, Phoenix Heights through a tender submitted by the Group's 25%-owned associated company, USB Holdings Pte. Ltd. (“USBH”), for the tender price of $33.1 million. USBH intends to apply to the Singapore Land Authority for a grant of a fresh 99-year lease for the 3,971.9-square metre property, which currently has a leasehold tenure of 99 years with effect from 1969. USBH plans to redevelop the property, subject to approvals from the relevant authorities.

Both acquisitions above are not expected to have a material impact on the earnings per share or net tangible assets per share of the Group for the current financial year ending 31 December 2018 (“FY2018”).

As part of efforts to diversify earnings and to build a recurrent stream of income, OKP expanded its property business abroad to Australia. On 9 April 2018, OKP completed the acquisition of its first overseas property, a freehold office complex, 6-8 Bennett Street, in Perth, Australia for AUD43.5 million, which is expected to have a positive impact on its earnings this financial year.

Meanwhile on the construction front, the industry will continue to experience headwinds in view of the challenging operating environment, which include rising business and operation costs, keen competition and shortage of experienced manpower. The Group remains cautiously optimistic on near-term prospects as it continues to be supported by a pipeline of projects.

As at 30 September 2018, the Group's net order book stood at $258.7 million, with projects extending till 2021.

On 6 July 2018, the Group's wholly-owned subsidiary Or Kim Peow Contractors (Pte) Ltd and the Land Transport Authority entered into an agreement to mutually terminate the contract for the construction of the viaduct from Tampines Expressway (“TPE”) to Pan Island Expressway (“PIE”) (Westbound) and Upper Changi Road East. The mutual termination of the project is expected to have a negative impact on the earnings per share and net tangible assets of the Group for FY2018.

Moving forward after the PIE incident, the Group will stay focused on its core business, strengthen its civil engineering expertise and leverage its solid track record as a leading infrastructure engineering company for public sector projects. In addition, OKP will also continue to explore potential opportunities within Singapore and overseas, to further expand its business and presence in property development and investment.