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Financials

Financial Statements And Related Announcement - Full Yearly Results

Financials Archive

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Consolidated statement of comprehensive income

Statements of Financial Position

Review of Performance

Our Business

OKP Holdings Limited is a home-grown infrastructure and civil engineering company in the region. It specialises 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 business segments: Construction, Maintenance and Rental income from investment properties.

Income Statement Review (Current Financial Year ended 31 December 2023 vs Previous Financial Year ended 31 December 2022)

Revenue

Our Group reported a substantial 36.3% or $42.7 million increase in revenue to $160.4 million during the financial year ended 31 December 2023 (“FY2023”), compared to $117.6 million recorded in the preceding financial year ended 31 December 2022 (“FY2022”). The surge was primarily due to a 25.0% increase in revenue from the construction segment, reaching $102.4 million, alongside a remarkable 75.2% rise in revenue from the maintenance segment, totalling $51.6 million. Additionally, there was a marginal 1.7% increase in rental income.

Both the construction and maintenance segments exhibited positive revenue growth in FY2023 as compared to FY2022. It was mainly attributable to a higher percentage of revenue recognised from various ongoing and newly awarded construction and maintenance projects as they progressed to a more active phase in FY2023.

The slight increase in rental income was mainly from the rental income generated by the property located at 6-8 Bennett Street, East Perth, Western Australia.

The construction and maintenance segments remain the major revenue drivers for our Group. On a segmental basis, construction, maintenance and rental income contributed 63.8% (FY2022: 69.7%), 32.2% (FY2022: 25.0%) and 4.0% (FY2022: 5.3%) respectively to our Group's revenue for FY2023.

Cost of sales

Our cost of sales saw a significant increase of 27.0%, translating to a $28.9 million increase from $106.8 million in FY2022 to $135.7 million in FY2023. The increase in cost of sales was attributed mainly to:

  1. an increase in sub-contracting costs, predominantly comprising costs related to premix works, signages, asphalt works, mechanical and electrical works, soil testing, landscaping and metalworks, typically outsourced to external parties;

  2. an increase in labour cost due to increased headcount and a higher provision for bonus;

  3. an increase in the cost of construction materials, driven by higher utilisation of materials and price hikes in construction materials; and

  4. an increase in overheads, particularly hiring costs associated with the rental of additional heavy equipment and machineries to support ongoing and newly awarded projects,

  5. during FY2023.

Gross profit and gross profit margin

Our gross profit increased by 128.5%, amounting to a $13.9 million increase from $10.8 million in FY2022 to $24.7 million in FY2023.

While the rental income segment demonstrated a marginal increase in gross profit contribution by $0.1 million, rising from $3.9 million in FY2022 to $4.0 million in FY2023, the construction and maintenance segments exhibited a substantial $13.8 million increase, soaring from $6.9 million in FY2022 to $20.7 million in FY2023.

The gross profit margin for the construction and maintenance segments notably improved from 6.2% in FY2022 to 13.4% in FY2023 The improvement in the gross profit margin was mainly attributed to the Group's ongoing initiatives to enhance cost management, notwithstanding the challenges posed by higher material costs and rising manpower costs.

Other gains, net

Other gains demonstrated a notable increase of $43.9 million or 1,480.8%, rising from $3.0 million in FY2022 to $46.9 million in FY2023. The substantial increase was mainly due to:

  1. an increase in interest income by $1.2 million resulting from higher fixed deposit placement and higher interest rate from bank deposits;

  2. the receipt of an arbitral award of $43.8 million in relation to the Contract 449A worksite incident;

  3. an increase of $2.7 million in fair value gain on investment properties; and

  4. a decrease of $0.8 million in the loss on foreign exchange arising from the revaluation of assets and liabilities denominated in Australian dollar to Singapore dollar,

  5. which were partially offset by:

  6. a decrease of $0.8 million in the loss on foreign exchange arising from the revaluation of assets and liabilities denominated in Australian dollar to Singapore dollar,

  7. a decrease of $0.8 million in the loss on foreign exchange arising from the revaluation of assets and liabilities denominated in Australian dollar to Singapore dollar,

  8. which were partially offset by:

  9. a decrease of $0.9 million in government grants; and

  10. an increase of $3.7 million in loss allowance provided for amount due from an associated company,

  11. during FY2023.

Administrative expenses

Administrative expenses increased by $6.3 million or 50.7% from $12.4 million for FY2022 to $18.7 million for FY2023. The increase was largely due to:

  1. an increase of $1.0 million in employee compensation due to salary adjustment and higher provision for bonus;

  2. an increase of $8.4 million in directors' remuneration (including profit sharing) accrued, reflecting the higher profit generated by the Group; and

  3. a $0.3 million increase in donation, $0.1 million increase in repair and maintenance of office equipment, and $0.1 million increase in withholding tax,

  4. which were partially offset by the decrease of $3.6 million in professional fees in FY2023.

Finance expenses

Finance expenses increased by $0.5 million or 31.6%, from $1.6 million in FY2022 to $2.1 million in FY2023. The increase was due mainly to higher borrowing costs arising from the increase in interest rates during FY2023.

Share of results of associated companies and joint ventures

The share of results of associated companies and joint ventures decreased by $0.5 million or 71.3% from $0.7 million in FY2022 to $0.2 million in FY2023. The decrease was due mainly to the decrease in share of profit from the 22.5%-held associated company, Chong Kuo Development Pte Ltd, during FY2023.

Profit before income tax

Profit before income tax increased by $50.6 million from $0.5 million in FY2022 to $51.1 million in FY2023. The increase was due mainly to (1) the increase in gross profit of $13.9 million and (2) the increase in other gains of $43.9 million, which were partially offset by, (3) the increase of $6.2 million in administrative expenses, (4) the increase in finance expenses of $0.5 million, and (5) the decrease in share of profit of $0.5 million, as explained above.

Income tax expense

Income tax expense increased by $3.3 million or 879.5% from $0.4 million in FY2022 to $3.7 million in FY2023, primarily driven by the Group's higher taxable profit, attributed to the arbitral award received in relation to the 2017 worksite accident and operational profit derived from both ongoing and newly awarded projects.

The effective tax rates for FY2023 and FY2022 stood at 7.2% and 69.6%, respectively.

The effective tax rate for FY2023 was 7.2%, which was lower than the statutory tax rate of 17%, due to the utilisation of tax credits. Conversely, the effective tax rate for FY2022 was higher than the statutory tax rate of 17.0% due mainly to (1) the relatively higher corporate tax rate of our Australian subsidiary corporation, (2) certain non-deductible items added back for tax purposes and (3) recognition of deferred tax liabilities in one of the subsidiary corporations.

Non-controlling interests

Non-controlling interests of $2.8 million was due to the share of profit of our subsidiary corporation, Raffles Prestige Capital Pte Ltd, in FY2023.

Net profit

Overall, net profit increased by $47.2 million or 28,832.3%, from $0.2 million for FY2022 to $47.4 million for FY2023, following the increase in profit before income tax, which was partially offset by the increase in income tax expense, as explained above.

Our net profit margin increased from 0.1% for FY2022 to 29.6% for FY2023.

Review of income statements for the Half Year ended 31 December 2023

Revenue

Our Group reported a 41.1% or $26.3 million increase in revenue to $90.4 million during the second half year ended 31 December 2023 (“2H2023”) as compared to $64.1 million during the second half year ended 31 December 2022 (“2H2022”). The increase was due mainly to a 38.7% increase in revenue from the construction segment to $61.9 million and a 54.1% increase in revenue from the maintenance segment to $25.3 million, along with a 6.2% increase in rental income.

The increase in revenue from both the construction and maintenance segments was mainly attributable to a higher percentage of revenue recognised from various ongoing and newly awarded construction and maintenance projects as they progressed to a more active phase in FY2023.

The marginal increase in rental income was mainly from the rental income generated by the property located at 6-8 Bennett Street, East Perth, Western Australia.

The construction and maintenance segments remain the major revenue drivers for our Group. On a segmental basis, construction, maintenance and rental income accounted for 68.5% (2H2022: 69.6%), 28.0% (2H2022: 25.7%) and 3.5% (2H2022: 4.7%) respectively of our Group's revenue for 2H2023.

Cost of sales

Our cost of sales increased by 16.3% or $9.5 million from $58.2 million for 2H2022 to $67.7 million for 2H2023. The increase in cost of sales was due mainly to:

  1. an increase in sub-contracting costs, predominantly comprising costs related to premix works, signages, asphalt works, mechanical and electrical works, soil testing, landscaping and metalworks, typically outsourced to external parties;

  2. an increase in labour cost due to a higher provision for bonus;

  3. an increase in the cost of construction materials, driven by higher utilisation of materials and price hikes in construction materials; and

  4. an increase in overheads, particularly hiring costs associated with the rental of additional heavy equipment and machineries to support ongoing and newly awarded projects,

  5. during 2H2023.

Gross profit and gross profit margin

Overall, our gross profit for 2H2023 increased by 288.6% or $16.9 million from $5.8 million for 2H2022 to $22.7 million for 2H2023.

The contribution from the rental income segment to gross profit increased from $1.9 million in 2H2022 to $2.0 million in 2H2023. Additionally, there was an increase in gross profit of $16.7 million from the construction and maintenance segments, soaring from $3.9 million in 2H2022 to $20.6 million in 2H2023.

Our gross profit margin for the construction and maintenance segments demonstrated a notable increase from 6.4% in 2H2022 to 23.7% in 2H2023. The improvement in the gross profit margin was mainly attributed to the Group's ongoing initiatives to improve cost management, notwithstanding the challenges posed by higher material costs and rising manpower costs.

Other gains, net

Other gains decreased by $0.2 million or 6.0% from $2.0 million in 2H2022 to $1.8 million in 2H2023. The decrease was due mainly to:

  1. an increase in interest income by $0.8 million resulting from higher fixed deposit placement and higher interest rate from bank deposits; and

  2. an increase of $2.7 million in fair value gain on investment properties,

  3. which were partially offset by:

  4. an increase of $3.7 million in loss allowance provided for amount due from an associated company,

  5. during 2H2023.

Administrative expenses

Administrative expenses increased by $2.8 million or 32.4% from $8.5 million in 2H2022 to $11.3 million in 2H2023. The increase was largely due to:

  1. an increase of $0.5 million in employee compensation due to salary adjustment and higher provision for bonus; and

  2. an increase of $5.9 million in directors' remuneration (including profit sharing) accrued, reflecting the higher profit generated by the Group,

  3. which were partially offset by the decrease of $3.6 million in professional fees in FY2023

Finance expenses

Finance expenses increased by $0.1 million or 10.7% from $0.9 million in 2H2022 to $1.0 million in 2H2023. The increase was due mainly to higher borrowing costs arising from the increase in interest rate during 2H2023.

Share of results of associated companies and joint ventures

The share of results of associated companies and joint ventures decreased by $0.4 million or 102.4% from $0.4 million in 2H2022 to $0.01 million in 2H2023. The decrease was due mainly to the decrease in share of profit from the 22.5%-held associated company, Chong Kuo Development Pte Ltd, during 2H2023.

Profit before income tax

Profit before income tax increased by $13.4 million or 1,089.0% from a loss of $1.2 million in 2H2022 to a profit of $12.2 million in 2H2023. The increase was due mainly to (1) the increase in gross profit of $16.9 million, which was partially offset by (2) the increase in administrative expenses of $2.8 million, (3) the increase in finance expenses of $0.1 million, (4) the decrease in other gains of $0.2 million, and (5) the decrease in share of results of associated companies and joint ventures of $0.4 million, as explained above.

Income tax expense

Income tax credit of $0.1 million and income tax expense of $0.6 million were reported in 2H2022 and 2H2023 respectively.

Tax expense for 2H2023 arose from provision for tax made for the profitable entities within the Group and deductible temporary differences due to the movements in fair value and the carrying value of assets, in particular, that arising from one of the Singapore subsidiary corporations.

Tax credit for 2H2022 arose from deductible temporary differences due to the movements in fair value and the carrying value of assets and value of assets for tax purposes, in particular, that arising from one of the Singapore subsidiary corporations, which was partially offset by a provision for current tax made for 2H2022 for our Australian subsidiary corporation.

Non-controlling interests

Non-controlling interests of $2.6 million was due to the share of profit of our subsidiary corporation, Raffles Prestige Capital Pte Ltd, in 2H2023.

Net profit/(loss)

Overall, net profit increased by $12.7 million or 1,166.5%, from net loss of $1.1 million in 2H2022 to net profit of $11.6 million in 2H2023, following the increase in profit before income tax of $13.4 million, partially offset by the increase in income tax expense of $0.7 million, as explained above.

Our net profit margin improved from a net loss margin of 1.7% in 2H2022 to a net profit margin of 12.9% in 2H2023.

Review of the financial position for the Financial Year ended 31 December 2023

Current assets

Current assets increased by $53.6 million, from $69.5 million as at 31 December 2022 to $123.1 million as at 31 December 2023. The substantial increase was primarily driven by:

  1. a $61.6 million boost in cash and cash equivalents, mainly due to $75.2 million generated from operating activities, an increase of $0.7 million in pledged deposits, alongside $2.3 million in cash used in investing activities and $12.0 million in cash used in financing activities; and

  2. an increase in contract assets of $3.3 million, due to an increase in construction contract receivable from customers, arising from higher unbilled amounts expected to be collected from customers following the higher revenue,

  3. which were partially offset by:

  4. a decrease of $0.6 million in inventories, attributed to the utilisation of materials for ongoing construction and maintenance projects; and

  5. a decrease of $10.7 million in trade and other receivables, as a result of timely collection of debts throughout the financial period and the reversal of previously paid deposits for arbitration,

  6. during FY2023.

Non-current assets

Non-current assets increased by $1.0 million, from $135.4 million as at 31 December 2022 to $136.4 million as at 31 December 2023. The increase was due mainly to:

  1. an increase of $0.5 million in investments in associated companies, driven by share of profit and recognition of notional fair value of a loan from an associated company;

  2. an increase in investment properties due to fair value gain of $4.7 million;

  3. an increase of $2.8 million in right-of-use assets, resulting from the purchase of plant and equipment to support new and ongoing projects through hire purchase, along with the reclassification of certain plant and machinery from property, plant and equipment; and

  4. an increase in deferred income tax assets of $0.5 million arising from the recognition of deferred income tax assets in one of the subsidiary corporations,

  5. which were partially offset by:

  6. a decrease in property, plant and equipment of $0.6 million, mainly attributable to the disposal and depreciation of property, plant and equipment, coupled with reclassification of certain plant and machinery to right-of-use assets; and

  7. a decrease of $6.9 million in other receivables, due to $3.4 million loan repayment from an associated company, Chong Kuo Development Pte Ltd, additional impairment losses of $4.2 million and a notional fair value adjustment of $0.3 million. The decrease was partially offset by a $1.0 million advance extended to USB Holdings Pte Ltd,

  8. during FY2023.

Current liabilities

Current liabilities increased by $11.0 million, from $44.1 million as at 31 December 2022 to $55.1 million as at 31 December 2023. The increase was due mainly to:

  1. an increase of $11.7 million in trade and other payables, attributable to $3.7 million increase in trade payables, advances amounting to $1.0 million extended by noncontrolling interest, and an increase of $7.0 million in accruals due to the provision of bonus and profit sharing for directors;

  2. an increase of $0.3 million in lease liabilities, resulting from the purchase of plant and machineries for newly awarded projects, mitigated by repayment of lease liabilities; and

  3. an increase in current income tax liabilities by $2.8 million due to higher tax provision allocated for profitable entities within the Group,

  4. which were partially offset by:

  5. a reduction of $3.8 million in bank borrowings, as a result of the repayment of existing borrowings,

  6. during FY2023.

Non-current liabilities

Non-current liabilities decreased by $2.1 million, from $37.0 million as at 31 December 2022 to $34.9 million as at 31 December 2023. The decrease was due mainly to:

  1. a decrease in other payables of $1.8 million, attributed to a notional fair value adjustment related to amount due to a non-controlling shareholder; and

  2. principal repayment of bank borrowings totalling $1.1 million,

  3. which were partially offset by:

  4. an increase of $0.8 million in deferred income tax liabilities,

  5. during FY2023.

Shareholders' equity

Shareholders' equity, comprising share capital, treasury shares, other reserves, retained profits and non-controlling interests, increased by $45.8 million, from $123.7 million as at 31 December 2022 to $169.5 million as at 31 December 2023. The increase was primarily driven by:

  1. an increase of $2.0 million in capital reserve; and

  2. profits generated from operations amounting to $44.6 million attributable to equity holders of the Company, along with $2.8 million in profits attributable to noncontrolling interests from the share of profit of Raffles Prestige Capital Pte Ltd,

  3. which were partially offset by:

  4. dividend payment to shareholders of $3.6 million,

  5. during FY2023.

Review of cash flows for the Financial Year ended 31 December 2023

Net cash provided by/(used in) operating activities

Our Group reported net cash generation of $75.2 million from operating activities in FY2023, marking a significant increase of $81.8 million compared to net cash usage of $6.6 million in FY2022. The increase was largely attributable to:

  1. an increase in cash generated from operating activities before working capital changes, amounting to $50.5 million;

  2. an increase in net working capital inflow of $29.7 million;

  3. an increase in interest received totalling $1.2 million; and

  4. a decrease in income tax payments of $0.4 million,

  5. during FY2023.

Net cash used in investing activities

Net cash used in investing activities decreased by $7.4 million from $9.7 million in FY2022 to $2.3 million in FY2023. The decrease was due mainly to:

  1. a loan repayment of $3.4 million received from an associated company;

  2. a decrease of $1.1 million in advances extended to an associated company;

  3. a decrease of $1.0 million in cash used for the purchase of property, plant and equipment; and

  4. a decrease of $2.0 million in cash used for other investment at amortised cost,

  5. which were partially offset by:

  6. an increase of $0.1 million in cash used for the purchase of right-of-use assets,

  7. during FY2023.

Net cash used in financing activities

Net cash used in financing activities increased by $3.4 million, from $8.6 million in FY2022 to $12.0 million in FY2023. The increase was due mainly to:

  1. an increase of $0.5 million in repayment of lease liabilities;

  2. an increase of $0.5 million in interest payments;

  3. an increase of $0.9 million in repayment of borrowings;

  4. an increase of $1.6 million in dividend disbursements; and

  5. a reduction of $0.7 million in pledged bank deposits,

  6. which were partially offset by:

  7. an increase of $0.8 million in advance from a non-controlling shareholder,

  8. during FY2023.

Overall, free cash and cash equivalents stood at $81.7 million as at 31 December 2023, demonstrating a notable increase of $60.9 million from $20.8 million as at 31 December 2022. This signifies cash reserves of 26.6 cents per share as at 31 December 2023, a marked increase from the 6.7 cents per share recorded as at 31 December 2022 (based on 306,961,494 issued shares).

Commentary

Economic Outlook

Based on advance estimates released by the Ministry of Trade and Industry (“MTI”) on 2 January 2024, the Singapore economy expanded by 2.8% on a year-on-year basis in the fourth quarter of 2023, compared with the 1.0% growth in the preceding quarter. On a quarter-on-quarter seasonally adjusted basis, the economy expanded by 1.7%, extending the 1.3% expansion in the third quarter. For the whole of 2023, the economy grew by 1.2%, moderating from the 3.6% growth in 2022.

In addition, it was announced by MTI on 22 November 2023 that the Singapore's economy is expected to grow between 1% and 3% in 2024 as the growth prospects of the manufacturing and trade-related sectors in Singapore are expected to improve in tandem with the turnaround in global electronics demand.

Industry Outlook

According to MTI, the construction sector expanded by 9.1% year-on-year in the fourth quarter, surpassing the 6.2% growth in the previous quarter attributed to the increased construction output from both public and private sector construction. On a quarter-on-quarter seasonally-adjusted basis, the pace of growth in the construction sector increased to 4.3% in the fourth quarter, from 0.8% in the third quarter.

Based on projections from the Building and Construction Authority (“BCA”) released on 15 January 2024, total construction demand in 2024 is projected to be between $32 billion and $38 billion.

The public sector demand is expected to contribute about 55% of total construction demand, or between $18 billion and $21 billion, mainly from public housing and infrastructure projects such as new Build-To-Order flats, contracts for phase two of the Cross Island MRT Line, infrastructure works for Changi Airport Terminal 5, Tuas Port developments, and major road and drainage improvement works.

On the other hand, the private sector demand is expected to account for between $14 billion and $17 billion, mainly from residential developments under the Government Land Sales programme, expansion of the two integrated resorts and redevelopment of commercial premises, as well as the development of mixed-used properties and industrial facilities.

Regarding the private residential property segment, statistics released by the Urban Redevelopment Authority ("URA") on 2 January 2024 indicated that the private residential price index continued to moderate for a second straight year, growing at a slower pace of 6.7%, compared to 8.6% in 2022.

For the year of 2023, total sale transaction volume declined by 15%, from 21,890 units in 2022 to 18,510 units in 2023, marking the lowest annual sale transaction volume since 2016.

Due to the numerous work-related injuries in the first half of 2023, the Ministry of Manpower (“MOM”) announced that it will step up inspections of the metalworking industry and raise safety standards for smaller-scale construction works such as Addition & Alteration, Renovation and Facility Management. Furthermore, MOM has introduced enhanced measures to reduce heat stress for outdoor workers, focusing on the four aspects of acclimatise, drink, rest, and shade.

Amidst signs of a moderating property market following the implementation of cooling measures and against a backdrop of sustained high interest rates environment, the Group expects the private residential market to remain challenging. In its commitment to preventing workplace incidents and building safer workplaces, the Group will take collective responsibility by implementing safety measures to safeguard all employees and cultivate a safe working environment.

Company Outlook And Order Book Update

Looking ahead, the Group is cautiously optimistic on the construction sector outlook for 2024 and will exercise caution and prudence in pursuing new opportunities. Additionally, the Group will prioritise risk management and regulatory compliance as well as leveraging on its strong track record and industry experience to navigate the challenges and capitalise on opportunities to ensure long-term sustainable growth.

The Group continues to be supported by a healthy pipeline of construction projects and has secured five projects in 2023 amounting to a total of approximately $322.5 million. Among these, two projects were awarded by the Public Utilities Board for drainage improvement works, while three projects were awarded by the Land Transport Authority for improvement of road related facilities, construction of cycling path network and maintenance of roads, roadrelated and commuter-related facilities. Nonetheless, the Group remains committed to upholding discipline and prudence in its finances and cashflow management and embracing technology to enhance productivity.

As at 31 December 2023, the Group's order book stood at $518.6 million, with projects extending till 2027. In pursuit of the mission to become the first and preferred civil engineering contractor, the Group will continue to prioritise the smooth execution and delivery of its projects, while also fostering strategic collaborations to drive growth and fortify its capabilities.

On the property development front, following the sale of all 74 units of the Group's residential project in Bukit Panjang, Phoenix Residences, the project is expected to attain its TOP in July 2024. In addition, the Group's joint venture residential project, The Essence, has achieved full sales and obtained TOP.

For its property investment business, the Group's investment property situated at 6-8 Bennett Street in Perth, Australia, continues to generate a steady stream of recurring rental income.

To drive recurring income, the Group owns a portfolio of investment properties, encompassing a freehold, three-storey shophouse situated at 35 Kreta Ayer Road, as well as freehold, two-storey conservation shophouses located at 69 and 71 Kampong Bahru Road, through its 51%-owned subsidiary, Raffles Prestige Capital Pte. Ltd., which have contributed positively towards the Group's performance.

To remain steadfast in its strategy to diversify earnings and drive recurring income streams, OKP will continue to pursue strategic partnership to strengthen its foothold in property development and investment ventures to deliver long term value to its stakeholders.


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