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

Operations Review

Email This Print This

(Extracted from Annual Report 2018)

OPERATING REVIEW

Business Segmental Breakdown

(i) Construction

Completed Construction Projects

During the year under review, there were three completed public sector construction projects, which were secured since June 2014 and completed by February 2018.

The construction segment continued to be one of the major contributors to our Group's total revenue, contributing 50.9 per cent or $46.0 million in FY2018.

List of Completed Construction Projects

Ongoing Construction Projects

During the year, we secured four construction projects from various public sector agencies. These four projects were:

In 2018, we continued the execution of several ongoing construction projects, which had been secured since February 2015.

List of Ongoing Construction Projects

In addition to the above projects, a contract for improvement to Bukit Timah first diversion canal Contract 3 (Holland Green to Clementi Road), was awarded to a joint venture, Chye Joo ‐ Or Kim Peow JV in May 2015. The results of Chye Joo - Or Kim Peow JV are accounted for in the Group's consolidated financial statement using the equity method.

(ii) Maintenance

Completed Maintenance Projects

We completed four maintenance projects during the year under review. The four projects involved improvement to roadside drains, and road resurfacing works.

In addition to providing a stable and recurrent income stream for the Group, our maintenance segment is an important part of the services that we provide to our clients. This segment contributed $40.4 million, which constituted 44.6 per cent of our Group's total revenue in FY2018.

List of Completed Maintenance Projects

Ongoing Maintenance Projects

We won two new maintenance contracts in FY2018 and one contract, which was awarded after 31 December 2018, from public sector agencies. The two new maintenance projects were:

The new project awarded after 31 December 2018 was for improvement to roadside drains and watermain replacement works under Estate Upgrading Programme Batch 9 - Contract 1 (Clover and Thomson Faber Island Gardens Estates).

List of Ongoing Maintenance Projects

List of Ongoing Maintenance Project Secured After FY2018

(iii) Rental Income

Rental income made up 4.5 per cent of our Group's total revenue for FY 2018, up from 0.2 per cent in the previous year.

The increase in rental income, which was derived from investment properties, was mainly attributed to rental income generated from the newly purchased property at 6-8 Bennett Street, East Perth, Western Australia based on the occupancy rate of approximately 68.0 per cent in FY2018.

Financial Review

Income Statement

Statement of Financial Position

Revenue

Our Group reported a 23.0 per cent or $27.1 million decrease in revenue to $90.4 million for the financial year ended 31 December 2018 (FY2018) as compared to $117.5 million for FY2017. The decrease was due mainly to a 41.3 per cent decrease in revenue from the construction segment to $46.1 million, partially offset by (i) a 3.9 per cent increase in revenue from the maintenance segment to $40.4 million and (ii) a 1,609.7 per cent 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 newly-awarded construction projects as well as no revenue generated from a construction project at the Pan-Island Expressway exit to Tampines Expressway following the mutual termination of the project, during FY2018.

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 FY2018.

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 based on the current occupancy rate of approximately 68.0 per cent.

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 50.9 per cent (FY2017: 66.7 per cent), 44.6 per cent (FY2017: 33.1 per cent) and 4.5 per cent (FY2017: 0.2 per cent) of our Group's revenue respectively for FY2018.

Cost of Sales

Our cost of sales decreased by 23.6 per cent or $22.6 million from $95.7 million for FY2017 to $73.1 million for FY2018. 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 additional cost arising from a construction project at the Pan-Island Expressway exit to Tampines Expressway following the mutual termination of the project; and

  6. the increase in depreciation of property, plant and machinery and right-of-use assets, during FY2018.

Gross Profit And Gross Profit Margin

Our gross profit for FY2018 decreased by 20.4 per cent or $4.5 million from $21.9 million for FY2017 to $17.4 million for FY2018.

However, our gross profit margin improved marginally from 18.6 per cent for FY2017 to 19.2 per cent for FY2018.

The slight improvement in the gross profit margin for FY2018 was largely attributable to the completion of a few maintenance projects which had commanded better gross profit.

Other Income

Other income increased by $1.1 million or 110.2 per cent from $1.0 million for FY2017 to $2.1 million for FY2018. 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. interest received from loan to a joint venture of $0.5 million;

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

  4. an increase in interest income received of $0.2 million due to higher interest earned from bank deposits, during FY2018.

Other Losses

Other losses increased by $2.3 million or 624.3 per cent from $0.4 million for FY2017 to $2.7 million for FY2018. The increase was largely attributable to:

  1. an increase in fair value loss of $1.7 million arising from the revaluation of some of the investment properties; and

  2. an increase in loss from foreign exchange of $0.6 million resulting mainly from the weakening of the Australian dollar against the Singapore dollar, during FY2018.

Administrative expenses

Administrative expenses decreased by $1.0 million or 9.7 per cent from $10.0 million for FY2017 to $9.0 million for FY2018. The decrease was largely attributable to:

  1. a decrease in directors' remuneration (including profit sharing) of $1.3 million as a result of the lower profit generated by the Group for FY2018; and

  2. a decrease in tender charges of $0.2 million due to tenders for lesser complex projects,

  3. which were partially offset by:

  4. an increase in staff costs of $0.3 million during 4Q2018; and

  5. foreign withholding tax of $0.2 million on loan interest paid in Australia.

Finance Expenses

Finance expenses increased by $1.1 million or 1,371.4 per cent from $77,000 for FY2017 to $1.1 million for FY2018. The increase was due to:

  1. interest from lease liabilities of $42,000 as a result of implementation of SFRS(I) 16;

  2. a notional interest on loan of $0.2 million resulting from fair value adjustment of loans from a minority shareholder; and

  3. interest expenses of $0.8 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 (Net of TAX)

  1. Share of profit of joint ventures

    The share of profit of joint ventures decreased by $0.7 million due mainly to:
    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 handed over during FY2018. All the units have been fully sold and recognised in FY2018.

  2. Share of profit of associated companies

    The share of loss of associated companies was due mainly to the operating expenses incurred by the Group's 22.5% held associated company, Chong Kuo Development Pte Ltd, and decrease in share of profit of the Group's 25% held associated company, USB Holdings Pte Ltd, during FY2018.

Profit Before Income Tax

Profit before income tax decreased by $8.4 million or 56.2 per cent from $15.0 million for FY2017 to $6.6 million for FY2018. The decrease was due mainly to (1) the decrease in gross profit of $4.5 million, (2) the increase in other losses of $2.3 million, (3) the decrease in the share of profit of associated companies and joint ventures of $2.6 million and (4) the increase in finance expenses of $1.1 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 $1.1 million, as explained above.

Income Tax Expense

Income tax expense decreased by $1.3 million or 59.3 per cent from $2.2 million in FY2017 to $0.9 million in FY2018 due to lower profit before income tax, as explained above.

The effective tax rates for FY2018 and FY2017 were 14.1 per cent and 15.2 per cent respectively.

The effective tax rate for FY2018 was lower than the statutory tax rate of 17.0 per cent due mainly to (1) statutory stepped income tax exemption, and (2) a tax rebate of 20 per cent on the corporate tax payable.

The effective tax rate for FY2017 was lower than the statutory tax rate of 17.0 per cent due mainly to (1) the profit before income tax of $15.0 million 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 20 per cent on the corporate tax payable.

Non-Controlling Interests

Non-controlling interests of $0.8 million was due to losses from our subsidiary corporation, Raffles Prestige Capital Pte Ltd, in FY2018. The loss was mainly due to the fair value loss of $2.5 million arising from the revaluation of the property at 6-8 Bennett Street, East Perth, Western Australia during the fourth quarter ended 31 December 2018.

Net Profit

Our net profit decreased by $7.1 million or 55.6 per cent, from $12.7 million for FY2017 to $5.7 million for FY2018 due to the decrease in profit before income tax of $8.2 million, which was partially offset by the decrease in income tax expense of $1.1 million, as explained above.

Our net profit margin decreased from 10.8 per cent for FY2017 to 6.2 per cent for FY2018.

Statement Of Financial Position

Current Assets

Current assets decreased by $15.6 million, from $112.1 million as at 31 December 2017 to $96.5 million as at 31 December 2018. The decrease was attributable to:

  1. a decrease in cash and cash equivalents of $11.8 million. This was due mainly to (1) the cash used in investing activities of $36.9 million and (2) cash used in operations of $2.5 million, which were partially offset by (1) cash generated from financing activities of $27.1 million and (2) increase in bank deposits pledged with a bank of $0.5 million; and

  2. a decrease in trade and other receivables of $5.9 million, due mainly to repayment of loans by a joint venture, Lakehomes Pte Ltd, of $3.9 million, coupled with a decrease in trade receivables of $2.0 million due to settlement of billings by a few customers during FY2018,

  3. which was partially off set by:
  4. an increase in contract assets of $2.1 million, due mainly to an increase in amount due from customers of $2.3 million which related to work done but not billed in December 2018. The increase was partially offset by a decrease in construction contract work-in-progress of $0.2 million due mainly to lower unbilled amounts expected to be collected from customers for contract work performed up to 31 December 2018 as compared to the previous year.

Non-current assets

Non-current assets increased by $35.9 million, from $54.3 million as at 31 December 2017 to $90.2 million as at 31 December 2018. The increase was attributable to:

  1. an increase in investment properties of $42.4 million resulting from the $46.3 million purchase of the property at 6-8 Bennett Street, East Perth, Western Australia. The increase was partially offset by (1) net fair value loss of $1.9 million arising from the revaluation of some investment properties and (2) an exchange realignment of $2.0 million due to depreciation of Australian dollar in FY2018;

  2. an increase in investments in associated companies of $0.3 million due mainly to the cost of investment of $0.5 million in an associated company, Chong Kuo Development Pte Ltd, which was partially offset by the share of loss of associated companies of $0.2 million; and

  3. the recognition of right-of-use assets of $0.5 million as the Group has applied SFRS(I)16,

  4. which were partially offset by:

  5. a decrease in other receivables of $3.1 million due to (1) the repayment of loans by an associated company, CS Amber Development Pte Ltd, of $8.5 million and (2) a notional fair value adjustment of loans extended to the associated companies of $0.1 million. The decrease was partially offset by (1) an advance to an associated company, Chong Kuo Development Pte Ltd, of $3.8 million and (2) an advance to another associated company, USB Holdings Pte Ltd, of $1.7 million; and

  6. a decrease in investments in joint ventures of $4.2 million due mainly to (1) dividends of $0.3 million received from a joint venture, Forte Builder Pte Ltd, and (2) dividends of $4.0 million received from another joint venture, Lakehomes Pte Ltd, which was partially offset by the share of profit of joint ventures of $1.0 million, during FY2018.
  7. Current liabilities

    Current liabilities decreased by $13.7 million, from $41.3 million as at 31 December 2017 to $27.6 million as at 31 December 2018. The decrease was due mainly to:

    1. a decrease in trade and other payables of $13.4 million arising from (1) lower accrued operating expenses related to project costs and (2) settlement of some major trade payables;

    2. a decrease in contract liabilities of $0.3 million due to utilisation of advance received from a customer; and

    3. a decrease in current income tax liabilities of $1.0 million due to lower tax provision resulting from lower profits generated,

    4. which were partially offset by:

    5. the recognition of lease liabilities of $0.2 million arising from the implementation of SFRS(I)16; and

    6. a bank borrowing of $0.8 million to finance the purchase of an investment property at 6-8 Bennett Street, East Perth, Western Australia, during FY2018.

    Non-Current Liabilities

    Non-current liabilities increased by $33.0 million, from $2.5 million as at 31 December 2017 to $35.5 million as at 31 December 2018. The increase was due mainly to:

    1. other payable of $8.1 million relating to an advance from a minority shareholder extended to a foreign operation for the purpose of purchasing the investment property and working capital needs;


    2. an increase in finance lease liabilities of $0.4 million as a result of the purchase of plant and machinery to support new projects;


    3. a bank borrowing of $23.9 million to finance the purchase of an investment property at 6-8 Bennett Street, East Perth, Western Australia;

    4. the recognition of lease liabilities of $0.4 million arising from the implementation of SFRS(I)16; and

    5. an increase in deferred tax liabilities of $0.2 million which arose from deductible temporary differences between the carrying value of assets and value of assets for tax purposes, during FY2018.

    Shareholders' Equity

    Shareholders' equity, comprising share capital, other reserves and retained profits, increased by $1.1 million, from $122.5 million as at 31 December 2017 to $123.6 million as at 31 December 2018. The increase was largely attributable to:

    1. the profit generated from operations of $6.5 million in FY2018; and

    2. a capital reserve of $1.6 million arising from the fair value adjustment on the interest-free loan from a minority shareholder,

    3. which was partially offset by:
    4. the dividend payment to shareholders of $6.2 million; and

    5. a non-controlling interest of $0.8 million due to the losses of Raffles Prestige Capital Pte Ltd, during FY2018.

    Our Operating And Financial Review

    Group's Quarterly Results

    All quarters in FY2018 reported lower revenue as compared to their corresponding quarters in FY2017. The lower revenue was due mainly to the lower percentage of revenue recognised from a few construction and maintenance projects, which were reaching completion. The decrease in revenue from the construction and maintenance segments was partially offset by an increase in rental income generated from investment properties due mainly to rental income from the newly purchased property at 6-8 Bennett Street, East Perth, Western Australia for the last two quarters in FY2018.

    Lower EBITDA were recorded in first two quarters and last quarter in FY2018 as compared to their corresponding quarters in FY2017.

    The decrease in profit before income tax for the first two quarters in FY2018 was due mainly to lower gross profit from certain construction projects and additional cost arising from the mutual termination of the PIE-TPE project, as well as a decrease in share of results of joint ventures based on the recognition of profits from the fewer remaining units of a development, which were handed over during the first two quarters in FY2018. The decrease in profit before income tax for the fourth quarter in FY2018 was due to an increase in fair value loss of $1.7 million arising from the revaluation of some of the investment properties and increase in loss from foreign exchange of $0.4 million resulting mainly from the weakening of the Australian dollar against the Sinapore dollar. The decrease was partially offset by the increase in gross profit which was attributable to the completion of a few projects which had commanded better gross profit margin during the last quarter of FY2018. The increase in profit before income tax for third quarter in FY2018 was due mainly to higher gross profit from a few maintenance projects, which had commended better gross profit and were nearing completion.

    Lower profit before income tax led to lower profit attributable to shareholders for the first and second quarters in FY2018. Higher profit before income tax led to higher profit attributable to shareholders for the third quarter in FY2018. On the other hand, the higher profit attributable to shareholders was due to losses from a subsidary corporation, in the last quarter in FY2018. The loss was due to the fair value loss of $2.5 million arising from the revaluation of the property at 6-8 Bennett Street, East Perth, Western Australia during the last quarter in FY2018.

    Corporate Liquidity And Cash Resources

    We maintain a strong and healthy balance sheet and cash flow position, which enable us to explore new infrastructure projects and property investments, either here or overseas.

    We reported net cash of $2.5 million used in operating activities in FY2018 as compared to net cash generated from operating activities of $17.5 million in FY2017. The $20.0 million decrease in net cash generated from operating activities was due mainly to:

    1. a decrease in net cash generated from operating activities before working capital changes of $2.7 miliion;
    2. an increase in net working capital outflow of $17.5 million,,

      which were partillay offset by:

    3. an increase in interest received of $0.2 million during FY2018.

    Net cash used in investing activites of $36.9 million was due to:

    1. the purchase of new property, plant and equipment and intangible assets of $1.5 million;
    2. the purchase of an investment property at 6-8 Bennett Street, East Perth, Western Australia for $46.3 million;
    3. the investment in chong Kuo Development Pte Ltd for $0.5 million; and
    4. an advance of $3.8 million extended to an associated company, Chong Kuo Development Pte Ltd, for the purpose of purchasing the land parcel, construction costs and working capital needs and another advance of $1.7 million extended to USB Holdings Pte Ltd, for the purpose of purchasing the property at 71-85 Phoenix Avenue, Phoenix Heights,

    5. which were partially offset by:

    6. the repayment of loan by a joint venture, Lakehomes Pte Ltd, of $3.9 million;
    7. the repayment of loan by an associated company, CS Amber Development Pte Ltd, of $8.5 million;
    8. proceeds received from the disposal of properoty, plant and equipment of $0.2 million;
    9. dividends of $0.3 million and $4.0 million received from the joint ventures, Forte Builder Pte Ltd and Lakehomes Pte Ltd, respectively during FY2018.

    Net cash of $27.1 million was generated from financing activites in FY2018. This was due mainly to (1) the proceeds from bank borrowing of $26.3 million and (2) an advance of $10.3 million received from a minority shareholder which was extended to a foreign operation for the purpose of purchasing the investment property and working capital needs. These were partially offset by (1) dividend payments to shareholders of $6.2 million, (2) repayment of finance lease liabilities of $1.2 million, (3) repayment of bank borrowing of $0.3 million, (4) interest payments of $0.8 million, (5) increase in bank deposit pledged with a bank of $0.5 million to secure a bank facility and (6) repayment of lease liabilities of $0.5 million, during FY2018.

    Overall, free cash and cash equivalents stood at $69.2 million as at 31 December 2018, a decrease of $12.3 million, from $81.5 million as at 31 December 2017. This works out to cash of 22.4 cents per share as at 31 December 2018 as compared to 26.4 cents per share as at 31 December 2017 (based on 308,430,594 issued shares as at 31 December 2018 and 31 December 2017).

    The finance lease liabilities of $2.8 million are secured by way of corporate guarantees issued by the Company and charged over the property, plant and equipment under the finance leases.

    The bank borrowing of $24.7 million is secured by first legal mortgage over an investment property of the Group, the Group's shares in a subsidiary corporation and corporate guarantee of the Company.

    The increase in debt amount from $2.5 million as at FY2017 to $27.5 million as at FY2018 as a result of bank borrowing obtained to finance the purchase of an investment property at 6-8 Bennett Street in FY2018.

    Value Added Statement

    Total value-added created by the Group in FY2018 amounted to $49.3 million (2017: $56.6 million) due to lower profits reported in Y2018.

    In FY2018, about $30.7 million or 62.0 per cent of the value-added was paid to employees in the form of salaries and wages. $1.0 million or 2.0 per cent was paid to the government in the form of corporate and property taxes while $7.1 million or 14.0 per cent was paid as dividends and interests to financial institutions. Balance of $8.6 million was retained by the Group for its future growth.

    In FY2017, about $33.8 million or 60.0 per cent of the value-added was paid to employees in the form of salaries and wages. $2.4 million or 4.0 per cent was paid to the government in the form of corporate and property taxes while $4.7 million or 8.0 per cent was paid as dividends and interests to financial institutions. Balance of $15.5 million was retained by the Group for its future growth.