Operations Review
Business Segmental Breakdown
(i) Construction
Completed Construction Projects
During 2010, we successfully completed five projects: a National Parks Board project and four from the Land Transport Authority. A list of the construction projects completed in 2010 is found below.
List of Completed Construction Projects
On-going Construction Projects
OKP is busy working on a number of on-going projects. Excluding the land reclamation project which was secured in 2010 and completed in February 2011, four were secured in 2010. Together with the project relating to the widening of the Central Expressway which was secured in January 2009 and the civil works project on Jurong Island, the Group is currently executing a total of seven construction projects. Of these, four will be completed this year. These are: the civil works project undertaken for FWP joint venture; the Central Expressway widening project undertaken for the LTA; road raising works along Orchard Road (from Orange Grove Road to Cairnhill Road) for the PUB; and the project involving final premix surfacing, reinstatement and ancillary works at Tuas View Extension, Phase 1 for the JTC. The other projects have different completion dates, with at least one targeted for completion only in 2013.
List Of On-Going Construction Projects
(ii) Maintenance
Completed Maintenance Projects
We completed four maintenance contracts in 2010, secured three new ones and continued to work on some that were secured previously. In addition to providing a steady and recurrent income stream for OKP, our Maintenance segment is an important part of the service that OKP provides to its clients. In 2010, this segment contributed $23.9 million, amounting to 17.1% of the Group's revenue.
List of Completed Maintenance Projects
On-going Maintenance Projects
During 2010, our Maintenance segment successfully landed three contracts. These included two from the Land Transport Authority involving upgrading of roads and one from the Public Utilities Board that involved desilting work at the Bukit Timah Phase II Division canal. Another maintenance project for the Public Utilities Board, involving the improvement to roadside drains in Opera and East View Garden Estates, was completed in January 2011.
List Of On-Going Maintenance Projects
Financial Review
Revenue
Our Group achieved a record revenue of $139.9 million for FY2010. This was an increase of 7.6% or $9.9 million, from the $130.0 million registered in the previous year ("FY2009"). The increase in revenue was contributed by revenue growth of 18.1% from the construction segment, partially offset by a 24.9% decrease in revenue from the maintenance segment.
The strong growth in revenue from the construction segment was largely attributable to a higher percentage of revenue recognised from a few major construction projects which were in full swing in FY2010.
The decrease in revenue from the maintenance segment was due mainly to the substantial completion of existing maintenance projects, coupled with a lower percentage of revenue recognised from a few newly-awarded maintenance projects during FY2010.
The construction segment continues to be the major contributor to our Group's revenue. On a segmental basis, our core construction segment and maintenance segment accounted for 82.9% (2009: 75.5%) and 17.1% (2009: 24.5%) of our Group's revenue, respectively, for FY2010.
Gross profit and gross profit margin
Our gross profit increased by $6.1 million or 26.1% from $23.4 million for FY2009 to $29.5 million for FY2010 following the increase in the revenue recognised.
Our gross profit margin increased from 18.0% for FY2009 to 21.1% for FY2010. The increase in our gross profit margin was largely attributable to a few projects in FY2010 which had commanded higher gross profit margins with better project management and tighter cost controls.
Other income
The decrease in other income of $0.6 million or 39.3% was largely attributable to the reversal of allowance for impairment of trade receivables of $1.1 million in FY2009 which did not recur in FY2010. The decrease was partially offset by a $0.1 million increase in bank deposits interests resulting from higher cash and cash equivalents and interest earned from financial assets, fair value gain arising from the revaluation of an investment property of $0.3 million in FY2010 and a $0.1 million increase in sale of used construction materials at site during FY2010.
Administrative expenses
The increase in administrative expenses of $2.1 million or 28.2% was largely attributable to higher directors' remuneration and staff costs due to salary adjustments and higher staff bonuses following the strong financial performance of the Group in FY2010.
Other expenses
Other expenses increased by $0.1 million or 222.4% due to a loss from foreign exchange resulting from the weakening of the US dollar against the Singapore dollar during FY2010.
Finance expenses
Finance expenses decreased marginally by $0.04 million due mainly to repayment of finance leases during FY2010.
Profit before income tax
Profit before income tax increased by $3.3 million or 19.5% from $17.1 million for FY2009 to $20.4 million for FY2010. The increase was due mainly to an increase in gross profit of $6.1 million, which was partially offset by a decrease in other income of $0.6 million, an increase in administrative expenses of $2.1 million and an increase in other expenses of $0.1 million, as explained above.
Income tax expense
Income tax expense increased by $0.9 million or 33.5%, from $2.7 million for FY2009 to $3.6 million for FY2010. The higher income tax expense was due to higher profit before income tax, as explained above.
Non-controlling interests
Non-controlling interests increased by $0.07 million, resulting from losses incurred by subsidiaries during FY2010.
Net profit
Our Group reported record high net profit of $16.9 million for FY2010. Net profit increased by $2.4 million or 16.9% from $14.4 million for FY2009 to $16.9 million for FY2010 following the increase in profit before income tax of $3.3 million which was partially offset by an increase in income tax expense of about $0.9 million, as explained above.
Our net profit margin increased from 11.1% for FY2009 to 12.1% for FY2010.
Current assets
Current assets increased by $25.4 million, from $105.8 million as at 31 December 2009 to $131.2 million as at 31 December 2010. The increase was attributable to:
- an increase in cash and cash equivalents of approximately $22.3 million due mainly to the inflow of proceeds from the issuance of new shares arising from the exercise of warrants coupled with cash generated from operations in the financial year ended 31 December 2010 ("FY2010");
- an increase in trade and other receivables of approximately $2.3 million due mainly to higher accrued receivables and retention monies on construction contracts following higher revenue recognised in FY2010; and
- an increase in construction contracts work-in-progress of approximately $0.8 million following the increase in revenue and business activities in FY2010.
Non-current assets
Non-current assets increased by $5.4 million, from $16.5 million as at 31 December 2009 to $21.9 million as at 31 December 2010. The increase was attributable to:
- the purchase of financial asset, held-to-maturity and financial asset, available-for-sale for $1.0 million and $0.7 million respectively in FY2010;
- the fair value gain of approximately $0.3 million arising from the revaluation of an investment property in FY2010; and
- an increase in property, plant and equipment of $3.4 million resulting from the acquisition of the property at 2A Sungei Kadut Drive Singapore 729554 for a consideration of $3.55 million and the purchase of new plant and equipment, which was partially offset by depreciation and disposal of property, plant and equipment during FY2010. The said property would be used for fabrication yard, workshop, storage of construction materials and office.
Current liabilities
Current liabilities increased by $21.6 million, from $61.2 million as at 31 December 2009 to $82.8 million as at 31 December 2010. The increase was due mainly to:
- an increase in trade payables and accrued operating expenses of approximately $24.3 million arising from the increase in work done by subcontractors on the various projects as the construction of the projects progressed; and
- an increase in current income tax liabilities of approximately $0.6 million due to higher tax provision for FY2010 resulting from higher profits generated during FY2010;
partially offset by:
- the decrease in advance payment of approximately $3.0 million from a customer for an on-going project. The entire advance has been transferred and recognised as revenue during FY2010; and
- the decrease in finance lease liabilities of approximately $0.3 million due to repayment during FY2010.
Non-current liabilities
The decrease in non-current liabilities was due mainly to repayment of finance lease liabilities during FY2010.
Total shareholders' equity
Shareholders' equity, comprising share capital, other reserves, retained profits and non-controlling interests, increased by $9.4 million, from $59.5 million as at 31 December 2009 to $68.9 million as at 31 December 2010. The increase was largely attributable to:
- the profit generated from operations of approximately $16.9 million in FY2010; and
- the increase in share capital of approximately $3.9 million which was partially offset by the decrease in warrants reserve of approximately $0.2 million, resulting from the issuance of new shares arising from the exercise of warrants during FY2010;
partially offset by:
- the dividend payments to shareholders of approximately $10.6 million during FY2010; and
- the decrease in non-controlling interests arising from the acquisition of the non-controlling interest in OKP (Oil & Gas) Infrastructure Pte Ltd for a cash consideration of $0.6 million during FY2010.
Financial Review
