Business Segmental Breakdown
Completed Construction Projects
During the year under review, there was one completed construction project, which was secured in October 2015 and completed in June 2016. The construction segment continued to be the major contributor to our Group's total revenue, contributing 81.5 per cent or $90.5 million in 2016.
List of Completed Construction Projects
Ongoing Construction Projects
During the year, we secured one construction project. In July 2016, we won a contract for the proposed infrastructure works at Punggol (Phase 1) from JTC Corporation.
In 2016, we continued the execution of several ongoing construction projects, which had been secured since April 2014.
List of Ongoing Construction Projects
In addition to the above projects, a Public Utilities Board (PUB) 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.
Completed Maintenance Projects
We completed two maintenance projects during the year under review. These projects involved term contract ad hoc repairs and upgrading of roads, road-related facilities and road structure and improvements to roadside drains at Lorong 101-108 Changi Road/Langsat Road, Hillview Avenue and Thomson Road.
In addition to providing a steady and recurrent income stream for us, our maintenance segment is an important part of the services that we provide to our clients. This segment contributed $20.7 million, which constituted 18.5 per cent of our Group's total revenue in 2016.
List of Completed Maintenance Projects
Ongoing Maintenance Projects
During the year under review, we won four new maintenance contracts. Two contracts are from the Public Utilities Board involving improvement to roadside drains at Penjuru, Jalan Sampurna, Pioneer Sector and Jalan Buroh areas and Lorong 22 to 22 Geylang areas.
The other two contracts are from the Land Transport Authority for road resurfacing works along PIE, AYE and other expressways, and along ECP, SLE, BKE, CTE and KPE.
Besides the new maintenance contracts, we are working on one ongoing maintenance project.
List of Ongoing Maintenance Projects
Our Group reported a 7.6 per cent or $7.8 million increase in revenue to $111.1 million for FY2016 as compared to $103.3 million for FY2015. The increase was due mainly to a 16.7 per cent increase in revenue from the construction segment to $90.5 million, partially offset by a 19.9 per cent decrease in revenue from the maintenance segment to $20.6 million.
The increase in revenue from the construction segment was due mainly to the higher percentage of revenue recognised from a number of existing construction projects as they progressed to a more active phase in FY2016.
The decrease in revenue from the maintenance segment was largely attributable to the substantial completion of some existing maintenance projects in FY2016.
The construction segment continued to be the major contributor to our Group's revenue. On a segmental basis, our core construction segment and maintenance segment accounted for 81.5 per cent (2015: 75.1 per cent) and 18.5 per cent (2015: 24.9 per cent) respectively of our Group's revenue for FY2016.
Cost of works
Our cost of works marginally decreased by 0.4 per cent or $0.3 million from $89.5 million for FY2015 to $89.2 million for FY2016. The decrease in cost of works was due mainly to:
Gross Profit And Gross Profit Margin
Consequently, our gross profit for FY2016 increased by 59.2 per cent or $8.1 million from $13.8 million for FY2015 to $21.9 million for FY2016.
Our gross profit margin increased from 13.3 per cent for FY2015 to 19.7 cent for FY2016.
The higher gross profit margin for FY2016 was largely attributable to the completion of a few maintenance projects which had commanded better gross profit and the recognition of variation orders for a construction project.
Other income decreased by $0.3 million or 11.7 per cent from $2.8 million for FY2015 to $2.5 million for FY2016. The decrease was largely attributable to:
Administrative expenses increased by $1.8 million or 20.1 per cent from $9.0 million for FY2015 to $10.8 million for FY2016. The increase was largely attributable to (1) higher directors' remuneration (including profit sharing) accrued as a result of the higher profit generated by the Group for FY2016, and (2) an increase in staff costs due to salary adjustments during FY2016.
Finance expenses increased marginally by $10,000 due mainly to an increase in finance lease liabilities arising from additional plant and equipment acquired to support new projects during FY2016.
Share Of Results Of Associates And Joint Ventures (Net Of Tax)
Profit Before Income Tax
Profit before income tax increased by $8.9 million or 117.0 per cent from $7.6 million for FY2015 to $16.5 million for FY2016. The increase was due mainly to (1) the increase in gross profit of $8.1 million and (2) the increase in the share of profit of associated companies and joint ventures of $2.9 million. The increase was partially offset by (1) the increase in administrative expenses of $1.8 million and (2) the decrease in other income of $0.3 million, as explained above.
Income Tax Credit/(Expense)
Income tax expense increased by $1.6 million or 260.3 per cent from $0.6 million in FY2015 to $2.2 million in FY2016 due mainly to higher profit before income tax, as explained above.
The effective tax rates for FY2016 and FY2015 were 13.1 per cent and 7.9 per cent respectively.
The effective tax rate for FY2016 was lower than the statutory tax rate of 17.0 per cent, due mainly to (1) enhanced tax deductions under the Productivity and Innovation Credit Scheme, (2) statutory stepped income tax exemption and (3) a tax rebate of 50 per cent on the corporate tax payable.
Due to the utilisation of capital allowances carried forward from prior years, the effective tax rate of 7.9 per cent for FY2015 was lower than the statutory tax rate of 17.0 per cent.
Overall, our net profit increased by $7.3 million or 104.7 per cent, from $7.0 million for FY2015 to $14.3 million for FY2016, following the increase in profit before income tax of $8.9 million which was partially offset by the increase in income tax expense of $1.6 million, as explained above.
Our net profit margin increased from 6.8 per cent for FY2015 to 12.9 per cent for FY2016.
Statement Of Financial Position
Current assets increased by $23.0 million, from $83.4 million as at 31 December 2015 to $106.4 million as at 31 December 2016. The increase was attributable to:
Non-current assets increased by $3.4 million, from $54.4 million as at 31 December 2015 to $57.8 million as at 31 December 2016. The increase was attributable to:
Current liabilities increased by $16.0 million, from $30.8 million as at 31 December 2015 to $46.8 million as at 31 December 2016. The increase was due mainly to:
Non-current liabilities increased by $0.7 million, from $2.3 million as at 31 December 2015 to $3.0 million as at 31 December 2016. The increase was due mainly to:
Shareholders' equity, comprising share capital, other reserves and retained profits, increased by $9.7 million, from $104.7 million as at 31 December 2015 to $114.4 million as at 31 December 2016. The increase was largely attributable to:
Statement Of Financial Position
Our Operating And Financial Review
Group's Quarterly Results
The first two quarters in FY2016 reported lower revenue as compared to their corresponding quarters in FY2015. The lower revenue was due mainly to the lower percentage of revenue recognised from several maintenance projects that were near completion during the half year ended 30 June 2016. The last two quarters in FY2016 reported higher revenue as compared to their corresponding quarters in FY2015. The higher revenue was due mainly to the higher percentage of revenue recognised from a number of existing key construction projects as they progressed to a more active phase during the last two quarters.
Higher EBITDA were recorded in first, third and last quarters in FY2016 as compared to their corresponding quarters in FY2015.
All the quarters except the second quarters in FY2016 registered higher profit before income tax as compared to the corresponding quarters in FY2015. The increase in profit before income tax was due mainly to the completion of several maintenance projects which commanded higher margins, as well as the recognition of variation orders for a construction project in FY2016. The increase in the profit before income tax in the last quarter of 2016 was mainly due to an increase in share of results of associated companies and joint ventures of $2.9 million.
Better profit before income tax led to higher profit attributable to shareholders for first, third and last quarters in 2016.
Corporate Liquidity And Cash Resources
We maintain a strong and healthy balance sheet and cash fl ow position which enable us to explore new large-scale infrastructure projects and investments, either here or overseas.
We reported net cash of $28.2 million generated from operating activities in FY2016 as compared to net cash generated from operating activities of $20.3 million in FY2015. The $7.9 million increase in net cash generated from operating activities was due mainly to:
Net cash used in investing activites of $2.0 million was due to:
Net cash of $5.6 million used in financing activities in FY2016 included repayment of finance lease liabilities of $1.5 million, interest payments of $0.1 million and dividend payments to shareholders amounting to $4.6 million. The $6.2 million outfl ow was partially offset by a decrease in pledged deposit of $0.6 million as a result of the cancellation of a bank facility during FY2016.
Overall, free cash and cash equivalents stood at $70.1 million as at 31 December 2016, an increase of $20.6 million, from $49.5 million as at 31 December 2015. This works out to cash of 22.7 cents per share as at 31 December 2016 as compared to 16.1 cents per share as at 31 December 2015. (based on 308,430,594 issued shares as at 31 December 2016 and 31 December 2015).
The finance lease liabilities are secured by way of corporate guarantees issued by the Company and charged over the property, plant and equipment under the finance leases.
The increase in debt amount from $2.6 million as at FY2015 to $3.1 million as at FY2016 as a result of purchase of plant and equipment to support new and existing projects in FY2016.
Value Added Statement
Total value-added created by the Group in FY2016 amounted to $58.5 million (2015: $41.6 million) due to higher profits reported in FY2016.
In FY2016, about $33.5 million or 57.0 per cent of the value-added was paid to employees in the form of salaries and wages. $2.3 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 $17.2 million was retained by the Group for its future growth.
In FY2015, about $29.8 million or 72.0 per cent of the value-added was paid to employees in the form of salaries and wages. $0.7 million or 2.0 per cent was paid to the government in the form of corporate and property taxes while $0.7 million or 2.0 per cent was paid as dividends and interests to financial institutions. Balance of $10.2 million was retained by the Group for its future growth.