Financials
Financial Statements And Related Announcement - Half Yearly Results
Financials Archive
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Income Statement
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 constructionrelated 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.
Review of income statements for the Half Year ended 30 June 2024
Revenue
Our Group reported a 5.6% or $3.9 million increase in revenue to $73.9 million during the first half year ended 30 June 2024 ("1H2024") as compared to $70.0 million during the first half year ended 30 June 2023 ("1H2023"). The improvement was mainly due to the 13.6% increase in revenue from the construction segment to $46.1 million, partially offset by a 6.0% decrease in revenue from the maintenance segment to $24.7 million and a 2.1% decrease in rental income.
The construction segment registered positive revenue growth in 1H2024 as compared to 1H2023. The growth was primarily driven by a higher percentage of revenue recognised from various ongoing and newly awarded construction projects as they progressed to a more active phase in 1H2024.
However, the maintenance segment saw a decrease in revenue in 1H2024, mainly due to the completion of certain projects and the resulting reduction in maintenance revenue. The decrease in rental income generated from investment properties was mainly due to the strengthening of Singapore dollar against the Australian dollar as the rental income generated from the property at 6-8 Bennett Street, East Perth, Western Australia was denominated in Australian dollar.
Both the construction and maintenance segments continued to be the major contributors to our Group’s revenue. On a segmental basis, construction, maintenance and rental income accounted for 62.4% (1H2023: 57.9%), 33.4% (1H2023: 37.6%) and 4.2% (1H2023: 4.5%) of our Group’s revenue, respectively, for 1H2024.
Cost of sales
Our cost of sales decreased by 21.9% or $14.8 million from $67.9 million for 1H2023 to $53.1 million for 1H2024. The decrease in cost of sales was due mainly to:
- the decrease in sub-contracting costs, which were mainly costs incurred for premix works,
signages, asphalt works, mechanical and electrical works, soil-testing, landscaping and
metalworks usually sub-contracted to external parties;
- the decrease in the cost of construction materials due to lower utilisation of materials; and
- a decrease in overheads such as hiring costs which related to rental of additional heavy
equipment and machineries to support existing projects and decrease in upkeep of plant and
machinery,
during 1H2024.
Gross profit and gross profit margin
Overall, our gross profit for 1H2024 increased by 909.7% or $18.7 million from $2.1 million for 1H2023 to $20.8 million for 1H2024.
The gross profit generated from rental income remained relatively consistent for both 1H2023 and 1H2024. However, there was a significant increase of $18.8 million in the gross profit of the construction and maintenance segments, from $0.1 million in 1H2023 to $18.9 million in 1H2024.
For the construction and maintenance segments, the gross profit margin increased from 0.1% for 1H2023 to 26.7% for 1H2024, largely attributable to the higher contribution from a few projects which had commanded better gross profit margin during 1H2024.
Other gains, net
Other gains decreased by $43.5 million or 96.4%, from $45.1 million for 1H2023 to $1.6 million for 1H2024. The decrease was mainly due to:
- the one-off arbitral award of $43.8 million in relation to the Contract 449A worksite incident
which was awarded in 1H2023;
- a decrease of $0.8 million in government grants; and
- a decrease of $0.1 million in gain on disposal of fixed assets,
- an increase in gain on foreign exchange of $0.4 million arising from the revaluation of assets
and liabilities denominated in Australian dollar to Singapore dollar; and
- the increase in interest income by $0.8 million resulting from higher interest rate from bank
deposits,
during 1H2024.
Administrative expenses
Administrative expenses remained consistent at $7.4 million for both 1H2023 and 1H2024.
Finance expenses
Finance expenses remained consistent at $1.0 million for both 1H2023 and 1H2024, due to the stable interest rates across the periods and there were no new major financing facilities within the Group.
Share of results of associated companies and joint ventures
The share of results of associated companies and joint ventures decreased by $0.2 million or 108.4%. The decrease was attributable to the share of loss of the Group’s 22.5%-held associated company, Chong Kuo Development Pte Ltd, during 1H2024.
Profit before income tax
Profit before income tax decreased by $24.9 million or 64.0%, from $38.9 million for 1H2023 to $14.0 million for 1H2024. The decrease was due mainly to (1) the decrease in other gains (net) of $43.5 million, and (2) the decrease in share of profit of associated companies and joint ventures of $0.2 million, which were partially offset by (3) the increase in gross profit of $18.8 million, as explained above.
Income tax expense
Income tax expense was mainly in relation to the operating profits registered by the profitable entities within the Group. The decrease of income tax expense by 39.5% or $1.2 million in 1H2024 is due mainly to lower taxable profit registered by the Group. The decrease in taxable profit compared to the 1H2023 was largely due to the previous period’s taxable profit including an arbitral award received in relation to the 2017 worksite accident.
The effective tax rate for 1H2024 and 1H2023 was 13.4% and 8.0% respectively, which was lower than the statutory tax rate of 17%, due to the utilisation of tax credits in both 1H2024 and 1H2023.
Non-controlling interests
Non-controlling interests of $0.2 million was due to the share of profit of our subsidiary corporation, Raffles Prestige Capital Pte Ltd, in 1H2024.
Net profit
Overall, for 1H2024, net profit decreased by $23.7 million or 66.1%, from $35.8 million for 1H2023 to $12.1 million for 1H2024, following the decrease in profit before income tax of $24.9 million offset by the decrease in income tax expense of $1.2 million, as explained above.
Our net profit margin decreased from 51.2% for 1H2023 to 16.4% for 1H2024.
Review of the financial position for the half year ended 30 June 2023
Current assets
Current assets increased by $12.0 million, from $123.1 million as at 31 December 2023 to $135.1 million as at 30 June 2024. The increase was due mainly to:
- a $13.0 million boost in cash and cash equivalents, mainly due to $22.9 million
generated from operating activities, an increase of $0.6 million in pledged deposits,
alongside $2.0 million in cash used in investing activities and $8.5 million in cash
used in financing activities; and
- an increase in trade and other receivables of $3.7 million as a result of higher
billings for on-going construction and maintenance projects,
- a decrease in contract assets of $4.7 million, due mainly to increase in billings for
the on-going construction and maintenance projects,
during 1H2024.
Non-current assets
Non-current assets increased by $1.7 million, from $136.3 million as at 31 December 2023 to $138.0 million as at 30 June 2024. The increase was due mainly to:
- an increase in investments in associated companies by $0.4 million arising from
the recognition of notional fair value of loan of an associated company;
- an increase in right-of-use assets by $0.8 million resulting from the purchase of
plant and equipment to support the new and existing projects through hire
purchase;
- an increase in investment properties by $0.5 million resulting from structural
improvement and a foreign exchange realignment relating to the property at 6-8
Bennett Street, East Perth, Western Australia due to the revaluation of Australian
dollar to Singapore dollar; and
- an increase in property, plant and equipment by $0.7 million resulting mainly from
the purchase of property, plant and equipment,
- a decrease in other receivables by $0.7 million due to an advance of $0.7 million
extended to an associated company, USB Holdings Pte Ltd, offset by the
recognition of fair value adjustment of $0.4 million on the said advance and a
repayment of loan of $1.0 million from an associated company, Chong Kuo
Development Pte Ltd,
during 1H2024.
Current liabilities
Current liabilities increased by $6.0 million, from $55.1 million as at 31 December 2023 to $61.1 million as at 30 June 2024. The increase was due mainly to:
- an increase of $15.4 million in contract liabilities due to advance billings for three
construction projects for which obligations have yet to be fulfilled; and
- an increase in current income tax liabilities by $0.2 million due to higher tax
provision provided for profitable entities within the Group;
- a decrease in trade and other payables of $9.6 million arising from the decrease of
trade payables of $1.4 million and decrease of $8.3 million in accrued operating
expenses, offset against the increase of $0.1 million in other payables,
Non-current liabilities
Non-current liabilities increased by $0.1 million, from $34.9 million as at 31 December 2023 to $35.0 million as at 30 June 2024. The increase was primarily due to:
- an increase in non-trade payables due to non-controlling interest by $0.3 million
resulting from the amortisation of notional fair value;
- an increase in lease liabilities of $0.4 million arising from the purchase of plant and
machineries for newly awarded projects;
- a decrease in bank borrowings of $0.5 million following repayment of bank borrowings; and
- a decrease in deferred income tax liabilities of $0.1 million,
during 1H2024.
Shareholders' equity
Shareholders' equity, comprising share capital, treasury shares, other reserves, retained profits and non-controlling interests, increased by $7.5 million, from $169.5 million as at 31 December 2023 to $177.0 million as at 30 June 2024. The increase was due mainly to:
- the profits generated from operations of $11.9 million attributable to equity holders
of the Company and non-controlling interests of $0.2 million arising from the share
of profit of Raffles Prestige Capital Pte Ltd,
- the dividend payment to shareholders of $4.6 million,
Review of cash flows for the half year ended 30 June 2024
Net cash generated from operating activities
Our Group reported net cash generated from operating activities of $22.9 million in 1H2024, which was mainly due to cash generated from operating activities before working capital changes of $16.7 million, net working capital inflow of $6.7 million and interest received of $1.2 million, which were partially offset by income tax paid of $1.7 million.
Net cash used in investing activities
In 1H2024, our Group reported net cash used in investing activities of $2.0 million, which mainly due to (i) purchase of property, plant and equipment and right-of-use assets of $2.0 million and $0.1 million respectively, (ii) structural improvements of $0.2 million that were capitalised into investment properties, and (iii) advances extended to an associated company of $0.7 million, partially offset by (iv) loan repayment of $1.0 million received from an associated company.
Net cash used in financing activities
Net cash used in financing activities of $8.5 million in 1H2024 was mainly attributable to (i) repayment of lease liabilities of $1.9 million, (ii) interest paid of $0.8 million, (iii) repayment of borrowings of $0.6 million, (iv) dividend paid of $4.6 million, and (v) pledge of bank deposits of $0.6 million.
Overall, free cash and cash equivalents stood at $94.2 million as at 30 June 2024, an increase of $28.4 million from $65.8 million as at 30 June 2023. This works out to cash of 30.7 cents per share as at 30 June 2024 as compared to 21.4 cents per share as at 30 June 2023 (based on 306,961,494 issued shares (excluding treasury shares) as at 30 June 2024 and 30 June 2023).
Commentary
Economic Outlook
Based on advance estimates released by the Ministry of Trade and Industry ("MTI") on 12 July 2024, Singapore’s economy grew by 2.9% on a year-on-year basis in the second quarter of 2024, extending the 3.0% growth in the previous quarter. On a quarter-on-quarter seasonally-adjusted basis, the economy expanded by 0.4% in the second quarter, slightly faster than the 0.3% reported in the preceding quarter of 2024. The year-on-year growth was higher than the 2.7% forecast by economists polled by Bloomberg, while quarter-on-quarter growth was in line with their projection.
On 12 April 2024, according to the Monetary Authority of Singapore ("MAS"), the Singapore economy is expected to strengthen over 2024. The slightly negative output gap is projected to narrow further in H2 2024, even as underlying inflationary pressures gradually dissipate. Core inflation is likely to remain elevated in the earlier part of the year but should stay on its broadly moderating path and step down in Q4, before falling further into 2025.
Industry Outlook
According to MTI, the construction sector extended growth by 4.3% year-on-year in the second quarter, from 4.1% growth in the preceding quarter. The growth was supported by an increase in public sector construction output. On a quarter-on-quarter seasonally-adjusted basis, the construction sector expanded by 2.4%, a reversal from the 1.9% contraction in the previous quarter.
For 2024, the Building and Construction Authority ("BCA") expects total construction demand to be between $32 billion and $38 billion. Public sector demand is expected to contribute about 55% of total construction demand, amounting to between $18 billion and $21 billion, while private sector demand is expected to account for the remaining 45%, or between $14 billion and $17 billion.
In the face of an ever-evolving regulatory landscape, the Group will diligently monitor updates relating to its core construction business and adapt to these changes to ensure effective compliance as well as leveraging on best practices to enhance its operations and maintain a competitive edge.
Regarding the private residential property segment, statistics released by the Urban Redevelopment Authority ("URA") showed that the private residential property price index increased quarter-on-quarter by 1.1% in 2Q2024, a moderation from the 1.4% increase in the previous quarter. The quarterly average price increase of 1.3% in 1H2024 was lower than the quarterly average price increase of 1.7% in 2023 and 2.1% in 2022.
The Government will make available a selection of sites on the Reserve List that can yield an additional 3,090 units for developers to initiate for development if they assess that there is demand. Furthermore, the Government will continue to release a steady supply of private residential units over the next few years, with supply calibrated to account for prevailing economic and property market conditions.
The Group expects the private residential market to continue stabilising as price momentum further moderates. However, the Group remains cautiously optimistic amidst economic and labour concerns, as well as changes to global supply chains, which add to the complexity of the operating environment.
Company Outlook and Order Book Update
Looking ahead, the Group expects continued global uncertainties, including sustained high interest rates and rising construction costs. Nevertheless, the Group will embrace technologies and innovation to enhance operational efficiencies. This will help mitigate the impact of rising construction costs, while creating better sustainable built environments for all. Supported by a healthy pipeline of construction projects, the Group will remain vigilant in navigating challenging market conditions, ensuring effective cashflow management and maintain prudence in its capital structure and finances.
As of 30 June 2024, the Group's order book stood at a record high of $706.9 million, with projects extending till 2027.
On the property development front, the Group's joint venture residential project, The Essence, has been completed. In addition, all 74 units of the Group's residential project in Bukit Panjang, Phoenix Residences, have been fully sold and is expected to attain its TOP in 2H2024.
As for property investment, the Group's investment property situated at 6-8 Bennett Street in Perth, Australia, continues to generate a positive stream of recurring rental income.
To enhance its recurring income, the Group owns a portfolio of investment properties. These include 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. These properties, held through its 51%-owned subsidiary, Raffles Prestige Capital Pte. Ltd., continue to generate a steady stream of recurring rental income, contributing positively towards the Group's performance.
Backed by a strong track record and decades of industry expertise, the Group remains committed to its long-term strategy of diversifying earnings and building on its portfolio recurring income stream. The Group will continue to explore strategic partnerships to strengthen its foothold in property development and investment ventures and will embrace technologies and innovations to achieve a more sustainable future.