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Combined Profit and Loss Accounts
Combined Balance Sheet
Review of Performance of the Group
Income Statement
Revenue
Total revenue of S$328.7 million for the financial year ended 31 March 2009 ("FY2009") increase 80.6% as compared to S$182.0 million for the financial year ended 31 March 2008 ("FY2008"). The significant increase in revenue was contributed by construction business in Singapore which accounted for about 98.6% of the Group's revenue in FY2009. The remaining of 1.4% was contributed from rental income of an investment property held in People's Republic of China ("PRC").
Other income
Other income decreased by S$41.1 million or 83.4% from S$49.3 million to S$8.2 million. This was mainly due to decrease by approximately S$43.5 million
in fair value gain adjustment of the investment properties of which was recognised in FY2008. The decrease was partially offset by the increase in other
operating income related to construction business of S$1.5 million and increase of S$0.7 million on fair value gain on embedded derivatives in FY2009 as
compared to FY2008.
The Group had engaged a professional valuation firm to value the fair value of the embedded derivative on the remaining S$20 million convertible notes as
at balance sheets date 31 March 2009. Based on the valuation, the fair value gain on embedded derivative for FY2009 was S$4.8 million and S$4.1
million in FY2008, increased by approximately S$0.7 million as above mentioned.
Operating expenses
Cost of construction increased by S$132.8 million or 82.1% from S$161.7 million in FY2008 to S$294.5 million in FY2009 as in line with the increase of
construction revenue in FY2009. Gross margin of construction business improved from 8.4% in FY2008 to 9.1% in FY2009.
Personnel expenses increased by S$0.7 million or 14.8% from S$5.0 million in FY2008 to S$5.7 million in FY2009. The increase was due to the increase
in headcount during the year so as to support the increase in construction activities in FY2009.
Depreciation expenses increased by approximately S$0.7 million or approximately 86.7% from S$0.8 million in FY2008 to S$1.5 million in FY2009. The increase is mainly due to additions of plant and equipment, driven by the Group's growth in the construction business.
Finance cost increased by approximately S$4.7 million or approximately 132.9% from S$3.5 million in FY2008 to S$8.2 million in FY2009. The increase is mainly due to the increase in interest expenses on Convertible notes of approximately S$4.5 million from S$1.2 million (imputed interest of S$1.1 million and coupon interest of S$0.1 million) in FY2008 to S$5.7 million (imputed interest of S$5.5 million and coupon interest of S$0.2 million) in FY2009. This increase was mainly due to the revised estimated life of the Convertible notes from 4 years as in prior year to 2 years. The revision on the estimate was based on the Group's intention to redeem the remaining Convertible notes at a discount before its maturity. If the estimated life remained the same, the interest expenses on Convertible notes for FY2009 would have been S$2.7 million instead of S$5.7 million. The interest expenses in FY2008 was lower as compared to FY2009 because the Convertible notes were issued in October 2007, therefore the interest in FY2008 was for a period shorter than FY2009.
Other operating expenses increased by approximately S$5.1 million or approximately 125.0% from S$4.1 million in FY2008 to S$9.2 million in FY2009. The increase was mainly due to loss from fair value adjustment of investment properties S$3.7 million and. additional provision for doubtful debts of S$0.8 million and an increase in other overhead costs relating to the property development and management entities in PRC.
Profit before tax
The Group's profit before tax decreased by approximately S$37.0 million or approximately 68.1% from S$54.3 million in FY2008 to S$17.3 million in FY2009 as explained above.
Tax expense
Tax expense decreased by approximately S$8.9 million or approximately 70.4%, mainly due to decrease in the provision of deferred tax on the fair value gain adjustment of investment properties and the decrease was partially offset by the current tax provision.
Profit after tax
As a result of the above, the Group made a net profit attributable to the Shareholders for FY2009 of approximately S$14.0 million as compared to S$31.4 million for FY2008.
With reference to the above mentioned S$43.5 million in fair value gain adjustment of the investment properties which was recognised in FY2008 under other income and S$3.7 million fair value loss of investment properties in FY2009 recognised under other operating expenses, the impact on profit for the financial year attributable to equity holders of the Company net of tax and minority interest was gain of S$22.6 million in FY2008 and loss of S$2.4 million in FY2009.
Balance Sheet Statements
Property, plant & equipment
The increase in this item from S$11.5 million in FY2008 to S$11.8 million in FY2009 was mainly due to the additions of plant and equipment during the financial year.
Properties held for development
The decrease in this item by approximately S$15.6 million in FY2008, was mainly due to decrease in shareholding in a subsidiary company which resulted in it becoming an associate company during the financial year. As such, the Group adopted the equity method of accounting for the said associate company; hence resulting in properties held for development no longer consolidated in the balance sheet.
Long term trade receivables
The increase in this item from S$4.0 million in FY2008 to S$11.8 million in FY2009 was mainly due to increase in retention sum held by the customers on progress claims certified for our on going construction projects as the number of projects and construction revenue increased.
Development property
The increase in this item from S$63.3 million in FY2008 to S$64.7 million in FY2009, was due to increase in expenditure incurred in a 25% owned joint venture company on a residential project.
Other payables and accruals
The increase in this item from S$39.3 million in FY2008 to S$49.0 million in FY2009 as the number of projects and construction revenue increased.
Convertible notes - liability component (current portion)
The increase of S$18.4 million was due to the reclassification on S$16.6 million from Convertible notes - liability component under non-current component in FY2008 and the additional imputed interest of S$5.5 million less S$3.7 million being the book carrying value for the S$5 million convertible notes that was bought back on 17 November 2008.
Convertible notes - embedded deriviative component (current portion)
The decrease of S$5.0 million from S$5.4 million in FY2008 to S$0.4 million in FY2009 was due to embedded derivative component of S$0.3 million on the S$5 million convertible notes which was bought back on 17 November 2008 as well as fair valuation gain of S$4.8 million recognised on the remaining $20 million convertible notes. As mentioned above, the fair value of the embedded derivative as at 31 March 2009 of S$0.4 million was based on the valuation conducted by a professtional valuation firm on the remaining S$20 million Convertible notes.
Total borrowings
The increase in total borrowings from S$95.3 million to S$102.7 million was mainly due to the increase in finance for the expansion of the property development business and construction business.
Cash flow statements
Net cash flows generated from operation in FY2009 increased mainly due to increase in operating profit from construction business, decrease in trade and other receivables, deposits and prepayments, decrease in construction work-in progress and increase in trade and other payables.
The restated net cash flows used in operations restated for FY2008 increased mainly due to investment in
development properties resulting from the expansion of the Group's property development business.
Net cash flows used in investing activities decreased as there was no acquisition of properties held for development in FY2009 as compared to FY2008
Net cash flows used in financing activities mainly due to increase in pledged fixed deposits, increase in long term receivables and payment made on dividend during FY2009
Commentary
The Group is cautiously optimistic on the outlook of its construction business. Singapore's Construction sector continues to demonstrate resilience, being the only output that registered positive growth of 24.4% year-on-year and 9.6% quarter-on-quarter despite sharp contraction in the rest of local economy in 1Q2009. The government's pledge to invest S$18 billion to S$20 billion in public projects, S$4.4 billion more than commitments made the previous year, is also helping to cushion the impact of the economic slump.
The Group has a construction order book of approximately S$400 million in Singapore as at 31 March 2009 of which a substantial part of it would be carried out during the financial year ending 31 March 2010. Nevertheless, the Group remains cautious on the possible impacts that the economic conditions and uncertainty in labour and materials cost may have on the performance of the Group for the next 12 months.
Despite the outlook in property development business is still uncertain, the Group noted the recent improvement in the sentiment of the residential property market in Singapore.
Barring unforeseen circumstances, the Group should remain profitable for the financial year 2010.
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