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Financial Statements

Second Quarter Results Financial Statement And Related Announcement

Financials Archive

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Unaudited Financial Statements and Related Announcement for the Second Quarter Ended 30 September 2018

Income Statement

NM – not meaningful

Comprehensive Income Statement

NM – not meaningful

Review of Performance

Overview

The Group’s revenue is largely derived from project-oriented businesses and as such, quarterly results would not accurately reflect the full-year performance. Full-year to full-year comparisons are more appropriate for analytical purposes.

For 2Q FY2019, total revenue increased 13% year-on-year to $118.4 million. However, total profit and profit attributable to equity holders of the Company (“net profit”) decreased 10% and 3% year-onyear to $11.2 million and $6.9 million respectively, mainly due to higher overhead expenses and share of losses of associated companies and joint ventures, which outpaced the improvements in gross profit, other income and other losses.

For 1H FY2019, total revenue increased 15% year-on-year to $225.4 million. Total profit and net profit increased 59% and 90% year-on-year to $29.3 million and $19.1 million respectively, mainly supported by a combination of better operating performance and sizeable other gains from the completed sale of 25 Changi North Rise in 1Q FY2019 under the Group’s separately listed Real Estate Solutions Division (under Boustead Projects Limited).

For a comparative review after adjusting for other gains/losses net of non-controlling interests, net profit for 2Q FY2019 and 1H FY2019 would have been about $1.4 million lower for both periods than 2Q FY2018 and 1H FY2018 or 17% and 11% lower year-on-year respectively.

2Q FY2019 Division Revenue

Segment Revenue

Each division’s revenue performance for 2Q FY2019 is summarised below.

With the gradual improvement in the outlook of the global oil & gas industries, the Energy-Related Engineering Division’s revenue grew 3% year-on-year to $23.4 million. Client enquiries continued to be under more active review as compared to one year earlier.

Riding on a healthy order book backlog carried forward at the end of FY2018, the Real Estate Solutions Division (under Boustead Projects)’s revenue climbed 21% year-on-year to $60.6 million, with higher design-and-build revenue partially offset by lower leasing revenue.

The Geo-Spatial Technology Division continued to witness steady demand for its solutions across Australia and parts of South East Asia, although there was a minor revenue dip of 4% year-on-year to $30.5 million.

Making its maiden revenue contribution, the newly acquired Healthcare Division generated revenue of $3.7 million.

2Q FY2019 Group Profitability

The Group’s overall gross profit for 2Q FY2019 increased 4% year-on-year to $42.5 million, though the overall gross margin was 36% compared to 39% in 2Q FY2018. Gross margin pressure continued to be felt across the Group.

Other income for 2Q FY2019 grew 53% year-on-year to $2.3 million on the back of higher interest income. Other losses for 2Q FY2019 of $0.2 million were significantly lower than other losses for 2Q FY2018 of $1.5 million, mainly due to a significant reduction in net currency exchange losses.

Total overhead expenses for 2Q FY2019 increased 10% year-on-year to $26.2 million (selling and distribution expenses of $9.1 million and administrative expenses of $17.1 million), in line with additional overhead expenses from the newly acquired Healthcare Division and team expansions at Boustead Projects and the Geo-Spatial Technology Division in order to execute strategic growth plans.

Finance expenses for 2Q FY2019 rose 13% year-on-year to $0.6 million following a net increase in borrowings, mainly for Boustead Projects.

Share of losses of associated companies and joint ventures for 2Q FY2019 was $2.1 million, largely driven by Boustead Projects eliminating construction and project management profits attributable to projects which Boustead Projects has entered into with an associated company and joint ventures. In 2Q FY2019, there was a share of gains of associated companies and joint ventures as a result of Boustead Projects’ associated company, THAB Development Sdn Bhd’s completion of iBP @ Nusajaya Phase 1.

Total profit before income tax (“PBT”) for 2Q FY2019 decreased 6% year-on-year to $15.7 million, mainly due to higher overhead expenses and share of losses of associated companies and joint ventures, which outpaced the improvements in gross profit, other income and other losses. A breakdown of PBT by divisions is provided as follows.

Excluding currency exchange losses, the Energy-Related Engineering Division would have registered an operating profit for 2Q FY2019.

Total profit for 2Q FY2019 decreased 10% year-on-year to $11.2 million due to reasons mentioned earlier. The Group’s effective tax rate was 29% compared to 26% in 2Q FY2018.

Net profit for 2Q FY2019 marginally declined 3% year-on-year to $6.9 million due to reasons mentioned earlier.

Dividend

As the Group delivered steady core profitability and maintained a healthy cash position, the Board of Directors has declared an interim cash dividend per share of 1 cent, matching the interim dividend of the previous year.

2Q FY2019 Statement of Cash Flows

During 2Q FY2019, cash and cash equivalents (after taking into account the effects of currency translation) decreased $12.1 million to $268.4 million, largely driven by sizeable net cash outflows for investing and financing activities, partially offset by net cash inflow from operating activities.

Net cash inflows for operating activities amounted to $7.9 million, after accounting for a negative change in working capital of $3.8 million.

Net cash outflows for investing activities amounted to $14.2 million, mainly due to a $1.8 million final payment for the newly acquired Healthcare Division (under WhiteRock Incorporation Pte Ltd) net of cash acquired, $5.6 million in additional shareholders’ loans extended to an associated company and joint ventures, and a $6.6 million payment for property, plant and equipment, most of which was for a newly acquired property in Melbourne for use by the Geo-Spatial Technology Division.

Net cash outflows for financing activities amounted to $4.1 million, with a $9.9 million dividend paid to shareholders and $2.2 million dividend paid to non-controlling interests, partially offset by $8.0 million in net proceeds from borrowings, mainly for Boustead Projects.

Statement of Financial Position

At the end of 1H FY2019, the Group’s financial position remained healthy and also included the consolidated balance sheet of the newly acquired Healthcare Division.

Under current assets, movements in cash and cash equivalents were explained under the earlier section on 2Q FY2019 Statement of Cash Flows. Other receivables and prepayments were significantly higher due to greater invoicing to clients, prepayments and the inclusion of the Healthcare Division. Similarly, the exponential rise in inventories was largely due to the Healthcare Division. Properties held for sale declined in line with the sale of 25 Changi North Rise by Boustead Projects. Net contract assets doubled as a result of a substantial increase in uninvoiced work at the end of 1H FY2019.

Under non-current assets, the significant increase in property, plant and equipment was mainly due to the newly acquired property in Melbourne for use by the Geo-Spatial Technology Division. The exponential rise in investments in associated companies was largely due to the Healthcare Division.

Reclassifications of financial assets held for trading and available-for-sale financial assets to investment securities were due to the adoption of SFRS(I) 9.

Under current liabilities, trade and other payables were significantly higher due to greater invoicing by subcontractors and suppliers, deferred revenue and the inclusion of the Healthcare Division. Total borrowings rose with new borrowings by Boustead Projects and the inclusion of the Healthcare Division, partially offset by the scheduled repayment of borrowings by Boustead Projects in relation to the leasehold portfolio.

Under equity, share capital declined to $82.2 million following the cancellation of 30 million treasury shares. Adjustments to other reserves and retained profits were due to the adoption of SFRS(I) 1 and SFRS(I) 9.

The Group’s net asset value per share strengthened to 66.2 cents at the end of 1H FY2019 from 63.5 cents at the end of FY2018, even after the final dividend payments for FY2018 by both Boustead Singapore and Boustead Projects, while the net cash position (i.e. net of all bank borrowings) remained healthy at $188.4 million at the end of 1H FY2019, translating to a net cash per share position of 38.2 cents. In addition, the Group held $66.0 million in investment securities at the end of 1H FY2019, of which about half of the amount is highly liquid.

Commentary On Current Year Prospects

The Group has been awarded about $127 million in contracts since the start of FY2019. The current order book backlog stands at a healthy $298 million (unrecognised project revenue remaining at the end of 2Q FY2019 plus the total value of new orders secured since then), of which $86 million is under the Energy-Related Engineering Division and $212 million is under the Real Estate Solutions Division.

The Group continues to see a gradual improvement in the outlook across the sectors in which the Group operates in, although the business environment remains challenging with global geo-political headwinds.

With a healthy balance sheet and net cash position, and wide range of financing options, the Group continues to be in an excellent position to capitalise on any good acquisition and investment opportunities that may arise.

Barring unforeseen circumstances and shifts in the global economic outlook, the Group believes that it can continue to deliver steady results in FY2019.

A Statement of Financial Position