Review of Financial Performance
For the year ended 31 December 2015 (“FY2015”), the Group recorded an increase in revenue to S$26.0 million, an increase of 31.6% or approximately S$6.2 million, as compared to the previous year in review (“FY2014”). The increase was led by both of our business segments – Fabrication and Distribution; and Maintenance and Servicing. Due to an expanded sales team as well as enhanced sales efforts to secure new customers, the Fabrication and Distribution segment accounted for S$5.6 million of the increase in revenue, while Maintenance and Servicing segment contributed an increase of S$0.6 million sales revenue as a result of increase in service jobs and contracts.
Cost of sales and gross profit
The Group’s cost of sales rose by 31.0%, approximately S$4.1 million in FY2015 compared to S$13.3 million in FY2014. The increase can be attributed to an increase of cost of material by S$3.6 million; higher wages cost, bonuses and levy charges of S$0.4 million and an increase in direct overheads of S$0.1 million.
Gross profit for the year improved by S$2.1 million to S$8.6 million, compared to S$6 million in the previous corresponding year. Overall gross profit margin also saw a climb of 0.3%, from 32.8% in FY2014 to 33.1% in FY2015.
Other income rose by approximately S$0.4 million to S$0.6 million from FY2014. The increase was brought about by a gain on disposal of property amounting to approximately S$0.2 million and higher other general income.
Due to the expansion of our sales team, there was an increase in sales staff cost that contributed largely to the rise of selling and distribution costs of the Group by approximately S$0.2 million or 9.7% in FY2015 to S$2.2 million (FY2014: S$2.0 million).
Administrative expenses increased from approximately S$3.6 million in FY2014 to S$4.7 million for the year in review, representing an increase of S$1.1 million or 29.2%. The bulk of the increase can be attributed to an increase in training fees of S$0.2 million, higher staff cost of S$0.4 million, higher consultation fee of S$0.1 million and reclassification of certain accounts amounting to S$0.2 million.
Owing to an increase in the provision of doubtful debts amounting to S$0.2 million, other expenses rose by S$0.2 million or 54.5% to approximately S$0.5 million in FY2015 (FY2014: S$0.3 million).
Finance costs remained flat at S$0.1 million in FY2015 compared to FY2014.
Income tax expense
Income tax expense for the year was S$0.3 million, comprising underprovision of income tax amounting to S$54,000 in respect of the previous year, deferred taxation credit of S$31,000 and income tax expense for FY2015 of approximately S$246,000. The income tax expense is lower than that based on the statutory rate of 17% owing to tax exempt income and corporate tax rebate.
Profit for the year
For FY2015, the Group report a higher net profit attributable to equity shareholders of approximately S$1.5 million compared to S$0.6 million for FY2014. This improvement stemmed from the increase in sales revenue, higher other income and a gain on disposal of property.
Statement of Financial Position and Cash Flows
The Group’s non-current assets decreased by S$0.1 million to S$1.7 million as at 31 December 2015 (31 December 2014: S$1.8 million). The Group incurred additional capital expenditure spending of S$0.4 million in FY2015, offset by a depreciation and amortisation cost of S$0.5 million.
The reported current assets of the Group amounted to approximately S$19.6 million as at 31 December 2015 (31 December 2014: S$19.6 million). Inventories increased by approximately S$0.9 million or 32.4% due to a need to build up stocks to satisfy project deliveries in FY2016. Trade and other receivables also increased by approximately S$1.5 million or 22.5% due to recognition of sales that were completed in December 2015. Following the repayment of bank borrowings, the Group’s cash and cash equivalents decreased by S$1.8 million or 19.3% from S$9.5 million as at 31 December 2014 to S$7.7 million as at 31 December 2015.
Non-current liabilities fell slightly by S$0.2 million or 25.7% from S$0.7 million as at 31 December 2014 to S$0.5 million as at 31 December 2015 mainly due to the repayment of finance lease payables amounting to approximately S$0.1 million.
The Group’s current liabilities as at 31 December 2015 decreased by approximately S$0.8 million or 10.3%, to S$7.0 million from S$7.8 million as at 31 December 2014. This was mainly due to increase in repayment of bank borrowings of approximately S$1.9 million in FY2015 offset by the increase in trade and other payables of S$0.8 million, provision of S$0.1 million and current tax payable of S$0.2 million.
As at 31 December 2015, the Group had shareholders’ equity of approximately S$13.8 million as compared to S$13.0 million as at 31 December 2014 resulting from an increase in retained earnings.
Cash and cash equivalents, excluding pledged fixed deposits, reduced by approximately S$1.9 million, standing at approximately S$7.0 million as at 31 December 2015, compared to the cash and cash equivalent balance of S$8.9 million as at 31 December 2014.
Net cash generated from operating activities during FY2015 was approximately S$0.6 million, compared to S$1.1 million in the same corresponding period last year. The operating cash flows before movements in working capital amounted to approximately S$2.8 million offset by a decrease in net working capital of approximately S$2.1 million and income taxes paid of approximately S$0.1 million. The decrease in net working capital was mainly due to higher trade and other receivables and inventory of approximately S$1.8 million and S$1.1 million respectively offset by increase in trade and other payables of approximately S$0.9 million.
Net cash generated from investing activities was approximately S$0.3 million in FY2015, much of this was attributed to proceeds from sale of assets held for sale of S$0.7 million offset by acquisition of capital expenditure amounting to S$0.4 million.
Net cash used in financing activities approximated S$2.8 million in FY2015. Funds from issuance of trust receipts of approximately S$6.7 million were offset by the repayment of trust receipts of approximately S$7.8 million. The cash outflows were mainly dividend payments made of approximately S$0.6 million in FY2015, settlement of term loan borrowing and finance lease payable of approximately S$0.9 million and payment of interest expense of S$0.1 million.