Sinjia Land Limited

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Half Year Financial Statement And Dividend Announcement 2017

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HALF YEAR FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR PERIOD ENDED 30 JUNE 2017 (UNAUDITED)

Income Statement

Review of Performance

Income Statement

Continuing Operations

Revenue for the 6 months ended 30 June 2017 ("1H2017") increased by 30.6% to S$9.89 million from S$7.57 million for the 6 month ended 30 June 2016 ("1H2016"). The increase was driven mainly by the Group's Elastomeric business units, which generated revenue of S$9.68 million in 1H2017 as compared to S$7.57 million in 1H2016. The increase in revenue for the Elastomeric business units in 1H2017 was mainly due to higher demand from its key customers in Malaysia. The Group's new revenue stream, G4 Stations Pte. Ltd. ("G4") which operates lodging and boarding houses and backpackers hostels, contributed S$0.21 million for 1H2017. However, the increase was impacted by the effects of the weakening of Ringgit Malaysia against the Singapore Dollar.

Gross profit in 1H2017 grew by 38.2% or S$0.96 million, from S$2.53 million in 1H2016 to S$3.49 million in 1H2017 due to improved gross margins from 33.4% for 1H2016 to 35.3% for 1H2017.

Other income of S$15,000 in 1H2017 (1H2016: S$0.19 million) comprised interest income from bank deposits.

Other credits of S$0.37 million in 1H2017 (1H2016: S$0.38 million) comprised foreign exchange gains of S$0.17 million (1H2016: S$0.29 million), government grants of S$22,000 (1H2016: S$30,000), reversal for impairment on inventories of S$40,000 (1H2016: S$55,000), reversal of impairment on trade and other receivables of S$11,000 (1H2016: NIL), gain on financial assets, at fair value through profit or loss of S$87,000 (1H2016: NIL), and rental income of S$43,000 (1H2016: NIL).

Distribution and marketing expenses decreased by S$0.18 million or 21.3% to S$0.63 million in 1H2017, from S$0.81 million in 1H2016. This was mainly due to a decrease in staff-related costs of S$0.20 million, partially offset by an increase in entertainment expenses of S$0.01 million.

Finance costs increased slightly from S$24,000 in 1H2016 to S$30,000 in 1H2017, largely due to additional interest expense payable on the loan extended to the Group's Elastomeric business units in China.

Other charges increased by S$0.77 million from S$5,000 in 1H2016 to S$0.77 million in 1H2017. The increase was mainly due to allowance for impairment of goodwill arising from the acquisition of G4 of S$0.75 million in 1H2017.

As a result of the above, the Group registered a net profit before tax of S$0.12 million in 1H2017 as compared to a net loss before tax of S$0.07 million in 1H2016.

Discontinued Operations

Discontinued operations relate to the Company's investments in Sinjia RTE Solutions Pte. Ltd. and Ace Empire Capital Sdn. Bhd., both of which had been classified as assets held-for-sale. The discontinued operations reported a net loss of S$0.05 million in 1H2017 (1H2016: S$0.08 million).

Financial Position

Current Assets

The Group's current assets as at 30 June 2017 comprised inventories of S$1.78 million, trade and other receivables of S$6.93 million, other current assets of S$0.60 milliion, financial assets (at fair value through profit or loss) of S$2.14 million, cash and cash equivalents of S$7.91 million and assets of disposal group classified as held-for-sale of S$3.25 million. The Group's current assets increased by S$2.69 million to S$22.61 million as at 30 June 2017, from S$19.92 million as at 31 December 2016.

Inventories, and trade and other receivables increased by S$0.24 million and S$0.97 million, respectively, due to the increase in orders received from key customers of the Group's Elastomeric business units, and was in line with the increase in revenue in 1H2017.

Financial assets, at fair value through profit or loss increased by S$0.09 million from S$2.05 million as at 31 December 2016 to S$2.14 million as at 30 June 2017, due to an increase in the fair value of the Company's investment fund (namely, Fortune Asia Long Short Fund).

Cash and cash equivalents increased by S$1.36 million from S$6.55 million as at 31 December 2016 to S$7.91 million as at 30 June 2017, mainly due to funds raised of S$2.1 million from a share placement exercise ("Share Placement"). The Company had, on 17 April 2017 allotted and issued an aggregate of 35,000,000 new ordinary shares in the capital of the Company at an issue price of S$0.060 per share pursuant to the Share Placement. The increase was partially offset by (i) purchase of new plant and equipment of S$0.05 million; (ii) repayment of borrowings and lease liabilities of S$0.83 million; and (iii) payment of income tax of S$0.36 million.

The Group had a positive working capital of S$6.72 million as at 30 June 2017, as compared to a positive working capital of S$4.21 million as at 31 December 2016.

Non-current Assets

The Group's non-current assets as at 30 June 2017 comprised available-for-sale financial assets and plant and equipments. Non-current assets of the Group decreased by S$2.04 million to S$14.93 million as at 30 June 2017, from S$16.97 million as at 31 December 2016. The decrease was mainly due to (i) depreciation of plant and equipment of S$0.31 million; (ii) decrease in fair value of quoted securities in Abterra Ltd of S$0.81 million; (iii) disposal of 339,000 number of quoted securities in Abterra Ltd in 1H2017; and (iv) impairment of goodwill arising from the acquisition of G4 of S$0.76 million.

Current Liabilities

The Group's current liabilities as at 30 June 2017 comprised trade and other payables of S$13.38 million, current income tax liabilities of S$0.39 million, borrowings of S$0.84 million and liabilities directly associated with disposal group classified as held-for-sale of S$1.27 million. Current liabilities of the Group increased by S$0.18 million from S$15.71 million as at 31 December 2016 to S$15.89 million as at 30 June 2017.

Current income tax liabilities increased by S$0.20 million from S$0.19 million as at 31 December 2016 to S$0.39 million as at 30 June 2017. This was due to additional income tax incurred by a subsidiary in Singapore after a tax review by the Inland Revenue Authority of Singapore, partially offset by payment of income tax of S$0.36 million in 1H2017.

Borrowings decreased slightly from S$0.90 million as at 31 December 2016 to S$0.84 million as at 30 June 2017, due to repayment of borrowings of S$0.73 million, partially offset by additional bank borrowings of S$0.68 million in 1H2017.

Non-current Liabilities

The Group's non-current liabilities as at 30 June 2017 comprised mainly borrowings of S$0.20 million, and provisions of S$0.24 million. Non-current labilities of the Group decreased by S$0.10 million, from S$0.57 million as at 31 December 2016 to S$0.47 million as at 30 June 2017. The decrease was due to a decrease in borrowings as the Group had repaid the finance lease liabilities of S$22,000 and borrowings of S$82,000.

Equity

Share capital increased by S$2.10 million, from S$23.15 million as at 31 December 2016 to S$25.25 million as at 30 June 2017, due to the Share Placement exercise completed in April 2017.

Other reserves decreased by S$1.03 million to S$0.57 million as at 30 June 2017. The decrease was mainly due to (i) an increase in losses from foreign currency translation reserves of S$0.22 million, as a result of the weakening of China's Renminbi, Malaysia Ringgit and Indonesia Rupiah against the Singapore Dollar; and (ii) changes in the fair value of available-for-sale financial assets of S$0.81 million.

Consolidated Statement of Cash Flows

Net cash outflow for operating activities for 1H2017 amounted to S$0.62 million, mainly due to working capital changes of S$1.29 million. Cash from working capital in 1H2017 amounted to S$1.29 million, mainly due to an increase in (i) inventories of S$0.24 million; (ii) trade and other receivables of S$0.97 million; (iii) other current assets of S$0.04 million; (iv) financial assets, at fair value through profit or loss of S$0.09 million; and (v) trade and other payables and provisions of S$0.04 million.

Net cash inflow from investing activities of S$0.11 million in 1H2017 was mainly due to the proceeds from available-for-sale financial assets of S$0.14 million and purchase of plant and equipment of S$0.05 million.

Net cash inflow from financing activities of S$1.94 million in 1H2017 was mainly due to proceeds received from the Share Placement in April 2017 and proceeds from borrowings of S$0.68 million. The increase was partially offset by repayment of borrowings of S$0.81 million.

As a result of the above, the Group had cash and cash equivalents of S$7.91 million as at 30 June 2017, representing an increase of S$0.42 million as at 30 June 2016.

Commentary

The Group continues to face challenges arising from uncertain economic conditions and financial environment. In addition, the volatility of the foreign exchange rate for the Malaysia Ringgit against our functional currency (Singapore Dollar) will continue to have a significant impact on the Group's financial results.

The Group remains focused on streamlining its business structure and maintaining disciplined cost management. The Group has implemented various measures to stay lean and cash flow positive in order to stay competitive in the challenging business environment.

Nevertheless, the Company has, and will continue to explore new business opportunities which can enhance long term shareholder value. These include geographical expansion, mergers and acquisitions, divestment and partnering with long term strategic investor(s) who can add depth and breadth to the Group's existing business portfolio.

Balance Sheet

balance sheet