Financial Statements And Related Announcement - Half Yearly Results
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Profit & Loss Statement
Group Performance Review
The Group's revenue of $4.7 million for HY2017 decreased by 24.7% from HY2016 mainly due to continued challenging and lackluster worldwide demand from the HDD markets as well as intensified pricing competition from overseas suppliers.
The Group recorded a gross loss of $0.4 million mainly due to low sales and fixed overheads which included additional depreciation of the newly completed Tuas South factory.
Other operating income decreased by 27.6% to $0.8 million, compared to $1.1 million in HY2016. Other operating income comprised mainly proceeds from sale of production scrap. The decrease was due to lower production hence lower scrap produced was available for sale.
Finance income doubled to $0.06 million from $0.03 million. Finance income comprised interest income earned on bank fixed deposits. The increase was mainly due higher fixed deposits balance.
Selling and distribution expenses remained relatively unchanged at $0.3 million.
Administrative expenses decreased by 6.3% to $3.4 million from $3.6 million in HY2016. Administrative expenses decreased due to lower salaries expenses.
Other operating expenses in HY2016 related to loss incurred on the sale and scrapping of inventories and moulds of the China subsidiary that had been disposed. There was none in HY2017.
Finance cost increased to $0.07 million from $0.002 million due to construction loan taken to finance the construction of Tuas South factory. The Tuas South factory construction has been completed and full Temporary Occupation Permit (“TOP”) obtained in January 2017 and interest costs from February 2017 onwards being charged to profit & loss account.
Share of results of associated company's loss for HY2017 was $0.09 million, compared with share of loss of $0.14 million in the same period last year.
At the pre-tax level, the Group's continuing operations reported a loss of $3.5 million.
Group Balance Sheet and Cash Flow Review
The Group's non-current assets decreased by $0.7 million from $24.3 million as at 31 December 2016 to $23.6 million as at 30 June 2017. The decrease was mainly due to the depreciation of property, plant and equipment, partially offset by purchase of plant and equipment.
The Group reported total current assets of $27.0 million as at 30 June 2017, a decrease of $6.4 million from last year end of $33.4 million. The decrease was mainly due to lower inventory level and lower trade receivables balance held by the Group as well as lower cash balances due mainly to repayment of bank loan.
The Group's total liabilities decreased by $3.6 million from $11.5 million as at 31 December 2016 to $7.9 million as at 30 June 2017. The decrease was mainly due to the repayment of term loan and payment of liabilities incurred for construction of Tuas South factory.
Net cash used in operating activities for HY2017 was $2.3 million as opposed to net cash generated from operating activities of $1.1 million for the corresponding period last year. The negative operating cashflow for HY2017 was mainly due to operating loss, partially offset by lower inventory and trade receivable balances.
The Group's net cash used in investing activities for HY2017 was $0.3 million, which was $3.3 million lower. There were additions in property, plant and equipment resulting from the construction of factory at Tuas South for the HY2016 period. The factory construction has been completed and TOP obtained in January 2017.
The Group's cash used in financing activities for HY2017 was $3.0 million, as opposed to net cash received of $1.0 million from financing activities in HY2016. The decrease was due to the repayment of term loan previously taken to finance the construction of factory at Tuas South.
Commentary On Current Year Prospects
Sales revenue for the Group dropped in the half year ended 30 June 2017 due to weak customer orders from its main Electronics & Precision Engineering customer segment. Intensifying competition in a tepid market resulted in escalating price pressure faced by the Group and lower sales order level. The Group continues to monitor fluctuations in raw material costs and energy prices, which will have ongoing significant impact on profitability.
The Board continues to review the options available to the use of the existing land and building at Penjuru Lane.
Facing a challenging business environment in our core business, the Group is actively reviewing other business opportunities and strategies to enhance shareholders' value.