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Financials

Financial Statements And Related Announcement - Second Quarter Results

Financials Archive

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Profit & Loss

Financials

Consolidated Statement of Comprehensive Income

Financials

Review of Group Performance

Effect for the change of Functional Currency

The presentation of the Group’s financial statements has been changed from Singapore dollars (“S$”) to Chinese Renminbi (“RMB”) based on the rationale explained in paragraph 5 of this announcement (the “Change in Presentation Currency”). Accordingly, the comparatives have been restated and presented in RMB.

Review of Financial Performance (2Q2017 vs 2Q2016)

Continuing Operations

Revenue rose by RMB 69.7 million to RMB 296.0 million in 2Q2017 due to (i) recognition of revenue from an overseas consultancy project in South Asia and (ii) a higher number of ongoing projects in China.

Despite higher revenue, gross profit fell by RMB 5.8 million to RMB 32.6 million. Overall gross profit margin in 2Q2017 was 11.0% as compared to 17.0% in 2Q2016, as (i) Ranken replaced more of its casual workers (which was part of the administrative expenses) with full-time workers, given its capacity expansion plans (now included as cost of sales) and (ii) certain major infrastructure projects recently secured by Ranken remained in the early stages of construction works during the period under review and specifically,

On a best effort basis, Ranken will negotiate for acceptance of variation orders for the Technical Compliance in due course over various stages. Whilst the clients have assessed the requirements for Technical Compliance, there is no certainty that Ranken could successfully receive approval from clients on the proposed variation orders.

Other income, including Ranken’s project-related income of RMB 0.8 million and gain on accounting translation of RMB 1.0 million, rose to RMB 3.1 million.

Selling and distribution costs rose by RMB 0.9 million to RMB 2.0 million, due mainly to Ranken’s higher travelling expenses and projects tendering costs, including costs for projects assessment. Ranken has been evaluating many more projects during the period under review and has selectively tendered some of those it has evaluated.

Administrative expenses fell by RMB 3.0 million to RMB 11.5 million due mainly to (i) replacement of casual workers (was part of indirect costs) with project-specific full-time workers (now part of direct production costs) given Ranken’s expansion plans; and (ii) abolishment of indirect taxes imposed on certain goods and services in China.

Other expenses rose by RMB 1.7 million to RMB 3.3 million due mainly to accounting loss of RMB 1.1 million from the change in fair value of financial assets and loss on disposal of plant and equipment of RMB 0.5 million.

Finance costs rose by RMB 1.0 million due mainly to higher refinancing costs during the period under review.

Income tax expense was RMB 3.7 million, attributable to provision for income tax on taxable profits for Ranken’s operations.

There were no results reported under Discontinued Operations for 2Q2017 following the completion of disposal of Mining Services Business (Discontinued Operations) on 28 February 2017.

Given the above, net profit for Continuing Operations for 2Q2017 fell by 23.2% to RMB 10.5 million from RMB 13.7 million for 2Q2016, net of non-controlling interests.

Review of Financial Position (30 June 2017 vs 31 December 2016)

Total non-current assets rose by RMB 74.5 million due mainly to (i) recognition of a 19% stake in Mancala as available-for-sale financial assets valued at RMB 14.1 million, (ii) the sale and lease back of two tunnel boring machines increased the carrying value of these machines by RMB 41.0 million, and (iii) additions of plant and equipment and site facilities by Ranken of RMB 19.4 million for recently secured projects, net of depreciation during the period under review.

Total current assets fell by RMB 57.7 million due mainly to (i) the absence of assets held for sale of RMB 199.0 million following the completion of the disposal of Mancala and (ii) changes in current assets (excluding disposal group, Mancala), which rose by RMB 141.3 million as at 30 June 2017. Significant changes (excluding those of the disposal group) during the period under review were:

Total non-current liabilities comprised mainly (i) recognition of long term portion of deferred income from the sale and leaseback arrangements, net of amortisation of RMB 25.0 million, (ii) RMB 48.2 million bonds for Ranken’s working capital purposes and (iii) finance lease liabilities of RMB 45.8 million.

Total current liabilities fell by RMB 104.9 million due mainly to (i) the absence of liabilities held for sale of RMB 98.4 million following the completion of the disposal of Mancala, and (ii) changes in current liabilities (excluding disposal group, Mancala), which fell by RMB 6.6 million as at 30 June 2017. Significant changes (excluding those of the disposal group) during the period under review were:

Total equity

Total equity attributable to owners of the Company or Shareholders’ Equity rose by RMB 16.7 million to RMB 480.1 million due to (i) current period earnings of RMB 20.5 million and (ii) issuance of shares net of expenses under Shares Award Scheme of RMB 0.4 million, (iii) offset by net movements in foreign currency translation reserve of RMB 4.2 million after taking into account of translation effects on disposal of foreign subsidiaries and translation of non-RMB denominated financial statements to RMB.

Review of Cash Flows (2Q2017 vs 2Q2016)

Operating cash flow from continuing operations for 2Q2017 fell by RMB 50.2 million to RMB 13.3 million outflows after accounting for operating profit before working capital changes (or “Cash Profit”) of RMB 29.6 million, net working capital investments of RMB 26.5 million and tax payment of RMB 16.4 million (mainly for FY2016 tax obligation).

Cash flows used in investing activities from continuing operations for 2Q2017 were RMB 32.4 million, due mainly to Ranken’s investment in equipment and site facilities for its recently secured projects.

Cash flows generated from financing activities of continuing operations for 2Q2017 were RMB 50.0 million, due mainly to net proceeds from sale and leaseback arrangements of RMB 66.3 million and proceeds from bank loan of RMB 61.0 million for refinancing of Ranken’s working capital, offset by repayment of bank loans, finance lease liabilities and interest expense amounting to RMB 77.2 million.

Given the above, cash and cash equivalents rose by RMB 67.6 million to RMB 109.0 million (net of fixed deposits pledged of RMB 0.7 million).

Commentary

The Group’s wholly owned subsidiary, Ranken Infrastructure (“Ranken”), continues to build business momentum in China, leveraging on its strong infrastructure engineering capabilities and track record. Ranken maintains a healthy order book of RMB 2.6 billion as at 30 June 2017 with an average contract fulfilment period of 24 to 36 months, which the Group has nearly completed the initial phase of its contracts, namely enabling works for construction and site preparation.

Despite complexities arising from differing site conditions which slowed down the progress of certain key projects during the period under review (see explanation in Note 8), Ranken remains confident that the delivery for affected projects are on schedule. In 2H2017, Ranken expects to enter the next phase of construction when progress of works certification and cost control measures during the projects mid-term stages will need to be closely monitored in order to meet targeted profit margins.

Over the next few months, the management expects to intensify efforts for the followings plans:

Having disposed of an 81%-stake in specialist mining services company Mancala Group in February 2017, the Group has also ceased to consolidate the results of the Mancala Group.

Barring unforeseen circumstances, the Group expects to be profitable for the current financial year ending 31 December 2017 (“FY2017”).

Balance Sheet

Financials