Financials

Quarterly Report For The Financial Period Ended 30 September 2017

Financials Archive

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Unaudited Condensed Consolidated Income Statement For The Quarter Ended 30 September 2017

Income Statement

Unaudited Condensed Consolidated Statement of Financial Position As At 30 September 2017

Balance Sheet

Performance Review

a) Current quarter against previous year corresponding quarter

Group revenue increased significantly to RM85.6 million compared with RM35.5 million for the corresponding quarter 2016, representing an increase in revenue by 141% or RM50.1 million. This was largely attributable to revenue from the manufacturing business of Century Bond Bhd ("CBB") of RM45.0 million which was acquired in November 2016. The revenue from trading business of Aqua Flo Sdn Bhd (‘'Aqua Flo") increased to RM2.1 million as well as revenue from the infrastructure business, KPS-HCM of RM2.5 million. In addition to that, licensing sector of King Koil recorded a higher revenue by RM0.5 million.

Share of profit of associates increased by RM36.2 million as compared to corresponding quarter 2016 mainly due to higher contributions from SPLASH. For the current quarter ended 30 September 2017, the Group registered a profit before tax of RM14.7 million as compared to a loss before tax of RM18.0 million for the corresponding quarter 2016.

Performance of the respective operating business segments for the third quarter ended 30 September 2017 as compared to the preceding year corresponding quarter is analysed as follows:

1. Manufacturing

Arising from acquisition of CBB in November 2016, the Group has consolidated the results of CBB with revenue and profit contributions of RM45.0 million and RM3.8 million respectively. 49% or RM22.0 million of the sector's revenue was from paper packaging and the remaining was from plastic packaging and others.

2. Trading

Revenue of RM26.3 million was 9% or RM2.1 million higher than the corresponding quarter's revenue of RM24.2 million. The increase in revenue was attributed to supply of chemicals to new customers secured in first half of 2017.

Correspondingly, on current quarter against corresponding quarter 2016 comparison, profit before tax for the current quarter was higher at RM2.3 million as compared to corresponding quarter 2016 of RM1.9 million.

3. Licensing

The licensing sector posted RM8.4 million revenue to the Group during the current quarter as compared to RM7.9 million in the corresponding quarter 2016 which comprises royalties of RM6.5 million and corporate sales and others of RM1.9 million. For the current quarter, this sector posted a loss before tax of RM0.5 million as compared to profit before tax of RM2.6 million in the corresponding quarter 2016. The loss is mainly due to lower royalty income from licensees coupled with higher marketing costs and administrative expenses.

4. Infrastructure and utilities

Arising from acquisition of KPS-HCM in June 2017, the Group has consolidated the results of KPS-HCM with revenue of RM2.5 million. Infrastructure and utilities sector recorded a profit of RM17.8 million as compared to corresponding quarter 2016 with loss of RM19.7 million, higher by RM37.5 million. The higher profits recorded in the current quarter is mainly due to higher share of profit from Syarikat Pengeluar Air Selangor Holdings Berhad ("SPLASH"), a 30% associated company by RM37.7 million due to lower impairment loss on trade receivables and accounting impact of IC 12. SPRINT posted share of loss of RM0.3 million as compared to profit of RM0.1 million for the corresponding quarter 2016 due to higher finance expenses and amortisation of highway development expenditure.

5. Oil and gas

NGC Energy Sdn Bhd ("NGC Energy") registered a profit after tax of RM7.3 million as compared to a profit of RM10.9 million in the corresponding quarter of 2016. Lower profit recorded during the current quarter due to higher direct cost of sales resulting in lower gross profit margin coupled with higher distribution and administrative expenses. Thus, the Group's share of profit was RM2.9 million as compared to share of profit of RM4.4 million in the corresponding quarter 2016.

6. Telecommunication

The Group's share of loss from Ceres Telecom Sdn Bhd ("Ceres") for the current quarter was RM0.6 million as compared to a share of loss of RM0.7 million for the corresponding quarter 2016 due to lower administrative expenses.

7. Investment holding and property investment

Investment holding and property investment recorded revenue of RM74.6 million as compared to RM3.5 million in the corresponding quarter 2016 due to higher dividend received. This sector recorded a profit before tax of RM59.7 million as compared to a loss of RM6.7 million in the corresponding quarter 2016.

b) Current year to-date against previous year to-date

For the nine months ended 30 September 2017, the Group registered revenue of RM238.3 million as compared to RM81.6 million in the corresponding period 2016, representing an increase in revenue by RM156.7 million or 192%. The significant increase was mainly due to revenue of RM124.1 million from newly acquired subsidiaries in 2016 in manufacturing sector coupled with higher revenue from trading and licensing sector by RM16.0 million and RM14.9 million respectively. In addition to that, there was also revenue recorded by newly acquired subsidiary in 2017 in infrastructure sector of RM2.5 million.

The Group's profit before tax for the current period of RM74.6 million was 46% lower or RM63.9 million lower than the corresponding period 2016 of RM138.5 million mainly due to realised gain from assets held for disposal of RM97.5 million recorded in 2016.

Performance of the respective operating business segments for the nine months ended 30 September 2017 as compared to the preceding year corresponding period is analysed as follows:

1. Manufacturing

The manufacturing sector contributed a revenue and profit before tax of RM124.1 million and RM10.1 million respectively arising from the consolidation of nine months' results of the newly acquired subsidiary, CBB in November 2016.

2. Trading

Trading sector recorded revenue of RM76.2 million as compared to corresponding period 2016 of RM60.2 million. Profit before tax of RM6.6 million is higher than the profit before tax in the corresponding period of RM5.3 million due to higher revenue from sale of chemicals arising from the new contracts secured in first half of 2017.

3. Licensing

The licensing sector recorded revenue of RM25.5 million as compared to corresponding period 2016 of RM10.6 million. Profit before tax was RM0.3 million as compared to corresponding period 2016 of RM3.9 million due to lower royalty income from licensees coupled with higher marketing and administrative expenses.

4. Infrastructure and utilities

The infrastructure and utilities sector recorded revenue of RM2.5 million from infrastructure project in Pulau Indah secured by KPS-HCM. Profit from the infrastructure and utilities sector for the current period of RM79.7 million was 76% higher than corresponding period's profit of RM45.2 million mainly due to higher share of profits contributed by the associated companies, primarily from SPLASH.

5. Oil and gas

For the current period, NGC Energy registered profit after tax of RM20.7 million which translated into the Group's share of profit of RM8.3 million as compared to share of profit of RM11.6 million for the corresponding quarter 2016. The lower profit recorded by NGC Energy was mainly due to higher cost of sales resulting in a lower profit gross margin.

6. Telecommunication

The Group's share of losses for the current period in Ceres was RM1.7 million, lower by RM0.2 million as compared to a loss of RM1.9 million for the corresponding period 2016.

7. Investment holding and property investment

The investment holding sector recorded higher revenue of RM95.1 million as compared to RM9.9 million in the corresponding period 2016 due to higher dividend income. This sector recorded a profit before tax of RM56.2 million as compared to a profit before tax of RM75.4 million in the corresponding period 2016 mainly due to realised gain from assets held for disposal of RM97.5 million recorded in 2016.

Commentary On Prospects

1. Manufacturing

CBB's primary focus would be on growing its paper bags business. To propel growth in the Malaysian market, CBB plans to strengthen its position in the non-cement sector specifically in the minerals and other constructions segments which has recently generated strong demand and generate better margins.

Regionally, CBB plans to tap into the opportunity of the increasing infrastructure spending and capital projects in South East Asia, which present tremendous growth opportunities.

2. Trading

Aqua Flo had been awarded three (3) contracts in May 2016 from PNSB Water Sdn Bhd, Konsortium ABASS Sdn Bhd and Konsortium Air Selangor Sdn. Bhd, respectively, with a cumulative total value of RM98.0 million over a period of two years of which RM65.4 million had been delivered as at 30 September 2017.

In addition to delivering on these contracts, Aqua Flo is continuously bidding for new contracts for supply of water treatment chemicals and monitoring equipment. Concurrently, Aqua Flo is embarking on strategic initiatives to enhance future profitability by strengthening operational efficiency and venturing into other water-related businesses.

3. Licensing

Future growth for the King Koil group of companies ("King Koil Group") will be largely driven by expansion of market share via direct distribution to retailers and consumers in the USA, which remains as one of two largest bedding markets in the world along with China, with estimated consumption of mattress in excess of USD7 billion in 2015. Initiatives have been put in place to grow the distribution network via conventional brick-and-mortar retailers as well as various online channels.

The Group is further optimistic on the growth prospects in the US market with the appointment of bedding industry specialist, Mr. David Binke ("Mr. Binke") as Chief Executive Officer of the King Koil Group in September 2017. Mr. Binke joined the King Koil Group from another US-based bedding player which doubled its revenue over a 5-year period during which he held the sales leadership and chief executive positions in the company. The King Koil Group is slated for bolder strategic moves in the US market with Mr. Binke at the helm, and success in the brand's home ground will in turn be beneficial to King Koil international licensees in their respective markets around the world.

4. Infrastructure and utilities

The outlook for the water services sector is expected to be positive with opportunities arising from the State Government's consolidation exercise to provide a holistic water services in Selangor, Kuala Lumpur and Putrajaya. In the light of this opportunity, the Group through its wholly owned subsidiary Nadi Biru Sdn Bhd ("Nadi Biru"), has ventured into the water pipe rehabilitation business through its subsidiary, Smartpipe Technology Sdn Bhd ("SPT"). SPT had obtained the product certification and C1 license from Suruhanjaya Perkhidmatan Air Negara and registered as G7 contractor with Construction Industry Development Board which enables SPT to undertake the water and sewerage projects for both conventional and compact pipe technology.

SPT is constantly engaging with various parties and state water agencies to promote the compact pipe technology where it has proven to be a success in several countries including Hong Kong. The Group plans to replicate this success locally.

On road maintenance and infrastructure segment, Perangsang Selangor had increased its stake in KPS-HCM to 51% on 22 June 2017. KPS-HCM was awarded infrastructure project for Pulau Indah Industrial Park by the main contractor, Central Spectrum Sdn Bhd. It is envisaged that the current order book of KPS-HCM will contribute positively to the Group's results for the financial years ending 2017-2019. Going forward, KPS-HCM will actively identify and bid for similar projects to enhance the performance of the Group's infrastructure and utility segment.

With the imminent takeover of the Group's 30% equity interest in Syarikat Pengeluar Air Selangor Sdn Bhd ("SPLASH") held through Viable Chip (M) Sdn Bhd, a wholly owned subsidiary of the Company, the Group is continuously assessing business opportunities in sectors where it already has existing investments as well as new business sectors or areas to ensure sustainability of the Group.

5. Oil and gas

The Group remains confident in the long-term prospects of the oil and gas sector as the Group expects an increase in demand for liquefied petroleum gas (LPG) in the commercial sector while demand from domestic sectors shall remain strong over the next few years.

6. Telecommunication

Ceres, a 34.35% associated company, is currently pursuing several new initiatives to streamline its business and to improve its financial performance; refocusing on its market segments, introducing new products and extending its network of distributors. Efforts are continuously being pursued in order to ensure that Ceres contributes positively to the Group in the future.