Financials

Quarterly Report For The Financial Period Ended 31 December 2017

Financials Archive

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Unaudited Condensed Consolidated Income Statement For The Quarter Ended 31 December 2017

Income Statement

Unaudited Condensed Consolidated Statement of Financial Position As At 31 December 2017

Balance Sheet

Performance Review

a) Current quarter against previous year corresponding quarter

Group revenue increased significantly to RM123.7 million compared with RM62.9 million for the corresponding quarter 2016, representing an increase in revenue by 97% or RM60.8 million. This was largely attributable to revenue from the manufacturing business of Century Bond Bhd ("CBB") of RM50.1 million which was acquired in November 2016. The revenue from trading business of Aqua Flo Sdn Bhd ("Aqua Flo") increased to RM25.1 million as well as revenue from the infrastructure business, KPSHCM Sdn Bhd ("KPS-HCM") of RM34.5 million. In addition to that, licensing sector of King Koil recorded a higher revenue by RM0.9 million

Share of profit of associates increased by RM12.4 million as compared to corresponding quarter 2016 mainly due to higher contributions from SPLASH. For the current quarter ended 31 December 2017, the Group registered a loss before tax of RM6.4 million as compared to a loss before tax of RM25.5 million for the corresponding quarter 2016.

Performance of the respective operating business segments for the fourth quarter ended 31 December 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 contributions of RM50.1 million. 77% or RM38.8 million of the sector's revenue was from paper packaging and the remaining was from plastic packaging and others

For the current quarter, this sector posted a profit before tax of RM1.0 million as compared to RM3.9 million in the corresponding quarter 2016 due to the higher raw material cost and foreign exchange losses

2. Trading

Revenue of RM25.1 million was 6% or RM1.4 million higher than the corresponding quarter's revenue of RM23.7 million. The increase in revenue was attributed to supply of chemicals to new customers secured in first half of 2017.

For the current quarter, this sector posted a profit before tax of RM1.0 million as compared to RM1.1 million in the corresponding quarter 2016.

3. Licensing

The licensing sector posted RM10.5 million revenue to the Group during the current quarter as compared to RM9.6 million in the corresponding quarter 2016. For the current quarter, this sector posted a profit before tax of RM0.9 million as compared to RM2.1 million in the corresponding quarter 2016 due to the higher marketing and administrative expenses

4. Infrastructure and utilities

Arising from acquisition of KPS-HCM in June 2017, the Group has consolidated the results of KPSHCM and Smartpipe Technology Sdn Bhd with revenue of RM38.6 million. Infrastructure and utilities sector recorded a profit of RM6.5 million as compared to corresponding quarter 2016 with loss of RM7.5 million, an improvement by RM14.0 million. The higher profit recorded in the current quarter is mainly due to profit recorded by KPS-HCM and share of results from Syarikat Pengeluar Air Selangor Holdings Berhad ("SPLASH"), a 30% associated company which improved by RM12.5 million due to lower impairment loss on trade receivables and accounting impact of IC 12. SPRINT posted share of loss of RM0.2 million as compared to profit of RM0.6 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 RM7.2 million as compared to a profit of RM7.6 million in the corresponding quarter of 2016 mainly due to the higher cost of sales. Thus, the Group's share of profit was RM2.9 million as compared to share of profit of RM3.0 million in the corresponding quarter 2016.

6. Telecommunication

The Group's share of profit from Ceres Telecom Sdn Bhd ("Ceres") for the current quarter was RM0.5 million as compared to a share of profit of RM0.4 million for the corresponding quarter 2016.

7. Investment holding and property investment

Investment holding and property investment recorded revenue of RM6.5 million as compared to RM40.8 million in the corresponding quarter 2016 due to no dividend income in the current quarter. This sector recorded a lower loss before tax of RM16.0 million as compared to a loss of RM26.0 million in the corresponding quarter 2016

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

For the twelve months ended 31 December 2017, the Group registered revenue of RM362.0 million as compared to RM144.5 million in the corresponding period 2016, representing an increase in revenue by RM217.5 million or 151%. The significant increase was mainly due to full year revenue of RM174.2 million from manufacturing sector namely Century Bond Bhd coupled with higher revenue from licensing and trading sector by RM17.5 million and RM15.9 million respectively. In addition to that, there was also revenue recorded by infrastructure and utilities sector of RM41.1 million

The Group's profit before tax for the current year of RM68.2 million was 52% lower or RM44.8 million lower than the corresponding period 2016 of RM113.0 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 twelve months ended 31 December 2017 as compared to the preceding year corresponding period is analysed as follows:

1. Manufacturing

The manufacturing sector contributed higher revenue and profit before tax of RM174.2 million and RM11.1 million respectively arising from the consolidation of full year as opposed to 2 months results in corresponding year 2016.

2. Trading

Trading sector recorded revenue of RM101.3 million as compared to corresponding period 2016 of RM83.9 million. Profit before tax of RM7.6 million is higher than the profit before tax in the corresponding year of RM6.5 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 RM36.0 million as compared to corresponding year 2016 of RM20.2 million. Profit before tax was RM1.2 million as compared to corresponding year 2016 of RM1.8 million due to higher marketing and administrative expenses

4. Infrastructure and utilities

The infrastructure and utilities sector recorded revenue of RM41.1 million from infrastructure project in Pulau Indah secured by KPS-HCM

Profit from the infrastructure and utilities sector for the current year of RM86.2 million was 129% higher than corresponding period's profit of RM37.6 million mainly due to higher share of profits contributed by the associated companies, primarily from SPLASH.

5. Oil and gas

For the current year, NGC Energy registered profit after tax of RM27.9 million which translated into the Group's share of profit of RM11.2 million as compared to share of profit of RM14.6 million for the corresponding year 2016. The lower profit recorded by NGC Energy was mainly due to higher cost of sales resulting in a lower gross profit margin

6. Telecommunication

The Group's share of losses for the current year in Ceres was RM1.3 million, lower by RM0.2 million as compared to a loss of RM1.5 million for the corresponding year 2016.

7. Investment holding and property investment

The investment holding sector recorded higher revenue of RM101.7 million as compared to RM50.7 million in the corresponding year 2016 due to higher dividend income. This sector recorded a profit before tax of RM40.2 million as compared to a profit before tax of RM49.4 million in the corresponding year 2016 mainly due to realised gain from assets held for disposal of RM97.5 million recorded in 2016

Commentary On Prospects

1. Manufacturing

CCBB'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 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 growth opportunities for CBB.

For King Koil group of companies ("King Koil Group"), its indirect 60%-owned subsidiary, Kyco Industries, Inc. ("Kyco"), had on 22 January 2018 formed a wholly-owned subsidiary named King Koil Manufacturing West, LLC ("KKMW") under the Delaware Limited Liability Company Act of the State of Delaware, the United States of America. The intended principal activities of KKMW are to carry out the business of the production, sale and distribution of mattresses, related bedding and sleep products as well as any other activities necessary or incidental thereto.

The next step for the King Koil Group is to take control of the distribution and product quality in the US market with the setting up of its first owned manufacturing plant, slated to commence operations in 2nd quarter 2018. The change in business model will see higher revenue contribution from the King Koil Group as wholesale revenue increases significantly as compared to royalties from licensing in the US

2. Trading

Aqua Flo had been awarded three (3) new 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 RM77.6 million had been delivered as at 31 December 2017. In anticipation of expiry of these contracts in May 2018, Aqua Flo will re-bid for renewal of these contracts and will continuously bid for other 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 waterrelated businesses.

3. Licensing

Future growth for the 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-andmortar retailers as well as various online channels.

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 plan to replicate this success locally

In November 2017, SPT entered into an agreement with Pengurusan Air Selangor Sdn Bhd ("Air Selangor") for a pilot rehabilitation project using compact pipe technology. The pilot project covers a length of 0.5km in Taman Bukit Anggerik, Cheras and is expected to be completed by Q2 2018

On road maintenance and infrastructure segment, Perangsang Selangor had increased its stake in KPS-HCM Sdn Bhd ("KPS-HCM") to 51% on 22 June 2017. KPS-HCM was awarded with an infrastructure work 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 initiatives to streamline its business and improve its financial performance; refocusing of its market segment, introducing new products, extending its network of distributors. Efforts are continuously being pursued in order to ensure that Ceres contributes positively to the results of the Group in the future.