Financials

Quarterly Report For The Financial Period Ended 30 June 2017

Financials Archive

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

Income Statement

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

Balance Sheet

Performance Review

a) Current quarter against previous year corresponding quarter

Group revenue increased significantly to RM75.9 million compared with RM26.9 million for the corresponding quarter 2016, representing an increase in revenue by 182% or RM49.0 million. This was largely attributable to revenue from the manufacturing business of Century Bond Bhd (“CBB”) of RM39.5 million which was acquired in November 2016. The revenue from trading business of Aqua Flo Sdn Bhd (‘’Aqua Flo”) increased to RM3.8 million as well as higher revenue from the licensing business, Kaiserkorp Corporation Sdn Bhd (“Kaiserkorp”) of RM5.6 million due to 3 months consolidation as compared to 1 month for the corresponding quarter 2016.

Share of profit of associates increased by RM4.4 million as compared to corresponding quarter 2016 mainly due to higher contributions from SPLASH. For the current quarter ended 30 June 2017, the Group registered a profit before tax of RM37.6 million as compared to a profit before tax of RM37.1 million for the corresponding quarter 2016.

For the current quarter ended 31 March 2017, the Group registered a profit before tax of RM22.3 million as compared to a profit before tax of RM119.4 million for the preceding year corresponding quarter 2016. The significant reduction in profit was due to realised gain of RM97.5 million on assets held for disposal. Share of profit of associates also reduced by RM9.1 million as compared to corresponding quarter 2016 due to impairment loss on receivables.

Performance of the respective operating business segments for the second quarter ended 30 June 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 RM39.5 million and RM2.3 million respectively. 66% or RM26.1 million of the sector’s revenue was from paper packaging and the remaining was from plastic packaging and others.

2. Trading

Revenue of RM24.7 million was 18% or RM3.8 million higher than the corresponding quarter’s revenue of RM20.9 million. The increase in revenue was attributed to supply of chemicals to PNSB Water Sdn Bhd, a new contract which Aqua Flo secured in May 2016.

Correspondingly, on current quarter against corresponding quarter 2016 comparison, profit before tax for the current quarter was slightly higher at RM2.2 million as compared to corresponding quarter 2016 of RM2.0 million.

3. Licensing

The licensing sector posted RM8.3 million revenue to the Group during the current quarter as compared to RM2.7 million in the corresponding quarter 2016 which comprises royalties of RM6.2 million and corporate sales and others RM2.1 million. For the current quarter, this sector posted a profit before tax of RM0.3 million as compared to profit before tax of RM1.3 million in the corresponding quarter 2016. The lower profit mainly due to lower corporate sales coupled with higher distribution and marketing costs and administrative expenses.

4. Infrastructure and utilities

Infrastructure and utilities sector recorded a profit of RM41.3 million as compared to the corresponding quarter 2016 profit of RM35.4 million, higher by RM5.9 million. The higher share of profits recorded in the current quarter is mainly due to higher share of profit from Syarikat Pengeluar Air Selangor Holdings Berhad (“SPLASH Holding”), a 30% associated company by RM6.3 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 RM4.6 million as compared to a profit of RM7.7 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 RM1.8 million as compared to share of profit of RM3.1 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 RM0.7 million as compared to a share of loss of RM0.6 million for the corresponding quarter 2016 due to higher administrative and marketing expenses.

7. Investment holding and property investment

Investment holding and property investment recorded revenue of RM16.3 million as compared to RM3.9 million in the corresponding quarter 2016 due to higher dividend received. This sector recorded a profit before tax of RM3.5 million as compared to a loss of RM3.8 million in the corresponding quarter 2016.

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

For the six months ended 30 June 2017, the Group registered revenue of RM152.7 million as compared to RM46.1 million in the corresponding period 2016, representing an increase in revenue by RM106.6 million or 231%. The significant increase was mainly due to higher revenue from trading sector by RM13.9 million coupled with revenue from newly acquired subsidiaries in 2016 in licensing sector of RM14.4 million and manufacturing sector of RM79.1 million.

The Group’s profit before tax for the current period of RM59.9 million was 62% lower or RM96.6 million than the corresponding period 2016 of RM156.5 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 six months ended 30 June 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 RM79.1 million and RM6.3 million respectively arising from the consolidation of six months’ results of the newly acquired subsidiary namely CBB in November 2016.

2. Trading

Trading sector posted a profit before tax of RM4.3 million on the back of total revenue of RM49.9 million. The current period revenue was higher by 37% or RM13.9 million due to higher revenue from sale of chemicals arising from the new contracts secured in May 2016 and correspondingly profit before tax increased by RM0.9 million from RM3.4 million to RM4.3 million.

3. Licensing

The licensing sector recorded revenue of RM17.1 million as compared to corresponding period 2016 of one month of RM2.7 million arising from the newly acquired subsidiary namely Kaiserkorp in May 2016. Profit before tax was RM0.8 million as compared to corresponding period 2016 of RM1.3 million due to lower corporate sales coupled with high distribution and marketing and administrative expenses.

4. Infrastructure and utilities

Profit from the infrastructure and utilities sector for the current period of RM61.9 million was 4% lower than corresponding period’s profit of RM64.8 million mainly due to lower share of profits contributed by the associated companies.

5. Oil and gas

For the current period, NGC Energy registered profit after tax of RM13.4 million which translated into the Group’s share of profit of RM5.3 million as compared to share of profit of RM7.2 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 RM1.2 million, lower by RM0.1 million as compared to a loss of RM1.3 million for the corresponding period 2016.

7. Investment holding and property investment

The investment holding sector recorded higher revenue of RM20.5 million as compared to RM6.4 million in the corresponding period 2015 due to dividend income. This sector recorded a loss before tax of RM3.6 million as compared to a profit before tax of RM82.1 million 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 cement packaging business in the domestic and international markets. To propel growth in the Malaysian market, CBB plans to enter new segments by developing new products such as paper packaging for minerals and other construction materials. 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) 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 RM30.0 million had been delivered in financial year 2016.

In addition to delivering on these contracts, Aqua Flo would continue bidding for new contracts for supply of water treatment chemicals and equipment. At the same time, Aqua Flo would endeavour to undertake strategic initiatives to enhance future profitability by enhancing operational efficiency and venturing into other water-related businesses.

3. Licensing

King Koil Licensing Company Inc (“KKLC”) future growth is expected from the expansion of direct distribution to retailers and consumers in the USA. Wholesale revenue in the US alone exceeded USD8 billion in 2015, with future growth contributed by increase in both sales volume and average price per unit. KKLC will focus on increasing King Koil®’s share of the market by adding more brick-and-mortar retailers to its distribution network and via various online channels starting with the collaboration with the International Chiropractors’ Association (ICA) via www.icaspinecare.com. In addition, KKLC will continue to expand King Koil’s global presence by adding more reputable manufacturers a

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 51% holding in 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 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.

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.