Gaylin International

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Third Quarter Results Financial Statement And Related Announcement For The Period Ended 31 December 2017

Financials Archive

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Consolidated Income Statements

Income Statement

Consolidated Statements of Comprehensive Income

Statements of Comprehensive Income

Statements of Financial Position

Statements of Financial Position

Review of the Group's Performance

Revenue

9M FY2018 vs 9M FY2017

For the nine months ended 31 December 2017 ("9M FY2018"), the Group's revenue was S$52.1 million with a decrease of S$6.0 million or 10.3% compared to S$58.1 million for the corresponding period ended 31 December 2016 ("9M FY2017"). The decrease was mainly due to a decline of S$7.6 million in the rigging and lifting segment due to the continued weakness in the oil and gas ("O&G") industry offset by an increase of S$1.6 million in the ship chandling segment.

3Q FY2018 vs 3Q FY2017

For the third quarter ended 31 December 2017 ("3Q FY2018"), the Group's revenue was S$14.6 million, 23.6% lower than S$19.1 million in the third quarter ended 31 December 2016 ("3Q FY2017"). The decrease was mainly due to a decrease of S$5.3 million in the rigging and lifting segment offset by an increase of S$0.8 million in the ship chandling segment.

Gross profit

9M FY2018 vs 9M FY2017

Gross profit decreased by S$1.9 million or 17.6% from S$10.5 million in 9M FY2017 to S$8.7 million in 9M FY2018. The corresponding gross profit margin decreased from 18.2% to 16.7%.

3Q FY2018 vs 3Q FY2017

For 3Q FY2018, the gross profit was S$2.2 million, 5.5% lower than the S$2.3 million achieved in 3Q FY2017. The corresponding gross profit margin increased from 12.2% to 15.1%.

Other income

9M FY2018 vs 9M FY2017

Other income decreased by S$0.6 million in 9M FY2018 compared to 9M FY2017 mainly due to (i) turnaround of a foreign exchange gain of S$0.4 million in 9M FY2017 to a foreign exchange loss of S$0.4 million in 9M FY2018, and (ii) turnaround of a gain on disposal of PPE of S$0.2 million in 9M FY2017 to a loss on disposal of PPE of S$0.1 million in 9M FY2018.

3Q FY2018 vs 3Q FY2017

Other income decreased by S$0.1 million in 3Q FY2018 compared to 3Q FY2017 mainly due to turnaround of a gain on disposal of PPE of S$0.2 million in 3Q FY2017 to a loss on disposal of PPE in 3Q FY2018 offset by an increase in foreign exchange gain of S$0.1 million in 3Q FY2018.

Distribution costs

9M FY2018 vs 9M FY2017

Distribution costs in 9M FY2018 did not vary significantly from that of 9M FY2017.

3Q FY2018 vs 3Q FY2017

Distribution costs increased by S$0.1 million or 13.6% in 3Q FY2018 compared to 3Q FY2017 mainly due to an increase in staff related expense of S$0.1 million.

Administrative expenses

9M FY2018 vs 9M FY2017

Administrative expenses decreased by S$0.5 million or 4.5% in 9M FY2018 compared to 9M FY2017 mainly due to a decrease in (i) depreciation of S$0.3 million, (ii) amortisation of intangible of S$0.2 million, (iii) bank charges of S$0.1 million, and (iv) staff related expenses of S$0.1 million offset by an increase in witholding tax of S$0.2 million. This is in line with the Group’s cost control measures.

3Q FY2018 vs 3Q FY2017

Administrative expenses in 3Q FY2018 did not vary significantly from that of 3Q FY2017.

Other operating expenses

9M FY2018 vs 9M FY2017

Other operating expenses in 9M FY2018 decreased by S$0.3 million compared to 9M FY2017 mainly due to a decrease in allowance for doubtful debts of S$0.7 million offset by an increase of S$0.4 million of foreign exchange loss.

3Q FY2018 vs 3Q FY2017

Other operating expenses in 3Q FY2018 did not vary significantly from that of 3Q FY2017.

Interest expense

9M FY2018 vs 9M FY2017

Interest expense in 9M FY2018 decreased by S$0.2 million compared to 9M FY2017 due to a reduction in bank borrowings.

3Q FY2018 vs 3Q FY2017

Interest expense in 3Q FY2018 decreased by S$0.1 million compared to 3Q FY2017 due to a reduction in bank borrowings.

Loss before income tax

As a result of the above reasons, loss before income tax was S$6.9 million for 9M FY2018.

Review of statement of financial position and cash flows

Current assets

The current assets decreased by S$21.5 million from S$157.9 million as at 31 March 2017 to S$136.5 million as at 31 December 2017. The decrease was mainly due to: (i) a decline in cash and cash equivalents of S$2.6 million, (ii) a decline in trade receivables of S$10.1 million due to lower sales in 9M FY2018, (iii) a decline in inventories of S$7.8 million due to sales, and (iv) a decrease in other receivables of S$0.9 million mainly due to collection of remaining profit guarantee monies from the vendor and VAT claim.

Non-current assets

The non-current assets decreased by S$2.5 million from S$38.5 million as at 31 March 2017 to S$36.1 million as at 31 December 2017. The decrease was mainly due to: (i) a drop in PPE of S$1.8 million mainly due to depreciation of S$3.1 million in 9M FY2018 and disposal of PPE with net book value of S$0.4 million offset by additions of PPE of S$1.9 million, and (ii) amortisation of intangible assets of S$0.4 million.

Current liabilities

The current liabilities decreased by S$15.5 million from S$96.4 million as at 31 March 2017 to S$80.9 million as at 31 December 2017. The decrease was mainly due to (i) a decrease in bank borrowings of S$11.1 million mainly due to repayment of bank borrowings, and (ii) a decrease in trade payables of S$3.5 million.

Non-current liabilities

Non-current liabilities reduced by S$0.7 million from S$6.1 million as at 31 March 2017 to S$5.4 million as at 31 December 2017 mainly due to repayment of finance lease and bank borrowings.

Capital, reserves and non-controlling interests

The decrease in shareholder's equity of S$7.8 million was mainly attributable to loss of S$7.1 million during the period and decrease in translation reserve of S$0.6 million.

Cash Flows

9M FY2018 ended 31 December 2017

Net cash from operating activities

In 9M FY2018, we have operating cash outflows of S$1.5 million from operating activities before changes in working capital.

Our net working capital inflow amounted to S$13.3 million. This was mainly due to: (i) a decrease in trade receivables of S$9.9 million due to collections during the period and lower sales, (ii) a decrease in inventories of S$7.4 million due to sales, and (iii) a decrease in other receivables of S$0.8 million, offset by (i) a decrease in trade payable of S$3.3 million, (ii) a decrease in bank bills payable of S$0.9 million due to repayment of bank borrowings, and (iii) a decrease in other payables of S$0.6 million.

We paid interest for bank bills of S$0.3 million and income tax paid of S$0.4 million.

Overall, our net cash generated from operating activities amounted to S$11.2 million.

Net cash used in investing activities

Net cash used in investing activities amounted to S$1.5 million in 9M FY2018 mainly due to the payments for PPE of S$1.8 million offset by proceeds on disposal of PPE of S$0.3 million.

Net cash used in financing activities

Net cash used in financing activities amounted to S$12.6 million in 9M FY2018. This was mainly due to: (i) the repayment of bank borrowings and related interest of S$12.6 million, and (ii) the repayment of obligations under finance leases of S$0.5 million, offset by proceeds from loan from immediate holding company of S$0.5 million.

3Q FY2018 ended 31 December 2017

Net cash from operating activities

In 3Q FY2018, we have operating cash outflows of S$0.8 million from operating activities before changes in working capital.

Our net working capital inflow amounted to S$5.0 million. This was mainly due to: (i) a decrease in trade receivables of S$4.7 million due to collections during the period, (ii) a decrease in inventories of S$1.2 million, and (iii) a decrease in other receivables of S$0.3 million, offset by (i) a decrease in trade payables of S$0.6 million, (ii) a decrease in other payable of S$0.4 million, and (iii) a decrease in bank bills payable of S$0.1 million due to repayment of bank borrowings.

We paid interest for bank bills of S$0.1 million.

Overall, our net cash generated from operating activities amounted to S$4.1 million.

Net cash used in investing activities

Net cash used in investing activities amounted to S$0.3 million in 3Q FY2018 mainly due to the purchase of PPE of S$0.3 million.

Net cash used in financing activities

Net cash used in financing activities amounted to S$2.8 million in 3Q FY2018. This was mainly due to: (i) the repayment of bank borrowings and related interest of S$2.6 million, and (ii) the repayment of obligations under finance leases of S$0.2 million.

Commentary

The recent recovery in oil prices suggests that the O&G market could be headed for a rebalancing. This is an encouraging sign for the Group.

On 23 October 2017, the Company entered into a conditional placement agreement with PeakBayou Limited, a wholly-owned unit of private equity fund ShawKwei Asia Value Fund 2017, L.P., to allot and issue an aggregate of 1,360,000,000 new ordinary shares in the capital of the Company at an issue price of S$0.05 for each subscription share, amounting to an aggregate consideration of S$68.0 million (the "Proposed Subscription"). The Proposed Subscription would represent about 75.64% of the enlarged share capital of the Company. The Company has since received approval-in-principle from the SGX-ST for the listing and quotation of the subscription shares.

The Company will convene an extraordinary general meeting to seek shareholders' approval for the Proposed Subscription.