Gaylin International

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Unaudited Second Quarter Results Financial Statement And Related Announcement For The Period Ended 30 September 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

For the six months ended 30 September 2017 ("HY FY2018"), the Group's revenue was S$37.5 million with a decrease of S$1.5 million or 3.8% compared to S$39.0 million for the corresponding period ended 30 September 2016 ("HY FY2017"). The decrease was mainly due to a decline of S$2.3 million in the rigging and lifting segment due to the continued weakness in the oil and gas ("O&G") industry offset by the increase of S$0.8 million in the ship chandling segment.

For the second quarter ended 30 September 2017 ("2Q FY2018"), the Group's revenue was S$19.1 million, 3.9% higher than S$18.3 million in the second quarter ended 30 September 2016 ("2Q FY2017"). The increase was mainly due to an increase of S$1.1 million in the rigging and lifting segment offset by the decrease of S$0.4 million in the ship chandling segment.

Gross profit

Gross profit decreased by S$1.7 million or 21.1% from S$8.2 million in HY FY2017 to S$6.5 million in HY FY2018. The corresponding gross profit margin decreased from 21.1% to 17.3%. For 2Q FY2018, the gross profit was S$3.0 million, 19.7% lower than the S$3.7 million achieved in 2Q FY2017. The corresponding gross profit margin decreased from 20.2% to 15.6%. The decrease was mainly due to the tighter product margins.

Other income

HY FY2018 vs HY FY2017

Other income decreased by S$0.2 million in HY FY2018 mainly due to turnaround of a foreign exchange gain of S$0.3 million in HY FY2017 to a foreign exchange loss of S$0.7 million in HY FY2018.

2Q FY2018 vs 2Q FY2017

Other income decreased by S$0.4 million in 2Q FY2018 mainly due to turnaround of a foreign exchange gain of S$0.4 million in 2Q FY2017 to a foreign exchange loss of S$0.4 million in 2Q FY2018.

Distribution costs

HY FY2018 vs HY FY2017

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

2Q FY2018 vs 2Q FY2017

Distribution costs decreased by S$0.1 million or 10.6% in 2Q FY2018 compared to 2Q FY2017 mainly due to a decrease in other marketing related expenses of S$0.1 million.

Administrative expenses

HY FY2018 vs HY FY2017

Administrative expenses decreased by S$0.5 million or 7.0% in HY FY2018 compared to HY FY2017 mainly due to a decrease in staff related expenses of S$0.4 million and depreciation of S$0.2 million. This is in line with the Group's cost control measures.

2Q FY2018 vs 2Q FY2017

Administrative expenses decreased by S$0.2 million or 6.3% in 2Q FY2018 compared to 2Q FY2017 mainly due to a decrease in (i) staff related expenses of S$0.1 million and (ii) depreciation of S$0.1 million.

Other operating expenses

HY FY2018 vs HY FY2017

Other operating expenses in HY FY2018 did not vary significantly from that of HY FY2017, there was a foreign exchange loss of S$ 0.7 million in HY FY2018 compared to allowance for doubtful debts of S$0.7 million in HY FY2017.

2Q FY2018 vs 2Q FY2017

Other operating expenses increased by S$0.3 million in 2Q FY2018 compared to 2Q FY2017 mainly due to a foreign exchange loss of S$0.4 million in 2Q FY2018.

Interest expense

HY FY2018 vs HY FY2017

Interest expense in HY FY2018 decreased by S$0.1 million due to a reduction in bank borrowing.

Loss before income tax

As a result of the above reasons, loss before income tax was S$4.4 million for HY FY2018.

Review of statement of financial position and cash flows

Current assets

The current assets decreased by S$16.5 million from S$157.9 million as at 31 March 2017 to S$141.4 million as at 30 September 2017. The decrease was mainly due to: (i) a decline in cash and cash equivalents of S$3.8 million, (ii) a decline in trade receivables of S$5.5 million due to lower sales in HY FY2018, (iii) a decline in inventories of S$6.7 million due to sales, and (iv) a decrease in other receivables of S$0.6 million due to collection of remaining profit guarantee monies from the vendor.

Non-current assets

The non-current assets decreased by S$1.7 million from S$38.5 million as at 31 March 2017 to S$36.8 million as at 30 September 2017. The decrease was mainly due to: (i) a drop in PPE of S$1.2 million mainly due to depreciation of S$2.1 million in 6M FY2018 and disposal of PPE with net book value of S$0.4 million offset by additions of PPE of S$1.7 million, and (ii) amortisation of intangible assets of S$0.3 million.

Current liabilities

The current liabilities decreased by S$35.9 million from S$96.4 million as at 31 March 2017 to S$60.4 million as at 30 September 2017. The decrease was mainly due to (i) a decrease in bank borrowings of S$32.5 million caused by a reclassification of bank borrowings of S$23.2 million from current to non-current as the outstanding due in respect of the related loan was settled and the remaining balances were restructured, and repayment of S$8.9 million and (ii) a decrease in trade payables of S$2.9 million due to lower purchases during the quarter.

Non-current liabilities

Non-current liabilities increased by S$22.7 million from S$6.1 million as at 31 March 2017 to S$28.8 million as at 30 September 2017 mainly due to reclassification of bank borrowings as explained above.

Capital, reserves and non-controlling interests

The decrease in shareholder's equity of S$5.0 million was mainly attributable to loss of S$4.5 million during the period and decrease in translation reserve of S$0.5 million.

Cash Flows

HY FY2018 ended 30 September 2017

Net cash from operating activities

In HY FY2018, we have operating cash outflows of S$0.7 million from operating activities before changes in working capital.

Our net working capital inflow amounted to S$8.3 million. This was mainly due to: (i) a decrease in inventories of S$6.2 million due to sales, (ii) a decrease in trade receivables of S$5.2 million due to collections during the period, and (iii) a decrease in other receivables of S$0.5 million, offset by (i) a decrease in trade payable of S$2.7 million and (ii) a decrease in bank bills payable of S$0.7 million due to repayment of bank borrowings.

We paid interest for bank bills of S$0.2 million and income tax paid of S$0.4 million.

Overall, our net cash generated from operating activities amounted to S$7.1 million.

Net cash used in investing activities

Net cash used in investing activities amounted to S$1.2 million in HY FY2018 mainly due to the payments for PPE of S$1.5 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$9.8 million in HY FY2018. This was mainly due to: (i) the repayment of bank borrowings and related interest of S$10.0 million, and (ii) the repayment of obligations under finance leases of S$0.3 million offset by proceeds from loan from immediate holding company of S$0.5 million.

2Q FY2018 vs 2Q FY2017

Net cash from operating activities

In 2Q FY2018, we have operating cash outflows of S$0.7 million from operating activities before changes in working capital.

Our net working capital inflow amounted to S$4.8 million. This was mainly due to: (i) a decrease in inventories of S$3.8 million, (ii) a decrease in trade receivables of S$2.7 million due to collections during the period, (iii) a decrease in other receivables of S$0.3 million, offset by (i) a decrease in trade payables of S$1.3 million due to lower purchase, (ii) a decrease in other payable of S$0.6 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 and income tax paid of S$0.1 million.

Overall, our net cash generated from operating activities amounted to S$3.9 million.

Net cash used in investing activities

Net cash used in investing activities amounted to S$0.6 million in 2Q FY2018 mainly due to the purchase of PPE of S$0.6 million.

Net cash used in financing activities

Net cash used in financing activities amounted to S$3.7 million in 2Q FY2018. This was mainly due to: (i) the repayment of bank borrowings and related interest of S$4.1 million, and (ii) the repayment of obligations under finance leases of S$0.2 million offset by proceeds from loan from immediate holding company of S$0.5 million.

Commentary

After being in prolonged weakness for more than two years, there are signs that the O&G market is rebalancing as indicated by improving oil prices in recent times. This is an encouraging sign for the Group whose products and services demands are generally driven by the overall performance of the O&G sector.

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 (each a “Subscription Share”) 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 Group intends to utilise the gross proceeds of approximately S$68.0 million from the placement entirely for general working capital purposes and to strengthen its capital base.

The Company has appointed Tata Capital Markets Pte. Ltd. as an independent financial adviser to advise its independent directors on the Proposed Subcription. The Proposed Subscription is subject to the approval of the Company's shareholders at an extraordinary general meeting to be convened.