Financials

FINANCIALS

FULL YEAR FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE YEAR ENDED 30 JUNE 2021

Profit & Loss

Balance Sheet

Statement of profit or loss

Revenue

For the six months ended 30 June 2021 (“2H21”), the Group reported revenue of $163.731 million, up 47.10% from $111.304 million in the last corresponding period ended 30 June 2020 (“2H20”). This was mainly from the Cable & Wire (“C&W”) Segment which posted an increase of $41.442 million, up 74.73% from $55.453 million to $96.895 million. The Electrical Material Distribution (“EMD”) Segment’s revenue also posted an increase of $5.450 million, up 13.48% and the Test & Inspection Segment (“T&I”) Segment’s revenue increased by $5.690 million, up 45.50% as compared to last corresponding period. The growth was mainly due to resumption of business activities after the Circuit Breaker Period (“CBP”) and Movement Control Order (“MCO”).

For the financial year ended 30 June 2021 (“FY2021”), the Group’s revenue edged higher by 7.97%, up $22.028 million from the last financial year (“FY2020”) of $276.414 million to $298.442 million in current year.

The Cable & Wire (“C&W”) Segment’s revenue posted an increase of 12.57%, up $19.467 million from $154.910 million to $174.377 million. The higher revenue was from Singapore and Malaysia’s C&W segment, which was driven mainly by higher sales volume and increase in copper prices. Most of the construction activities resumed during the year which led to higher deliveries during the year. While in the last financial year, the business activities were disrupted by CBP and MCO.

The C&W Segment in Vietnam was affected by the slower business activity amid the global COVID-19 pandemic.

The EMD Segment registered revenue of $87.010 million, a growth of $2.290 million, 2.70% higher from $84.720 million. The growth was supported by higher revenue from the Building & Infrastructure Cluster as both public and private sector construction works expanded. However, the growth was from a low base, as most domestic construction activities were suspended during the CBP last year.

The T&I segment revenue grew marginally by $212,000 from $31.339 million to $31.551 million in the current year. The growth in the T&I Segment was largely due to higher revenue from the non-destructive testing and heat treatment services in Indonesia as new contracts were executed. It was partially offset by lower revenue contribution from Singapore and Malaysia operations as their business activities were affected by the COVID-19 outbreak.

Revenue was relatively stable for the Switchboard Segment with a marginal increase of 1.08%, amounting to $59,000.

Gross Profit

Gross profit (“GP”) increased marginally by $188,000, from $16.426 million in 2H20 to $16.614 million in 2H21. However, gross profit margin softened from 14.76% in 2H20 to 10.15% in 2H21 due to provision for onerous contracts which resulting from the increase in copper price towards year end. There is no provision for onerous contracts accounted for in the first six months ended 31 December 2020 (“1H21”). Management has made assessment based on the copper price as at 31 December 2020 and concluded that provision for onerous contracts was not necessary.

The Group’s GP for FY2021 decreased 6.73% to $41.373 million from $44.360 million in FY2020. GP margin dropped by 2.19% from 16.05% in FY2020 to 13.86% in FY2021. This was attributed mainly to provision for onerous contracts of $22.687 million, offset partially by higher margins from more adhoc contracts which required immediate deliveries.

Other operating income

Other operating income in 2H21 increased by $1.177 million from $4.560 million in 2H20 to $5.737 million in 2H21. This was mainly due to higher fair value gain on derivative financial instruments which resulting from the increase in copper price towards year end, offset partly by lower government grants.

For FY2021, the Group recorded other operating income of $20.157 million, attributed mainly to higher fair value gain on derivative financial instruments of $10.802 million as the Group benefited from the increase in copper price towards year end. In addition, the Group recognised grant income of $6.943 million under government schemes to support businesses amid the COVID-19 pandemic.

Selling and distribution expenses

Selling and distribution expenses increased 3.05% to $9.756 million in 2H21, in line with higher revenue.

For FY2021, selling and distribution expenses dropped by $947,000, 4.89% lower than FY2020. This was mainly due to reduction in transportation cost and lower advertising and marketing costs amid the COVID-19 outbreak.

Administrative expenses

Administrative expenses for 2H21 increased by $1.776 million, up 20.62% as compared to 2H20, while for FY2021, administrative expenses increased by $856,000, up 4.61% as compared to FY2020. This was mainly because of increase in directors’ remuneration and staff costs as a result of better performance.

Other operating expenses

Other operating expenses for 2H21 and FY2021 increased by $900,000 and $872,000 respectively, mainly due to higher foreign exchange loss and higher loss allowance for trade receivables. Higher foreign exchange loss was mainly due to fluctuation in the Group’s exposure to the United States dollar against Singapore dollar. Higher loss allowance for trade receivables was mainly due to slower collection from the C&W and EMD segment customers from the construction industry.

Finance costs

Finance costs for 2H21 and FY2021 decreased by $125,000 and $308,000 respectively, mainly due to lower utilisation of bank facilities and lower interest charge.

Share of (loss) profit of associates

Nylect Group’s performance were affected by COVID-19 pandemic which resulted lower profit contribution in 2H21 and FY21.

Profit before income tax

The Group’s profit before income tax (“PBT”) decreased $2.108 million to $117,000 in 2H21 from $2.225 million in 2H20.

PBT for FY2021 jumped $8.904 million to $21.318 million from $12.414 million in FY2020, on the back of higher other operating income.

The C&W Segment’s PBT for FY2021 increased by $6.466 million from $6.039 million to $12.505 million, mainly driven by fair value gain on derivative financial instruments and grants extended by the Singapore government in view of the COVID-19 pandemic. The EMD Segment’s PBT expanded by $2.596 million from $3.700 million to $6.296 million, moving in tandem with higher revenue. The PBT from T&I Segment and Switchboard Segment however declined by $109,000 and $22,000 respectively. Lower PBT from T&I Segment was mainly the result of set-up costs for the subsidiary in Cambodia.

Income tax expense

Income tax expense for 2H21 and FY21 increased by $341,000 and $1.419 million respectively. The increase was mainly due to the timing differences arising from the provision for onerous contracts of $22.687 million and increase in other operating income from the higher fair value gain on derivative financial instruments of $10.802 million.

Statement of financial position

Cash and bank balance increased by $5.828 million, due to higher collection from customers and government grants received.

Trade receivables increased by $29.875 million, as a result of higher sales for the quarter ended 30 June 2021 as compared to the quarter ended 30 June 2020.

Contract assets increased by $3.611 million, primarily attributable to unbilled revenue and retention sum receivables for those revenue recognised over time for on-going contracts.

Derivative financial instruments in total increased by $10.802 million, mainly due to fair value gain on foreign currency forward contracts and copper contracts.

Inventories decreased by $8.983 million, mainly due to higher sales in the C&W and EMD Segments towards year end. In addition, most of the deliveries were delayed due to disruptions in business activities in last financial year due to COVID-19 outbreak.

Property, plant and equipment was up by $1.094 million, mainly due to addition of property, plant and equipment amounting to $6.666 million, particularly the acquisition of property at Hillview amounting to $3.584 million, against depreciation charges of $5.122 million, disposal and write off of property, plant and equipment with net book value of $231,000.

Right-of-use (“ROU”) assets increased by $3.849 million mainly due addition of $5.208 million, particularly warehouse and building rental for the newly set-up subsidiary in Cambodia against depreciation charges of $1.359 million.

Deferred tax assets increased by $3.310 million, mainly due to timing differences arising from provision for onerous contracts.

Bank borrowings in total declined by $2.371 million, primarily because of lower borrowings by the C&W Segment and EMD Segment, offset partially by higher bank borrowing by the T&I Segment for investment in a newly subsidiary.

Trade payables increased by $12.510 million, substantially due to higher purchases by the Group towards year end.

Other payables increased by $1.205 million, mainly the result of directors’ remuneration.

Provision for onerous contracts amounting to $22.687 million relate to deliveries of contracts that are expected to be made after the year end.

Statement of cash flows

The cash and cash equivalents at the end of the year increased to $39.329 million compared with $33.501 million at the end of the previous year.

The Group’s net cash from operating activities of $26.340 million was attributable to operating profit before working capital changes, decrease inventories, increase in trade and other payables and advances received from customers. These were offset partially by the increase in trade and other receivables and contract assets as well as payment of income tax.

The net cash used in investing activities of $6.197 million was mainly for purchase of property, plant and equipment and investment property, net of proceeds from disposal of plant and equipment, dividend received from an associate and interest received.

The net cash used in financing activities of $14.271 million was mainly due to repayment of borrowings, lease liabilities, dividends and interest paid, net of proceeds from bank borrowings.

Commentary

COVID-19 continues to be a significant concern as it extends to a second year. In addition, copper prices remain volatile, and shipment of goods is constrained by limited availability of container cargo space and shipment routes affecting the Group’s production and delivery schedules.

Despite the limited visibility due to COVID-19 and the above challenges, the Group managed to continue its transformation process to be Industry 4.0 ready and will launch new products and services when opportunities arise.

Moving forward, the Group will build on its capabilities, expertise and initiatives to be robust in the new normal and deliver sustainable value to its stakeholders.