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(1): Comparatives have been restated to conform with current year's presentation.Click here to enlarge the image
Second quarter ended 31 December 2016 ("2Q17") vs second quarter ended 31 December 2015 ("2Q16")
Group revenue of USD 50.20 million was 1.3% higher than 2Q16. Higher revenue was derived from electronics manufacturing services and investment activities. This was partially offset by lower property revenue.
Profit after tax of USD 1.18 million was lower than USD 3.88 million in 2Q16. The increase in profit contribution from electronics manufacturing services was offset by unrealized foreign exchange loss and lower fair valuation gain on investments.
Improved margins were achieved by the electronics manufacturing services business. Property development expense of USD 2.73 million related to the ongoing sale and settlement of Unison on Tenth apartment units. There was a marginal improvement in the market value of financial investments during 2Q17. Employee benefits expense of USD 2.51 million was 30.8% above 2Q16 due to higher provision for staff cost. Finance cost had risen as a result of bank borrowing in relation to investment acquired during the current quarter. Other losses of USD 1.21 million resulted from exchange loss on translation due to the strengthening of US dollar against Australian and Singapore dollars.
Share of results of associate in relation to Finbar Group Limited was not recorded in the current quarter as its financial results for half year ended 31 December 2016 was not available on the Australian Securities Exchange at the date of this announcement.
Other comprehensive loss of USD 5.82 million in 2Q17 was largely due to foreign currency translation loss on the back of a stronger US dollar.
Earnings per share in 2Q17 was US cents 0.06, as compared to US cents 0.38 in 2Q16.
Half year ended 31 December 2016 ("1H17") vs half year ended 31 December 2015 ("1H16")
Group revenue for 1H17 of USD 106.51 million was comparable to 1H16 of USD 106.45 million. Revenue was boosted by an increase in electronics manufacturing services business activities, which had offset a reduction in property revenue.
Profit after tax for 1H17 of USD 3.41 million was significantly above 1H16 of USD 0.16 million. This was mainly due to substantially higher profit contribution from electronics manufacturing services, coupled with lower foreign exchange loss in 1H17.
Lower profit was recorded from sale of Unison on Tenth apartments in the current period as compared to profit derived from sale of Toccata apartments in 1H16. Increase in mark-to-market valuations relating to financial investments amounted to USD 1.26 million. Employee benefits and other expenses were well above prior period as over-accrual of expenses were reversed in 1H16, in addition to higher provision for staff cost in 1H17. Higher depreciation expense was due to renovation of premises and manufacturing equipment acquired in prior year.
Other comprehensive loss of USD 4.31 million stemmed mainly from foreign currency translation loss due to a stronger US dollar in 1H17.
Earnings per share in 1H17 was US cents 0.27, as compared to loss per share of US cents 0.03 in 1H16.
As at 31 December 2016, the financial position of the Group remains healthy. Net assets attributable to equity holders of the company amounted to USD 272.68 million, as compared to USD 280.78 million as at 30 June 2016. Cash and cash equivalents increased 23.8% to USD 94.06 million.
Development properties amounted to USD 25.22 million as compared to USD 33.8 million as at 30 June 2016. This was attributable to a residual 25% of Unison on Tenth apartment units not yet sold.
Investment securities held as current assets decreased by 41.6% to USD 16.95 million mainly due to divestment of quoted equity investments. Trade and other receivables decreased 34.8% to USD 36.04 million due to customer payments, as well as a conversion of trade receivables to additional property development loan, which led to a corresponding increase in non-current other receivables. A loan extended during the current quarter further increased non-current other receivables to USD 28.12 million.
Investment securities held as non-current assets decreased to USD 27.21 million from USD 48.15 million as at 30 June 2016. During the current quarter, the Group invested in a convertible loan to Major Star Holdings Limited ("MSH") of USD 14.71 million, financed by short term bank borrowing. This was in addition to the Group's investment in convertible loans to PSD Holdings Pte Ltd ("PSDH") of USD 20.18 million, recorded as investment securities held as non-current assets as at 30 June 2016.
MSH is an investment holding company which has a 50% interest in PSDH. PSDH in turn holds 100% interest in Pacific Star Development Pte Ltd ("PSD"), the subject of a Reverse Takeover ("RTO") transaction with LH Group Limited ("LH") (refer to the note below), a company listed on the SGX-ST.
The convertible loan agreements with PSDH were novated to MSH on 30 November 2016. These loans were then partially converted to a 77.2% stake in MSH with a residual loan receivable from MSH of USD 7.74 million. The 77.2% stake in MSH of USD 27.14 million was recorded as an investment in subsidiary held as current asset as at 31 December 2016. Due to the proposed RTO transaction, MSH's financials were not available for consolidation as at 31 December 2016.
Resolutions in relation to the proposed RTO transaction were approved by LH shareholders at its extraordinary general meeting on 8 February 2017, including waiving their rights to receive a mandatory offer from the Company's wholly-owned subsidiary and approving the proposed allotment and issue of 59,151,600 new shares in the capital of LH to the Company's wholly-owned subsidiary. In accordance with an agreement dated 30 November 2016, upon completion of the RTO, MSH will procure LH to issue 59,151,600 shares to the whollyowned subsidiary of the Group. Upon receipt of the 59,151,600 shares in LH, the Group will reclassify its investment in subsidiary to an investment in associate held as non-current asset. (Note: LH had resolved to change its name to "Pacific Star Development Limited" with effect from 8 February 2017. The change of its trading counter name on the SGX-ST will take effect on 16 February 2017. For more information on the foregoing, shareholders may wish to refer to (i) the announcements made by the Company on 21 April 2016, 30 May 2016, 30 September 2016, 30 November 2016 and 31 December 2016; (ii) LH announcements on 3 March 2016, 25 April 2016, 20 May 2016, 25 November 2016, 30 December 2016 and 8 February 2017 and LH shareholders' circular dated 30 December 2016.)
Net asset value of the Group was US cents 29.32 per share as at 31 December 2016, as compared to US cents 30.19 as at 30 June 2016.
Despite a recovery in the financial markets in late 2016, the global economic growth outlook remains subdued. Financial markets are expected to be volatile amidst geopolitical uncertainties. Slow demand in the Western Australia property market is expected to continue into 2017.
The Board of Directors will continue to exercise prudence when considering new investments.
Save as disclosed herein, there are no known material factors or events which may affect the earnings of the Group between this date up to which the report refers and the date on which the report is issued.