Quarterly Report For The Financial Period Ended 31 December 2016
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Consolidated Statement Of Profit Or Loss And Other Comprehensive Income
For the fourth quarter and nine months ended 31 December 2016(The Figures have not been audited)
Consolidated Statement Of Financial Position
For the fourth quarter and nine months ended 31 December 2016(The figures have not been audited)
Review Of Group Performance
The Group recorded lower revenue of RM428.0 million for the year under review, as compared to RM594.4 million reported in 2015, mainly contributed by the Construction division [see Note 17.1 (b) for details)].
The Group profit before tax declined substantially from RM44.2 million in 2015 to RM3.5 million in 2016. The decline was mainly attributed to our major associate, Dayang Enterprise Holdings Bhd. The share of results from this associate decreased significantly from RM51.1 million in 2015 to RM16.1 million in the current year under review (see Note 17.2 for details).
Detailed review of the performance and prospects of each operating segment (as shown in Note 11) are discussed in Section 17.1 below.
Review of performance of operating segments and current year prospects
Current 12-month vs corresponding preceding 12-month review (2016 vs 2015) For the current year under review, Property segment achieved revenue of RM149.2 million, against the RM156.4 million achieved in 2015. However, Property profit increased from RM12.1 million in 2015 to RM15.8 million in 2016. The increase was partly due to improved work progress of development projects. The Group also recorded higher new sales of about RM112 million, compared to the RM104 million achieved in 2015. Current 3-month vs immediate preceding 3-month review (December 2016 vs September 2016) When compared to the immediate preceding quarter (July to September 2016), Property revenue increased from RM24.6 million to RM33.2 million in the current quarter. However, the segment performance declined from a profit of RM2.7 million in the previous quarter to a loss of RM1.3 million in the current quarter. The drop was mainly due to slower progress of works from certain property projects that have been substantially completed during the immediate preceding quarter, leading to lower contributions in this quarter. Prospects The property market continues to experience slow down and remain challenging due to factors such as rising costs of doing business, increased competition, weakening buyers’ sentiment and strict bank lending policy.
In the near term, we continue to focus on our existing three main flagship/integrated developments in Miri, Bintulu and Kuching and put in aggressive and intensive efforts to sell off the existing properties stocks.
At the same time, a cautious attitude / approach has been adopted particularly on product launches and product types, which are more selective and sensitive to the buyers’ demand and market conditions. We believe that continuous in-depth study and monitoring of the buying sentiments will enable us to tailor better product development to suit the market.
In short, product planning and pricing as well as tightening of costs control (including appropriate right sizing and cost cutting) are amongst the key measures being implemented in order to sustain the performance in our Property segment in the near term.
Current 12-month vs corresponding preceding 12-month review (2016 vs 2015) Construction segment recorded lower revenue of RM242.2 million, against the RM398.7 million achieved in 2015. At the same time, the Segment registered a loss of RM18.8 million, against a loss of RM12.6 million in the corresponding period of 2015. The decline in the performance of this Division was due to the following:
- lower contributions from certain construction projects that had been substantially completed during 2015.
- delay in the commencement of certain newly secured projects due to late finalisation of contract details with the clients. This has led to lower contributions from these newly secured projects for the current year, by more than 50% from what was initially expected.
- increased operational costs incurred (including additional acceleration costs to complete certain projects within the contract timeline)
- downwards adjustments in the contract sums of certain construction projects at their completion due to some negative variation orders from the clients due to reduction/omission of works by the clients.
Current 3-month vs immediate preceding 3-month review (December 2016 vs September 2016) When compared to the immediate preceding quarter, the Construction revenue increased from RM17.8 million to RM102.1 million in the current quarter, mainly attributable to the commencement of certain newly secured projects. However, the Segment reported a loss of RM13.2 million in the current quarter, as compared to a profit of RM1.2 million in the immediate preceding quarter due to increased operational costs incurred (including additional acceleration costs incurred to complete certain projects within the contract timeline). Prospects Various proactive efforts and measures have been put in place to improve efficiency and to closely monitor operational costs. Meanwhile, strict monitoring of the progress of projects is implemented to ensure they are on schedule. Apart from that, we are also continuously educating the project team that they are empowered and responsible to implement, manage and account for each of the projects to ensure it is completed and delivered within budget and on schedule.
We will continue to improve existing risk management system and process, and embark on tightening of internal controls for this segment. Appropriate right sizing and cost cutting are to be carried out as part of the process to better manage the costs.
With continuous efforts and resources invested to further improve our project deliverables, we remain cautiously optimistic to complete the current outstanding order book at decent margin and within scheduled timeline. Meanwhile, we have participated in a number of sizeable construction tenders and we are cautiously optimistic to secure some contracts to replenish our order book which currently stands above RM2 billion.
- Other segment
Current 12-month vs corresponding preceding 12-month review (2016 vs 2015) During the current year, Other segment reported revenue of about RM36.7 million (January to December 2015: RM39.3 million). At the same time, the Segment reported a loss of RM0.6 million in 2016, as compared to a profit of RM0.2 million in 2015. The decline was partly due to lower trading sales during the year. Rising overhead costs caused by lower operational activities in our quarry and premix operations that are running below capacity also led to the lower performance in this division. Current 3-month vs immediate preceding 3-month review (December 2016 vs September 2016) Other segment reported a slight decrease in revenue from RM7.6 million in the immediate preceding quarter to RM7.4 million in the current quarter. The Segment also registered a loss of RM1.4 million, against a loss of RM0.5 million in the immediate preceding quarter, mainly due to lower trading and quarry sales achieved against a backdrop of fixed operational costs. Prospects In the near term, we will continue to improve the quarry and premix operations by putting various measures to market and sell the products to achieve economies of scale and improve their performance. The Group may look into divesting non-performing business to realise some funds and to reduce further losses.
The property investment and trading operations will continue to contribute positively to the Group results.
In addition to retail property, we will be embarking on other types of commercial properties, for example hotel in Bintulu Paragon, for recurring income.
Review Of Performance Of Major Associate
Our associate, Dayang Enterprise Holdings Bhd. (“DEHB”), registered a lower level of profit after tax attributable to owners of about RM54.9 million for the year ended 31 December 2016, as compared to the RM172.2 million achieved in 2015.
The decline was mainly due to higher finance costs, one off break fund costs arising from early loan settlements and losses reported by newly acquired subsidiary, Perdana Petroleum Berhad (which was acquired by DEHB in the last quarter of 2015).