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Quarterly Report For The Financial Period Ended 30 September 2016

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Consolidated Statement Of Profit Or Loss And Other Comprehensive Income

For the third quarter and nine months ended 30 September 2016
(The Figures have not been audited)

Consolidated Statement Of Financial Position

For the third quarter and nine months ended 30 September 2016
(The figures have not been audited)

Review Of Group Performance

The Group recorded lower revenue of RM285.1 million for the nine-month period under review, as compared to RM397.4 million reported in the corresponding period of 2015, mainly contributed by the Construction division [see Note 17.1 (b) for details)].

The Group profit before tax declined substantially from RM65.0 million in September 2015 to RM7.5 million in September 2016. The decline was mainly attributed to our major associate, Dayang Enterprise Holdings Bhd. The share of results from this associate decreased significantly from RM45.7 million in September 2015 to RM2.4 million in the current period 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

  1. Property
    Current 9-month vs corresponding preceding 9-month review (September 2016 vs September 2015) For the current 9 months under review, Property segment achieved revenue of RM116.0 million, against that RM118.4 million achieved in the corresponding period of 2015. At the same time, Property profit has improved slightly from RM13.9 million in 2015 to RM17.0 million in 2016. The increase was partly due to improved work progress of development projects. The Group also recorded higher new sales of about RM86 million for the current 9 months, compared to that RM77 million achieved in the corresponding period of 2015.
    Current 3-month vs immediate preceding 3-month review (September 2016 vs June 2016) Compared to the immediate preceding quarter (April to June 2016), Property revenue decreased from RM37.2 million to RM24.6 million in the current quarter. The segment profit also declined from RM4.8 million in the previous quarter to RM2.7 million in the current quarter. The drop was mainly due to lower progress of development works achieved and lower new sales reported during the current 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.

  2. Construction
    Current 9-month vs corresponding preceding 9-month review (September 2016 vs September 2015) Construction segment recorded lower revenue of RM139.9 million, against RM249.4 million achieved in the corresponding period of 2015. At the same time, the Segment also registered a loss of RM5.6 million, against a profit of RM8.6 million in the corresponding period of 2015. The decline in the performance of this Division was partly due to lower contributions from certain construction projects that had been substantially completed during 2015.

    At the same time, the performance of the Construction Division was also badly affected by the 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 period, by more than 50% from what was initially expected.

    Increased operational costs incurred as well as adjustments to the contract sums (in particular the provisional items) arising from the completion of some projects has also led to higher loss incurred during the current period.

    Current 3-month vs immediate preceding 3-month review (September 2016 vs June 2016) Compared to the immediate preceding quarter, the Construction revenue decreased from RM47.3 million to RM17.8 million in the current quarter, mainly attributable to lower contributions from certain projects that had been substantially completed during the quarter. The Segment performance has improved, from RM14.0 million loss in the preceding quarter to a modest RM1.2 million profit in the current quarter. On top of the increased work progress at site, recovery of certain liquidated and ascertained damages and bad debts previously provided for certain completed projects also led to the improvement in the segment performance.
    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.

  3. Other segment
    Current 9-month vs corresponding preceding 9-month review (September 2016 vs September 2015) During the current 9-month period, Other segment reported revenue of about RM29.3 million, similar to that achieved in the corresponding period of 2015. At the same time, the Segment also showed an improvement in its performance, from a loss of RM0.07 million in September 2015, to a profit of RM0.8 million in September 2016. The improvement was mainly due to higher trading and premix sales achieved with improved margin.
    Current 3-month vs immediate preceding 3-month review (September 2016 vs June 2016) Other segment reported a decrease in revenue from RM11.5 million in the immediate preceding quarter to RM7.6 million in the current quarter. The Segment also registered a loss of RM0.5 million, against a profit of RM1.9 million, mainly due to lower trading and quarry sales achieved against the 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 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"), reported a lower level of profit after tax attributable to owners, from RM155.7 million in September 2015 to RM7.8 million in September 2016. 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).