Koon Holdings Ltd
Our Divisions
Infrastructure Construction and Civil Engineering
One of the leading civil engineering, reclamation and shore protection specialists in Singapore.
Plant and Equipment Rental
Wide range of land-based and marine construction machineries and equipment.
Precast Concrete Works
Comprehensive range of prefabricated works ranging from standard RC piles to high value products such as tunnel segments.
Investments
Creating synergies within our organisation.
Half Year Results Financial Statement And Related Announcement For the Financial Period Ended 30 June 2011
Financials Archive
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Consolidated Statement of Comprehensive Income for the period ended 30 June 2011
Statement of Financial Position as at 30 June 2011
Review Of Performance
Income Statement
Turnover
Revenue for first half year ended 30 June 2011 (1H2011) declined by 3.7% to S$35.7 million as compared to the previous period due to decline in revenue from the Construction division partially mitigated by an increase in revenue from the Precast division.
The decrease in revenue from the Construction division was mainly due to changes in timing of revenue recognition (Koon only starts recognizing revenue when a project is 20% or more complete) and project completion. Substantial completion of major projects such as Punggol-Serangoon Reservoir, Gardens by the Bay at Marina South, Jurong Island projects, PUB Wetland contributed significantly to revenue in 1H2010 as compared to 1H2011. However, the decrease was partially offset by new projects such as infrastructure works at Changi East, coastal protection work at Pulau Tekong and a private civil engineering project at Tuas which exceeded 20% revenue recognition level during 1H2011.
The Plant and equipment rental division also reported lower revenue due to lower equipment requirements from the Construction division.
The higher revenue derived from the Precast division was due to consolidation of 6 months cumulative revenue for 1H2011 as compared to the previous period as the acquisition of the Precast division was completed in late March 2010.
Gross Profit
The Group's gross profit decreased from S$7.9 million to S$3.0 million due to lower revenue and lower gross profit margin from the Construction division. The Construction division recorded a lower gross profit for 1H2011 due to write back of provision for anticipated losses and liquidated damages for certain projects in 1H2010. In addition, projects with better margin such as Gardens by the Bay at Marina South and Jurong Island projects contributed to the gross profit in 1H2010 compared with 1H2011.
The Plant and equipment rental division also reported lower earnings due to lower equipment requirements from the Construction division.
The Precast division recorded a lower profit margin mainly because of preliminary set up, technical design and production related costs incurred for new contracts awarded.
Other Income
Other income increased from S$0.8 million to S$9.6 million in 1H2011 mainly due to the gain on disposal of leasehold property and dividend income received from Koon Zinkcon of S$5.6 million and S$3.0 million respectively as compared to the previous period.
Administrative Expenses
For the period ended 30 June 2011, there was an increase by 98.4% in the administrative expenses from S$3.2 million as compared to S$6.4 million in 1H2011. The significant increase in operating cost was mainly due to higher manpower costs, business development expenses, professional fee in relation to acquisition of subsidiaries and additional operating expenses from Contech Precast Pte Ltd (CPPL) in the Precast division. CPPL was acquired in 27 August 2010.
Distribution Expenses
The Group saw an increase of 171% in its distribution expenses as compared to that in 1H2010. This was due to corresponding increase in revenue by Precast division.
Finance Expenses
There was an increase of 91.8% from S$0.09 million in 1H2011 as compared to S$0.05 million in the previous period for finance expenses. This was due to purchase of new gantry cranes through hire purchase finance arrangement to enhance the Precast division production capabilities.
Share of Loss of Associate
The loss from associate of S$0.3 million arose from the ownership of Tesla, an Australia energy infrastructure company. Tesla's first 9.9MW diesel power plant in Western Australia has commenced its operations.
Profit Before Tax and Net Profit
The Group's profit before tax from continuing operations decreased from S$6.9 million to S$5.5 million in 1H2011 due to lower gross profit from Construction division, preliminary costs from Precast division and share of losses from associates mitigated by non operating income - gain from disposal of property and dividend income from Koon Zinkcon. Excluding these non operating income, our Group's net operating loss before tax is approximately S$3.1 million, mainly attributed to the Precast division of approximately S$2.1 million and S$1.0 million from our Construction division.
Dividend
The Group is pleased to announce an interim dividend of 0.5 Singapore cent per ordinary share. This would have been equivalent to 1 Singapore cent per ordinary share last year before the bonus issue.
The discussion that follows compares the Finance Position as at 30 June 2011 with that of 31 December 2010
Current assets
Current assets increased by S$0.2 million from S$72.8 million to S$73.0 million when compared to the beginning of the year.
This was mainly due to the following:
- Cash and cash equivalents increased by S$0.5 million due to a small favorable movement in working capital;
- Trade receivables increased due to a back to back receivable of S$2.9 million from a joint venture partner;
- Other receivables decreased by S$1.4 million due to refund of lease rental and project tender deposits and proceeds received from sales of certain tugboats and barges; and
- Inventories increased by S$0.8 million due to higher raw materials held for newly awarded contracts for Precast division.
The above are offset by the reversal of:
- The fair value of options granted to Tesla where the net value of the put and call options was transferred to the cost of investment in associate when the option was exercised to subscribe for 2.4 million preference shares on 29 June 2011; and
- The leasehold property classified as non-current assets held for sale, the transaction was completed in January 2011.
Non-current assets
The increase in non-current assets of 25.9% from S$25.9 million in FY2010 to S$32.6 million was mainly due to:
- The subscription of preference shares in Tesla Holdings Pty Ltd at a consideration of S$4.7 million and the transfer of the net fair value of the call and put options of S$0.8 million resulted from the share subscription into Tesla.
- The property, plant and equipment in FY2010 had increased by 6.3% to S$23.4 million due mainly to additions of an additional office building, purchase of moulds by the Precast division and the acquisition of motor vehicles, bulldozers and steel sheet piles in the Plant and equipment rental division.
Current liabilities
Current liabilities increased by S$3.0 million from S$45.6 million to S$48.6 million mainly due to the following:
- Bills payable increased due to the increase in trade financing by the Precast division for its purchase of raw material for production,
- Trade payables increased from a back to back payable to a joint venture partner and an increase in the business activities for 1H2011,
- Other payables and accruals reduced mainly due to transfer of dividend received from Koon Zinkcon Pte Ltd, a 50% joint venture with Boskalis International (S) Pte Ltd to other income in the period,
- Contract work-in-progress increased due to cost accruals for projects; and
- Income tax payable decreased due to tax paid during the period.
The discussion that follows compares the consolidated statement of cash flows for the 6 months to 30 June 2011 with that of 31 December 2010
Despite the net cash used in operations, the cash and cash equivalents of the Group increased marginally mainly due to proceeds from sale of leasehold property which was partially offset by net cash outlay for purchase of fixed assets, the payment of dividends of S$1.6 million and subscription of preference shares in Tesla Holdings Pty Ltd.
The increase in cash outlay for purchase of property, plant and equipments was mainly due to the construction of the additional office building and the acquisition of moulds by the Precast division, Plant and equipment rental division acquisition of motor vehicle, bulldozers and steel sheet piles.
Commentary
On 1 July 2011, the Group acquired a 51% stake in GPS Alliance Holdings Pte. Ltd. (formerly known as GA Property Management Pte. Ltd.) and its subsidiaries for S$3 million. Based in Singapore, GPS Alliance Holdings Pte. Ltd. is an investment holding company that owns premier real estate agency, Global Property Strategic Alliance Pte. Ltd. ("GPS"), which is involved in a wide spectrum of real estate services that includes corporate leasing services, investment sales, en bloc sales, full time sales and domestic and international project sales. Since its establishment, GPS has made significant progress in expanding its business network via regional strategic alliances.
This acquisition is a synergistic addition to the Group's business model, which has been transformed to diversify its revenue base and accelerate recurring revenue growth.
On 3rd August 2011, the Group also announced the incorporation of the new subsidiary, GPS Alliance Appraisals Pte. Ltd. under GPS to provide property valuation and advisory services to explore opportunities in the real estate market.
The Group intends to continue to actively seek to maximize its resources. This may include strategic alliances, joint ventures, being involved in BOTs (build-operate-transfers) and PPPs (public private partnerships) and further acquisitions.