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Half Year Results Financial Statement And Related Announcement


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Consolidated Statement of Profit or Loss

Income Statement

Consolidated Statement of Profit or Loss

Statement Of Comprehensive Income

Balance Sheet

Balance Sheet

Review of Group Performance

The Group registered revenue of S$93.6 million in 1H2021, a 7% decrease compared to S$100.6 million in 1H2020 on the back of lower contribution from PCS and Engineering Divisions. The S$2.9 million loss before tax recorded in 1H2021 was 64% higher than the 1H2020 loss before tax of S$1.8 million. This was mainly attributed to the lower government grants and hardly any rental rebates received in 1H2021. These supports received had partially alleviated some of the Group fixed cost in 1H2020. There were also expenses incurred for the Group’s new initiatives in 1H2021. Lower operating expenses and lower financing cost had partially mitigated the lower gross profit in 1H2021. If the government and rental support received were to be excluded, the Group operating loss in 1H2021 would have been lower than that of 1H2020 mainly due to the profit improvement from the PCS Division, which was partially offset by the higher operating loss from the ICT division.

PCS Division registered a significant profit improvement in 1H2021. Revenue was lower due to short supply of some of the popular handset models. Gross margin improved as compared to the corresponding period a year ago when the COVID-19 situation, which caused lower footfall in shopping malls due to movement restrictions and physical distancing requirements as well as temporary store closures, had impacted performance. In addition, the sales of Quair, an innovative clean air solution, have been encouraging since its launch in June 2021. Unfortunately, retail traffic in its Malaysia operations continued to be lackluster due to the surge of COVID-19 cases, resulting in lower profits due to lower variable commissions received with fewer walk-in customers.

ICT Division incurred a loss although higher revenue was registered in 1H2021. Customers remained prudent in capex spending with resultant delay in project tendering and awards. There is also increasing demand for cloud-based solutions to reduce capex spending. The higher revenue in 1H2021 was mainly from lower margin maintenance renewal and hardware sales. The Division’s loss was primarily due to lower project revenue recognition, product sales and voice usage. It was less impacted in 1H2020 due to completion of orders secured prior to the COVID-19 outbreak. To capture new market, the Division also incurred expenses relating to its new Internet of Things (“IoT”) and cloud initiatives. The development of its in-house IoT service platform and cloud-based unified communications and contact centre solutions will bolster its service capabilities to enable these solutions to be delivered in a faster, cheaper and more consistent manner.

Engineering Division’s performance in 1H2021 continued to be impacted by the COVID-19 pandemic situation and it recorded losses mainly from its Singapore and Philippines operations. Loss in Singapore was mainly due to lower gross margin while in the Philippines, the Division managed to narrow its loss on the back of revenue from its new higher-margin projects. Its Indonesian operations recorded lower profit due to project delays and higher operational costs. The overall operating environment for the Division remains challenging, especially for its regional operations which saw a surge of COVID-19 cases among its employees. Operating margin had been severely impacted by mandatory COVID-19 movement measures which include restrictions to building access and transport. Mandatory work-from-home arrangements in a poor internet access environment have also resulted in project inefficiencies and rising costs of project implementation. The Division weaker operating performance was also compounded by the lack of government support for its regional operations and the safety concerns for its employees.

The Group generated cash from its operating activities in 1H2021 due to the improvement in working capital. As at 30 June 2021, after paying dividends of S$2.3 million, the Group remains in a net cash position with of S$19.6million, an improvement of S$6.4million against 31 December 2020 net cash of S$13.2 million.

Prospects

The Ministry of Trade and Industry has upgraded its forecast for Singapore’s gross domestic product to grow between 6 and 7 per cent for 2021 from its initial forecast of between 4 and 6 per cent. For retail services, the sector grew 50.7 per cent year-on-year in the second quarter of 2021, due primarily to the low base from a year ago when sales were significantly lower because of the circuit breaker measures. The information and communications sector also expanded, by 9.6 per cent year-on-year in the second quarter of 2021 from 6.8 per cent growth in the previous quarter.

While Singapore’s economic growth remains largely on track with the successful rollout of the COVID19 vaccine, recovery could be derailed if new and more contagious virus variants emerge and if the existing vaccines efficacy is reduced. For regional economies which have had slow vaccination rollouts, a more severe and protracted period of slowdown is expected if infection cases continue to surge. In addition, the gradual tapering of governmental support, Inflation risks and rising costs, could exert pressure on, and impact consumer sentiments. On account of the uncertainties in the domestic and regional economies, the Group maintains a cautious outlook for FY2021. In spite of the fluidity and challenges in our operating environment, we remain confident of our ability to withstand the headwinds given our strong balance sheet, healthy cash position and order book backlog. Our divisions are on track with their transformation initiatives as they reposition themselves to take advantage of growth areas in the consumer and enterprise sectors.

PCS Division, leveraging on its strengths and track record in distribution, fulfilment and retail managed services, has expanded its product portfolio beyond mobile handsets and accessories to include innovative lifestyle and healthcare wearables to capture the growing consumer shift towards personal care and well-being. It will also expand its e-commerce channel in line with the irreversible shift to online shopping.

ICT Division which was impacted by customer lower capex spending and delayed project tendering and awards, may benefit from the rebound in business activities, digitisation acceleration and the resumption of projects as Singapore implements its COVID-19 pandemic exit strategy. The division’s entry into higher margin cloud-based services with its IoT capabilities in unified communications, call centre solutions and smart building management and maintenance applications, will provide new revenue streams and will enable it to better meet customers’ migration to more cost-efficient cloud solutions. Although Engineering Division is operating under very demanding conditions regionally, it is making good headway in markets like the Philippines where it narrowed its losses on the back of new higher margin projects. On a longer horizon, 5G network rollout, continued network upgrading and ongoing telecommunications infrastructural needs will provide sound prospects for the division.

While pursuing growth, the Group will continue to take steps to improve our operational efficiencies and further strengthen our balance sheet and liquidity to fund growth and to deliver shareholder return.

This release may contain forward-looking statements that involve risks and uncertainties. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements as a result of risks, uncertainties and assumptions. Representative examples of these factors include (without limitation) general industry and economic conditions, interest rate trends, cost of capital and capital availability, competition from other companies and venues for the sale/distribution of goods and services, shifts in customer demands, customers and partners, changes in operating expenses, including employee wages, benefits and training, and governmental and public policy changes. You are cautioned not to place undue reliance on these forward looking statements, which are based on current view of management on future events.