Sinjia Land Limited

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Half Year Financial Statement And Dividend Announcement 2014

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HALF YEAR FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR PERIOD ENDED 30 JUNE 2014 (UNAUDITED)

Income Statement

Review of Performance

The principal historical activities of our Group involve the manufacture and sale of a wide range of customised precision elastomeric, polymeric and metallic components which are used in a variety of industries principally in office automation, lifestyle products, industrial application, consumer electronics and automotive industries.

Income Statement

In accordance with the FRS, the results of the disposed group are presented separately as “Discontinued Operations”.

  1. Continuing Operations

    The Group experienced a drop of 20.0% in revenue to $7.24 million in 1H2014 from $9.04 million in 1H2013 mainly due to the revenue contribution from the Polymeric subsidiary in Singapore being replaced with fixed operating lease income since the second half of FY2013. However, the elastomeric business units recorded an increase in revenue due to the higher demand of its key customers in PRC and Malaysia.

    Gross profit declined by $0.92 million or 29.6% to $2.19 million in 1H2014 from $3.11 million in the previous corresponding period. The overall gross profit margin for 1H2014 was 30.2% compared to 34.4% for the previous corresponding period.

    Distribution costs and administrative expenses declined by 10.3% in 1H2014 to $3.63 million from $4.05 million in 1H2013 due to decrease of staff related cost, withholding tax, outward freight, audit fee, software maintenance, insurance expenses and entertainment expenses, offset by increase in legal fees. Finance costs declined by $1,000 to $16,000 in 1H2014 mainly for the interest incurred for the revolving credit facilities of a subsidiary in Malaysia and the hire purchase interest for motor vehicles.

    The Group recorded other charges of $292,000 in 1H2014 (1H2013: $52,000) mainly due to the foreign exchange loss of $79,000. The foreign exchange loss was due to the depreciation of Indonesia Rupiah (“IDR”) versus the Singapore Dollar (“SGD”) during 1H2014. In 1H2014, the Group recorded allowance for slow moving and obsolete inventories of $149,000 (1H2013: $32,000), loss on disposal of plant and equipment of $23,000 (1H2013: $5,000), $30,000 for the plant and equipment written off (1H2013: $7,000), no bad debts on trade and other receivables for 1H2014 (1H2013: $12,000) and donation of $12,000 (1H2013: $2,000).

    Other credits in 1H2014 amounted to $0.59 million compared to $0.21 million in 1H2013 mainly due to forfeiture of the deposit of $0.45 million, operating lease income from Process Innovation Technology SE Asia Pte Ltd of $80,000 (1H2013: Nil), Government Grants of $44,000 (1H2013: $65,000), rental income of $5,000 (1H2013: Nil) and reversal for impairment on trade and other receivables of $6,000 (1H2013: Nil). The Group recorded foreign exchange gain of $139,000 in 1H2013.

    In 1H2014, the Group reported a loss before tax of $1.15 million compared to the loss before tax of $0.80 million in 1H2013 and a loss after tax of $1.29 million (1H2013: $1.02 million).

    The Group posted a loss attributable to equity holder of the Company of $1.21 million in 1H2014 (1H2013: $1.02 million).

  2. Discontinued Operation

    On 19 September 2013, the Group disposed of its polymeric subsidiary in PRC and reported a loss attributable to owners of $169,000.

Financial Position

Non-current Assets

The Group’s non-current assets increased by $3,000 to $2.929 million as at 30 June 2014 as compared to non-current assets of $2.926 million as at 31 December 2013. The variance was mainly due to the depreciation of plant and equipment of $438,000, $30,000 for plant and equipment written off, loss on disposal of plant and equipment of $23,000 and the foreign currency translation loss for plant and equipment in overseas operations of $9,000; offset by the purchase of new plant and equipment of $588,000.

Current Assets

The Group’s current assets amounted to $35.85 million as at 30 June 2014, a decrease of $2.16 million compared to 31 December 2013.

Inventories increased by $0.08 million due to increase orders from customers of elastomeric business unit.

Cash and cash equivalents decreased by $1.76 million mainly due to the cash used in purchase of treasury shares which amounted to $1.13 million and the payment for income tax of $0.36 million.

Total Liabilities

Total liabilities as at 30 June 2014 was $10.71 million, an increase of $0.23 million from $10.48 million as at 31 December 2013.

Trade and related payables of $9.73 million was recorded as at 30 June 2014, an increase of $0.47 million mainly due to the progress payment of RMB5 million which was equivalent to $1 million for the proposed disposal of a 50.54% shareholding interest in a majority stake in a BVI incorporated company that holds a 30% shareholding interest in a PRC developer, offset by the forfeiture of deposit receipt of $0.45 million. An advance payment for income tax by Indonesia subsidiary was recorded as at 30 June 2014, hence the income tax reported as at 30 June 2014 was lower than the income tax reported as at 31 December 2013.

Approximately $0.64 million under non-current liabilities was for deferred tax and the financial lease liability which comprised of the outstanding amount from a hire purchase of motor vehicle as at 30 June 2014.

Total Equity

The equity decreased by $2.40 million to $28.06 million as at 30 June 2014 from $30.46 million as at 31 December 2013. The Group recorded foreign currency translation reserve gain due to the appreciation of the IDR and MYR against SGD and the depreciation of the RMB against SGD. The Group purchased 5,753,000 treasury shares for $1.13 milion. As at 30 June 2014, there were 11,118,000 shares held as Treasury Shares (31 December 2013: 5,365,000 shares).

Commentary

The rising cost pressure due to the increase in minimum wages in the respective countries of operation in PRC, Indonesia and Malaysia has been effective for the financial year.

The challenges facing the group is to focus on diversifation away from its traditional businesses to other industries.

The JV Company, Sinjia RTE Solutions Pte Ltd (“SR”) has commenced business development activities to procure the assembling and installing fuel cell systems in commercial and other building for the generation of electricity. As and when the new projects come on stream in FY2014, SR will progressively provide alternative source of income for the Group. Production of synthetic diesel has been planned in the next stage of SR activities.

The mixed development project located in Batu Pahat, Malaysia which was launched on 26 December 2013 is expected to contribute some returns to the Group’s result in the second half of FY2014.

On 04 August 2014, the Company announced the 10-year lease agreement to supply Singaporebased Tembusu Industries Private Limited a complete set of power generation equipment with a production capacity of six (6) megawatts (MW). Under the said Agreement, Sinjia Land’s power generation equipment will be leased to Tembusu Industries. The plant will provide the town of Myeik, Myanmar with one-third of its electricity requirements. The project will provide a fixed income and is expected to break even by the third year of the contracted period. Installation is expected to be completed within three months of equipment delivery.

Sinjia Land has and will continue to explore business opportunities beyond manufacturing.

Balance Sheet

balance sheet