Sinjia Land Limited

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Full Year Financial Statement And Dividend Announcement 2014

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FULL YEAR FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR YEAR ENDED 31 DECEMBER 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 10.3% in revenue to $15.53 million in FY2014 from $17.31 million in FY2013 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 $1.35 million or 21.3% to $4.96 million in FY2014 from $6.31 million in FY2013. The overall gross profit margin for FY2014 was 32.0% compared to 36.4% for FY2013.

    Distribution costs and administrative expenses declined by 6.4% in FY2014 to $6.97 million from $7.54 million in FY2013 mainly due to decrease of staff related cost, withholding taxes and statutory charges, travelling expenses, outward freight, entertainment expenses, software maintenance, fines and penalties offset by increase in legal fees, rental fee and depreciation. Finance costs increased by $0.01 million in FY2014 mainly for the interest incurred for the debenture loan & term loan for 2 subsidiaries in Singapore, revolving credit facilities of a subsidiary in Malaysia and the hire purchase interest for motor vehicles.

    The Group recorded other charges of $5.24 million in FY2014 (FY2013: $0.42 million) mainly due to the fair value adjustment on available-for-sale financial assets of $4.66 million (FY2013: $29,000), foreign exchange loss of $0.38 million (FY2013: foreign exchange gain of $0.25 million) and write-down in inventories of $0.3 million (FY2013: $0.04 million). The foreign exchange loss was due to the depreciation of Indonesia Rupiah ("IDR") and Ringgit Malaysia ("MYR") versus the Singapore Dollar ("SGD") during 2014. In FY2014, the Group also recorded loss on disposal of plant and equipment of $21,000 (FY2013: $156,000), $33,000 for the plant and equipment written off (FY2013: $83,000).

    Other credits in FY2014 amounted to $0.78 million compared to $0.49 million in FY2013 mainly due to forfeiture of the deposit of $0.45 million, operating lease income from Process Innovation Technology SE Asia Pte Ltd of $161,000 (FY2013: $80,000), Government Grants of $78,000 (FY2013: $70,000), rental income of $5,000 (FY2013: $13,000), reversal for impairment on trade and other receivables of $15,000 (FY2013: allowance for impairment on trade and other receivables of $16,000) and fair value adjustment on bank borrowings of $19,000 (FY2013: NIL).

    In FY2014, the Group reported a loss before tax of $7.30 million compared to the loss before tax of $1.24 million in FY2013 and a loss after tax of $7.77 million (FY2013: $1.73 million).

    The Group posted a loss attributable to equity holder of the Company of $7.31 million in FY2014 (FY2013: $1.90 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 $13.18 million to $16.11 million as at 31 December 2014 as compared to non-current assets of $2.93 million as at 31 December 2013. The variance was mainly due to the reclassification of the investment of Tianjin Swan Lake which was previously grouped as disposal group classified as held for sale. This is offset against the fair value adjustment on available-for-sale financial assets of $4.66 million, depreciation of plant and equipment of $0.83 million, $33,000 for plant and equipment written off, loss on disposal of plant and equipment of $21,000 and the foreign currency translation loss for plant and equipment in overseas operations of $16,000; offset by the purchase of new plant and equipment of $0.75 million and assets under construction of $5.96 million.

Current Assets

The Group's current assets amounted to $25.24 million as at 31 December 2014, a decrease of $12.78 million compared to 31 December 2013. This was mainly due to the reclassification of the investment of Tianjin Swan Lake which was previously grouped as disposal group classified as held for sale. These are offset against the increased in inventories of $0.08 million and trade and other receivable of $1.05 million mainly due to increase orders from customers of elastomeric business unit.

Cash and cash equivalents decreased by $2.83 million mainly due to the purchase of new plant and equipment of $0.75 million and assets under construction of $5.96 million, the cash used in purchase of treasury shares which amounted to $1.99 million, payment for income tax of $0.59 million and payment for finance lease & borrowings of $0.22 million, offset against the new increase of bank borrowings of $7.24 million.

Total Liabilities

Total liabilities as at 31 December 2014 was $19.79 million, an increase of $9.31 million from $10.48 million as at 31 December 2013.

Trade and other payables of $11.61 million was recorded as at 31 December 2014, a increase of $2.41 million mainly due to and 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 and increase orders from suppliers of elastomeric business unit. This is offset against the forfeiture of deposit receipt of $0.45 million.

In FY2013, the higher income tax recorded was due to profitable operations in higher tax jurisdictions. Additionally, losses incurred by subsidiaries in one tax jurisdiction were not available for offset against profit generated by subsidiaries in other tax jurisdictions. As at 31 December 2014, income tax was recorded at $0.17 million.

Approximately $7.21 million under non-current liabilities was for deferred tax of $0.17 million and the borrowings which comprised of the outstanding amount from a hire purchase of motor vehicle of $0.30 million and bank borrowings of $6.67 million as at 31 December 2014.

Total Equity

The equity decreased by $8.91 million to $21.54 million as at 31 December 2014 from $30.46 million as at 31 December 2013. While retained earnings decreased by $6.41 million during the year, the increase in losses from foreign currency translation reserve which mainly due to the depreciation of the MYR against SGD and the appreciation of the RMB & IDR against SGD and acquisition of the 51% non-controlling interest in Sinjia RTE Solutions Pte Ltd ("SR") reduced the effect of higher retained earnings on total equity.

The Group purchased 9,613,000 treasury shares for $1.99 million. As at 31 December 2014, there were 14,978,000 shares held as Treasury Shares (31 December 2013: 5,365,000 shares).

Commentary

The rising costs pressure due to the increase in minimum wages in the respective countries of operations in the PRC, Indonesia and Malaysia current during the financial year.

The board is of the view at this juncture given the uncertain global economic outlook, it will be more prudent to focus on the existing business to ensure a steady income for the group.

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 FY2015. The project is currently under construction.

In the SGXNET announcement released on 17 February 2015, the Company has announced that it has entered into a Sale and Purchase Agreement with Tembusu Industries Private Limited for the disposal of power generation system equipment in Myanmar to Tembusu Industries Pte Ltd. Under the terms of the said agreement, the Company shall sell the power generation system equipment in Myanmar for a cash consideration of US$2.214 million. Company has collected the initial deposit of US$400,000 for the purchase. The Proposed Disposal is expected to be completed on or about 17 April 2015.

Sinjia Land has and will continue to explore new business opportunities and further develop existing businesses to enhance the proftability of the Group.

Balance Sheet

balance sheet