Tai Sin Electric Limited

24 Gul Crecent, Jurong Town, Singapore 629531

T: (+65) 6672 9292 E: ir@taisin.com.sg


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Second Quarter Financial Statement And Related Announcement

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SECOND QUARTER FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE PERIOD ENDED 31 DECEMBER 2019

Profit And Loss

Financials

Balance Sheets

Financials

Review

Statement of profit or loss

For the six months ended 31 December 2019, the Group's revenue eased by 3.73% to $165.110 million from $171.515 million in the last corresponding period.

The Cable & Wire ("C&W") Segment's revenue declined by $15.754 million. The Group's cable & wire operations in Singapore, Malaysia and Vietnam registered lower revenue mainly due to lower sales volume and drop in copper prices.

Revenue from the C&W's Segment in Singapore and Malaysia were down mainly due to lower deliveries to both the Infrastructure and Commercial & Residential Sectors as some of the projects were completed. The decrease was partially offset by higher exports.

In Vietnam, revenue was down mainly due to lower deliveries to the Industrial Sector and Trading Sector, offset partially by increase in revenue from the Infrastructure and Commercial & Residential Sectors.

Electrical Material Distribution ("EMD") Segment's revenue improved by $5.710 million, lifted mainly by the increase in the Electronic Cluster and Building & Infrastructure Cluster.

Test & Inspection ("T&I") Segment's revenue grew by $3.556 million. Drivers for growth include higher revenue from non-destructive testing and heat treatment in Singapore, Malaysia and Indonesia. In addition, there was increased revenue for soil investigation and monitoring related work in Singapore.

Revenue was relatively stable for the Switchboard Segment, with a marginal increase of 3.40%, amounting to $83,000, attributable to higher delivery for the local infrastructure projects.

Despite lower revenue, gross profit ("GP") for the current period climbed 14.83% or $3.607 million to $27.934 million from $24.327 million in the last corresponding period. The GP margin of 16.92%, was higher by 2.74% as compared to 14.18% achieved in the last corresponding period. Higher margins were attributable to the drop in copper prices during the period and lower deliveries for the low margin infrastructure projects secured 2-3 years ago that are nearing completion.

Other operating income increased by $1.986 million to $3.013 million from $1.027 million. The Group benefited from foreign exchange gain as a result of depreciation of US Dollar and fair value gain on derivative financial instruments as compared to loss in the last corresponding period.

Selling and distribution expenses increased by $428,000 to $9.883 million, mainly because of higher staff cost.

Administrative expenses increased by $599,000 to $9,966 million. This was mainly due to higher staff cost and higher depreciation of property, plant and equipment.

Other operating expenses decreased from $821,000 to $606,000. This was the result of absence of Group's fair value loss on derivative financial instruments offset against higher loss allowance for trade receivables and higher property, plant and equipment written off.

Finance costs increased to $562,000 from $559,000, mainly due to adoption of SFRS(I) 16 Leases. The Group's operating leases are recognised as right-of-use assets and lease liabilities on its statement of financial position. With these lease liabilities, an interest expense of $168,000 has been charged during the period. The increase was partially alleviated by lower utilisation of short-term bank borrowings during the period.

The Group's profit before income tax ("PBT") for the period ended 31 December 2019 improved by 78.69%, which was an increase of $4.487 million from $5.702 million to $10.189 million in the current period. Driven by improvement in gross profit margin and fair value gain on derivative financial instruments of $1.746 million, the C&W Segment's PBT improved by $3.760 million. The T&I Segment's PBT grew by $1.156 million, moving in tandem with higher revenue achieved during the period. The Switchboard Segment's PBT improved by $29,000. PBT from the EMD Segment, was however down by $451,000, mainly attributable to lower share of profit from associate and higher staff cost.

The Group incurred income tax expenses of $1.871 million for the current period. This was up $966,000 primarily due to higher profit attained for the current period.

Statement of financial position

Cash and bank balance increased by $7.384 million, substantially due to higher collection from customers towards period end by the C&W Segment.

Trade receivables declined by $625,000, mainly the result of lower sales for the quarter ended 31 December 2019 as compared to the quarter ended 30 June 2019 and higher collection from customers towards period end.

Other receivables decreased by $287,000, mainly due to lower prepayment for purchase of plant and equipment.

Contract assets was down by $446,000, primarily attributable to issuance of billing during the period.

Derivative financial instruments increased by $1.746 million from $437,000, mainly due to fair value gain on foreign currency forward contracts and fair value gain on copper contracts in December 2019.

Inventories increased by $845,000, mainly due to lower sales in the C&W Segment towards period end.

Following the adoption of SFRS (I) 16 Leases, the Group's operating leases are recognised as right-of-use assets with corresponding lease liabilities recorded on the balance sheet.

Short-term bank borrowings increased by $414,000 primarily because of higher bank borrowing by the C&W Segment for purchases of copper.

Trade payables increased by $682,000, mainly due to slower payment to suppliers by the C&W Segment towards period end.

Statement of cash flows

The cash and cash equivalent at the end of the period increased to $24.206 million compared with $16.822 million at the end of the previous period.

The Group's net cash from operating activities of $11.966 million was attributable to operating profit before working capital changes, decrease in trade and other receivables and contract assets, increase in trade payables and contract liabilities, offset partially by an increase in inventories and decrease in other payables as well as income tax paid.

The net cash used in investing activities of $2.252 million was mainly for purchase of property, plant and equipment, net of proceeds from disposal of plant and equipment and interest received.

The net cash used in financing activities of $2.274 million was mainly due to repayment of short-term bank borrowings, finance lease, lease liabilities following the adoption of SFRF(I) 16, dividends and interest paid, net of proceeds from bank borrowings.

Commentary

The Group expects the operating landscape to remain challenging amid rising business uncertainties from the recent outbreak of the novel coronavirus and the continuing trade tensions between US and China.

The Group's financial performance is also influenced by other factors such as volatility in copper prices, foreign exchange rates and intensifying industry competition that leads to pressure on selling prices.

Notwithstanding the challenging business conditions, the Group will intensify efforts to optimize the operational efficiency and focus on developing businesses in the Industrial and Infrastructure Sector for all our business segments.