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Revenue from continuing operations for the 3-month period ended 30 June 2017 (“1Q2018”) increased by approximately RMB 15.6 million or 48.1%, from RMB 32.4 million of the 3-month period ended 30 June 2016 (“1Q2017”) to RMB 48.0 million in 1Q2018. The higher revenue registered in 1Q2018 was mainly due to the increase in sales across all of our product segments as our production and sales activities have started to normalise during the period under review.
Our products can be categorised mainly into (a) explosive devices such as boosters; (b) industrial fuse and initiating explosive devices such as detonating cords and non-electric tubes; (c) industrial detonators such as non-electric detonators and piston non-electric detonators; and (d) ammonium nitrate (discontinued operation).
The breakdown and comparison of our revenue by the above product types and geographical segments between 1Q2018 and 1Q2017 are as follows:
Sales within PRC increased by approximately RMB 8.0 million or 25.3% to RMB 39.7 million in 1Q2018, as compared to RMB 31.7 million in the previous corresponding period. The increase in PRC sales was mainly due to higher sales across all our product segments and particularly, sales from the Group's explosive devices within PRC improved by 116.7% in 1Q2018 as our boosters production only resumed on 26 May 2016 (whereby there was only close to one month of production and sales activities during 1Q2017). Also, the Group had commenced the second automatic booster production line which was approved for trial production during April 2017.
Sales to Australia registered a revenue of RMB 8.3 million for 1Q2018. There was no sale to Australia during the previous corresponding quarter as our boosters production facilities only resumed on 26 May 2016.
There was no sale to other countries during 1Q2018. During 1Q2017, sales to other countries was approximately RMB 751,000 or approximately 2.3% of the total consolidated revenue of the Group.
All local PRC sales contracts and export applications sought by export agents have been approved by the Ministry of Industry and Information Technology, Department of Work Safety ("MIIT").
As the Group's production and sales activities starts to normalise during the period under review, the Group's gross profit margin improved by approximately 10.8 percentage points, from 10.5% in 1Q2017 to 21.3% in 1Q2018.
Interest income remained relatively unchanged at RMB 70,000 in 1Q2018.
Finance costs decreased by approximately RMB 228,000 mainly due to lower bank lending interest rates in the general market and lower average bank loan amounts during 1Q2018 as compared to 1Q2017.
For 1Q2018, other gains include the reversal of allowance for impairment on trade receivables of RMB 157,000, gain on disposal of property, plant and equipment of approximately RMB 320,000 and government grants of approximately RMB 114,000. For 1Q2017, other gains include the reversal of allowance for impairment on trade receivables of RMB 172,000, gain on disposal of property, plant and equipment of approximately RMB 7,000 and government grants of approximately RMB 240,000. Gain on disposal of property, plant & equipment relates to the disposal of certain motor vehicles and machineries that were no longer in use. Government grants relate to the miscellaneous grants from governments on an ad hoc basis and the grant for certain plant and equipment which will be amortised over 3 years.
Other losses for 1Q2018 and 1Q2017 relate to foreign exchange adjustment loss. Foreign exchange adjustment gain or loss arises from foreign exchange rate changes between Renminbi (RMB), US Dollars and Singapore Dollars.
The Group's distribution costs increased by approximately RMB 2.1 million or 70.5% mainly due to higher sales activities during 1Q2018 as well as higher freight and port charges related to increased export sales during the current quarter under review.
Administrative expenses declined marginally by approximately RMB 527,000 or 6.2% in 1Q2018. Depreciation expenses increased by approximately RMB 620,000 or 13.6% in 1Q2018 mainly due to additions to property, plant and equipment during the preceding quarters.
The income tax expenses was mainly due to the provision of withholding tax for the Group.
Property, plant and equipment decreased by approximately RMB 4.5 million, mainly due to the depreciation charged for the current period under review of approximately RMB 5.2 million and disposal of certain property, plant and equipment, which was partially offset by the acquisition of property, plant and equipment of approximately RMB 721,000.
Other assets, non-current relate to the Group's land use rights, which decreased by approximately RMB 0.7 million mainly due to the amortisation charges during the current period under review.
Deferred tax assets relate mainly to the deferred tax differences for the allowance for impairment on trade and other receivables, provision for safety expenses and deferred tax on tax losses incurred.
Inventories, trade and other receivables, other assets and cash and cash equivalents, represented approximately 17.4%, 30.2%, 12.4% and 40.0% respectively of our total current assets as at 30 June 2017.
Inventories decreased by approximately RMB 2.6 million or 7.2% to RMB 32.8 million as at 30 June 2017, as compared to RMB 35.4 million as at 31 March 2017. The decrease in inventories was mainly due to the lower finished goods at the end of the period under review.
During the current quarter under review, trade and other receivables decreased by approximately RMB 4.0 million or 6.5% to RMB 57.1 million as at 30 June 2017.
Other assets, current comprising the Group's prepayments, increased by approximately RMB 3.1 million or 15.2% to RMB 23.5 million as at 30 June 2017 due to higher prepayments for raw materials as at 30 June 2017.
As at 30 June 2017, our current liabilities comprised of trade and other payables of approximately RMB 74.1 million, other current financial liabilities of approximately RMB 39.7 million and other liabilities of RMB 2.7 million. Non-current liabilities comprised of deferred tax liabilities of RMB 2.1 million.
Trade and other payables increased by approximately RMB 6.6 million mainly due to the increase in production activities and operations during 1Q2018.
As at 30 June 2017, other current financial liabilities of RMB 39.7 million relates to the secured bank loans of Yinguang Technology, of which the Group repaid some of the bank loans that were due during 1Q2018. Adhering to the customary banking practices in the PRC, the Group's bank loans are for a period of one year or less.
Other liabilities of RMB 2.7 million relate to the Group's provision for safety expenses, advances from customers and a deferred government grant.
Deferred tax liabilities of RMB 2.1 million relate to the deferred tax liabilities for the withholding tax on the dividend payable by our subsidiary in China.
For the current quarter ended 30 June 2017, the Group's net cash from operating activities, continuing operations amounted to approximately RMB 13.3 million, while net cash used in investing activities and financing activities, continuing operations amounted to approximately RMB 251,000 and RMB 20.7 million, respectively.
The net cash from operating activities, continuing operations of approximately RMB 13.3 million was mainly due to lower trade and other receivables and higher trade and other payables, partially offset by the increase in other assets due to prepayments for raw materials.
The net cash used in investing activities, continuing operations of approximately RMB 251,000 was mainly due to the purchase of property, plant and equipment of approximately RMB 721,000, partially offset by the proceeds from disposal of property, plant and equipment of approximately RMB 400,000 and interest received of approximately RMB 70,000.
The net cash used in financing activities, continuing operations of approximately RMB 20.7 million was mainly due to the net decrease in bank loans of RMB 20.0 million and the payment of interest expenses.
Update on our boosters production facilities
As previously announced, Yinguang Technology's second automated boosters production line has successfully passed the relevant authority's inspection and was approved for trial production during April 2017. However, this second automated boosters production line may require a few months to scale up its production capabilities.
As a result of the cessation of the two manual boosters production lines, our revenue and profitability will continue to be affected, however, with the commencement of the second automated boosters production line, the impact should be mitigated going forward, barring any unforeseen circumstances.