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Financials

Full Year Results Financial Statement And Related Announcement

Financials Archive

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Financial Statements for the Financial Year ended 31 March 2018 ("FY2018")

Income Statement

Financial Statement

Balance Sheet

Balance Sheet

Review Of Performance

Revenue

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 of our revenue by the above-mentioned product types and geographical segments during the financial year ended 31 March 2017 (“FY2017”) and financial year ended 31 March 2018 (“FY2018”) are as follows:

Financials

Note:

  1. Others include sales of raw materials and packaging materials.
  2. These were sales to export distributors in the PRC in which they export the products to their customers overseas.

During FY2018, revenue from continuing operations increased by approximately RMB 42.7 million or 28.8% to RMB 191.3 million from RMB 148.5 million in FY2017. The increase in revenue was mainly attributed to the increased sales of explosives devices such as boosters and industrial detonators, which was partially offset by the slight decline in sales registered for industrial fuse and initiating explosive devices. The increased sales of boosters was due to higher production capacity of boosters as the Group's second automated boosters production line commenced production in April 2017.

  1. Sales within PRC from continuing operations

    During FY2018, sales within PRC from continuing operations increased by approximately RMB 7.3 million or 6.2%. The increase in PRC sales was mainly attributed to higher PRC sales of boosters and industrial detonators which increased by approximately RMB 11.3 million or 279.1% and RMB 4.9 million or 9.7% respectively, but was partially offset by the decrease in PRC sales of industrial fuse and initiating explosive devices of approximately RMB 8.4 million or 13.7%. The increased PRC sales of boosters were due to higher production capacity of boosters as the Group's second automated boosters production line commenced production in April 2017. As some of our customers' mining operations were temporarily impacted by local authorities measures in FY2018, the Group's sales of industrial fuse and initiating explosive devices in the PRC was affected.

  2. Sales through export distributors

    Sales through export distributors increased by approximately RMB 6.0 million or 178.8% from RMB 3.4 million during FY2017 to RMB 9.4 million during FY2018. The increment was mainly due to more shipments to South Africa during the current financial year.

  3. Sales to Australia

    Sales to Australia increased significantly by approximately RMB 30.2 million or 112.2% as the exports of our boosters increased after our production resumed on 26 May 2016 and our production capacity of boosters was enhanced after our second automated boosters production line commenced production in April 2017.

All domestic 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").

Gross profit margin

The Group's gross profit margin improved from 15.0% to 18.8% mainly due to the normalisation of the Group's production and sales activities during the current year under review. However, lower average selling prices across our products range due to higher market competition from manufacturers in other provinces have created a downward pressure on our selling prices.

Interest income / (Finance costs)

Interest income increased by approximately RMB 4.7 million or 1630.1% mainly due to an interest income from the measurement on long-term payable at amortised cost for the purchase of office building.

Finance costs decreased marginally by approximately RMB 177,000 or 5.0%.

Other gains / (Other losses)

For FY2018, other gains relate to write back of allowance for impairment on trade receivables of approximately RMB 0.3 million, gain on disposal of property, plant and equipment of approximately RMB 1.2 million and government grants of approximately RMB 935,000.

Other gains for FY2017 relate to write back of allowance for impairment on trade receivables of approximately RMB 1.7 million and government grants of approximately RMB 682,000.

For FY2018, other losses related to foreign exchange adjustment losses of approximately RMB 1.5 million, inventories written-off of approximately RMB 58,000, property, plant and equipment written off of approximately RMB 55,000 and allowance for impairment on trade receivables of approximately RMB 1.7 million.

Other losses for FY2017 relate to loss on disposal of property, plant and equipment of approximately RMB 182,000, foreign exchange adjustment losses of approximately RMB 424,000, property, plant and equipment written-off of approximately RMB 0.7 million and allowance for impairment on trade receivables of approximately RMB 3.8 million.

Government grants relate to a grant for certain plant and equipment which will be amortised over 3 years and other ad hoc government grants for various purposes including safety awareness.

Foreign exchange adjustment gain/(losses) arose mainly from foreign exchange rate fluctuation among Renminbi (RMB), United States Dollar (US$) and Singapore Dollars (S$).

Allowance for impairment on trade receivables was based on the management's assessment on the Group's individual trade receivable as at the end of the period under review, in accordance to Singapore Financial Reporting Standards. The impairment of RMB 1.7 million for FY2018 was provided on those individual long outstanding and slow-moving trade receivables during the assessment as at 31 March 2018, which was mainly attributed to the slowdown in China's economic growth that directly impacted the coal and iron-ore mining industries, which are the key markets for our commercial explosives products.

A review on the property, plant and equipment was carried out as of 31 December and 31 March and items of obsolescence were written-off, disposed-off or impaired according to their respective conditions. Gain or loss on disposal of property, plant & equipment relates to the disposal of certain motor vehicles and equipment that were no longer in use.

Operating expenses

With higher revenue recorded in FY2018, distribution costs increased by approximately RMB 2.4 million or 12.8% from FY2017's RMB 18.9 million to FY2018's RMB 21.3 million.

Administrative expenses decreased marginally by approximately RMB 0.5 million or 1.7% to approximately RMB 30.7 million in FY2018 as compared to the previous financial year as majority of the costs are fixed costs.

Income tax expenses

During FY2018, the Group registered a loss before tax from continuing operations of RMB 15.3 million (FY2017: RMB 33.9 million) and an income tax income of RMB 0.2 million (FY2017: RMB 8.7 million). The income tax income for FY2018 and FY2017 were mainly due to the deferred tax assets recognized on Yinguang Technology's loss before income tax, allowance for impairment on trade receivables and provision for safety expenses.

Statement of Financial Position

Property, plant and equipment increased by approximately RMB 25.0 million, mainly due to the acquisition of the office building from a related party of approximately RMB 32.87 million which was approved during the Extraordinary General Meeting on 31 July 2017, and was partially offset by the depreciation charged for the current year under review of approximately RMB 18.1 million.

Other assets, non-current relate to the Group's land use rights, which increased by approximately RMB 4.7 million due to the addition to land use rights for the Group for warehousing purposes, partially offset by the amortisation charges during the current year under review. Addition to the land use rights were previously paid during FY2016 and reflected as prepayment for land use rights as at 31 March 2017.

Deferred tax assets relate mainly to the temporary deductible differences for the allowance for impairment on trade and other receivables, provision for safety expenses and unused tax losses incurred.

Inventories, trade and other receivables, other assets and cash and cash equivalents, represented approximately 17.3%, 29.6%, 5.0% and 48.1% respectively of our total current assets as at 31 March 2018.

Inventories decreased by approximately RMB 3.3 million or 9.3% to RMB 32.1 million as at 31 March 2018, as compared to RMB 35.4 million as at 31 March 2017. The decrease in inventories was mainly due to lower level of work-in-progress and raw materials as at 31 March 2018.

During the current year under review, trade and other receivables decreased by approximately RMB 6.4 million or 10.5% to RMB 54.7 million as at 31 March 2018 mainly due to the absence of the RMB 6.0 million refundable deposit that was used to purchase the office building, which was paid in FY2017.

Other assets, current comprising the Group's prepayments, decreased by approximately RMB 11.1 million or 54.5% to RMB 9.3 million as at 31 March 2018. The decrease is mainly due to the transfer of prepayment for land use rights to the Group's land use rights as mentioned above under other assets, non-current.

As at 31 March 2018, our current liabilities comprised of trade and other payables of approximately RMB 77.7 million, other current financial liabilities of approximately RMB 59.7 million and other liabilities of RMB 4.6 million. Non-current liabilities comprised of deferred tax liabilities of RMB 2.2 million and other payables, non-current of approximately RMB 18.3 million.

Trade and other payables increased by approximately RMB 10.2 million or 15.1% mainly due to the higher levels of production activities and operations during the current year under review.

As at 31 March 2018 and 31 March 2017, other current financial liabilities of RMB 59.7 million relates to the secured bank loans of Yinguang Technology.

As at 31 March 2018, other liabilities of RMB 4.6 million relate to the Group's provision for safety expenses, advances from customers and a deferred government grant. The increase was mainly due to more advances from customers and higher provision for safety expenses, partially offset by the utilisation of deferred government grant.

Deferred tax liabilities of RMB 2.2 million relate to the deferred tax liabilities for the withholding tax on the dividend payable by our subsidiary in China.

Non-current payable relates to the long-term payable at amortised cost for the purchase of office building from a related party which was approved during the Extraordinary General Meeting on 31 July 2017.

Cash flow

For the financial year ended 31 March 2018, the Group recorded net cash from operating activities of approximately RMB 27.7 million, net cash used in investing activities of approximately RMB 18.6 million and net cash used in financing activities of approximately RMB 3.4 million.

The net cash from operating activities is mainly due to the Group's improvement in working capital management. Over the past few years, the Group has faced a challenging operating environment, hence the management will continue to be financially prudent and focus on new measures to further improve our operating cash flows going forward.

The net cash used in investing activities of RMB 18.6 million is mainly due to the purchase of property, plant and equipment of RMB 20.5 million, partially offset by the proceeds from disposal of property, plant and equipment of RMB 1.7 million.

The net cash used in financing activities of approximately RMB 3.4 million is due to the payment of interest expenses.

Commentary On Current Year Prospects

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, for safety measures and precautions, the management is gradually scaling up the production capabilities of this second automated boosters production line.

As a result of the cessation of the two manual boosters production lines during FY2017, 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.

The Group has started the design of our third automated boosters production line and construction is expected to complete by the end of FY2019.

Mergers and Acquisitions

Since 2017, the PRC government has begun to rationalise the commercial explosives industry by encouraging companies within this specialized and niche market segment to merge and consolidate their business operations. Aligned with this government policy and to meet the various requirements of the MTP Exit Criteria under Rule 1314(2) of the SGX-ST's Listing Manual, the Group is proactively exploring merger and acquisition opportunities in the PRC. The Company will make the appropriate announcements as and when there is any material development with respect to any potential material acquisition.


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