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Financials

Second Quarter Results Financial Statement And Related Announcement

Financials Archive

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Financial Statements for the Second Quarter ended 30 September 2018 ("2Q2019")

Income Statement

Financial Statement

Statement of Comprehensive Income

Comprehensive Income

Balance Sheet

Balance Sheet

Review Of Performance

Revenue

Revenue from continuing operations for the 3-month period ended 30 September 2018 ("2Q2019") decreased by approximately RMB 8.2 million or 16.7%, from RMB 49.0 million of the 3-month period ended 30 September 2017 ("2Q2018") to RMB 40.9 million in 2Q2019. The lower revenue was mainly due to lower sales registered across the Group's product categories.

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; and (c) industrial detonators such as non-electric detonators and piston non-electric detonators. The breakdown and comparison of our revenue by the above product types and geographical segments between 2Q2019 and 2Q2018 and between the 6-month period ended 30 September 2018 ("6M2019") and the 6-month period ended 30 September 2017 ("6M2018") are as follows:

Financials

Notes:

  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.
  1. Sales within PRC

    During 2Q2019, sales within PRC decreased by approximately RMB 6.4 million or 21.0% as compared to 2Q2018. For 6M2019, sales within PRC decreased by approximately RMB 17.3 million or 24.7% as compared to 6M2018. The decline in sales within PRC was mainly due to The Shanghai Cooperation Organisation meeting in Qingdao during June 2018, where commercial explosive manufacturers in the Shandong province were given directives by the authorities to cease production temporary and as a result, our subsidiary had to temporarily cease production for about 10 days during June 2018 given the nature of our products.

  2. Sales through export distributors

    During 2Q2019 and 6M2019, sales through export distributors increased by RMB 0.7 million or 15.3% and RMB 11.4 million or 265.2% respectively as compared to 2Q2018 and 6M2018. The increase was mainly due to more shipments to overseas customers through export distributor during the current period under review.

  3. c) Sales to Australia

    During 2Q2019 and 6M2019, sales to Australia decreased by approximately RMB 2.5 million or 17.1% and RMB 5.6 million or 24.6% respectively. The lower sales to Australia was mainly due to the timing of scheduled shipments of boosters to Australia customers.

  4. Sales to other countries

    During 6M2019, sales to other countries registered revenue of approximately RMB 311,000. There was no sale to other countries during 6M2018.

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

Due to higher market competition and lower sales of industrial fuse and initiating explosive devices during 2Q2019 and 6M2019, the Group's gross profit margins declined by approximately 1.7 percentage points to 21.8% and 5.1 percentage points to 17.3% respectively. The dip in gross profit margins was also attributed to the temporary cease production directive because of The Shanghai Cooperation Organisation meeting in Qingdao during June 2018 as mentioned above.

Interest income / (Finance costs)

For 2Q2019 and 6M2019, interest income remained relatively stable at RMB 73,000 and RMB 149,000, respectively.

During 2Q2019 and 6M2019, finance costs increased by approximately RMB 299,000 and RMB 706,000 mainly due to imputed interest expense on financial liabilities measured at amortised cost and higher bank lending interest rates in the general market during the current period under review.

Other gains / (Other losses)

For 2Q2019, other gains relate to foreign exchange adjustment gain of approximately RMB 558,000, government grants of RMB 105,000 and a reversal of allowance for impairment on trade receivables of RMB 516,000. For 2Q2018, other gains relate to government grants of RMB 104,000 and a reversal of allowance for impairment on trade receivables of RMB 18,000.

For 6M2019, other gains relate to foreign exchange adjustment gain of approximately RMB 753,000, government grants of approximately RMB 211,000 and reversal of allowance for impairment on trade receivables of RMB 611,000. For 6M2018, other gains relate to gain on disposal of property, plant and equipment of approximately RMB 320,000, government grants of RMB 218,000 and reversal of allowance for impairment on trade receivables of RMB 175,000. 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 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.

For 2Q2019 and 6M2019, other losses relate to foreign exchange adjustment loss.

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

Operating expenses

Corresponding to lower revenue registered in 2Q2019 and 6M2019, the Group's distribution costs also decreased by approximately 4.8% and 9.5%, respectively.

For 2Q2019 and 6M2019, administrative expenses decreased by approximately 1.1% and 9.1%, respectively as majority of the administrative expenses are fixed components.

For 2Q2019 and 6M2019, amortisation expenses remained relatively stable at RMB 686,000 and RMB 1.4 million, respectively.

For 2Q2019 and 6M2019, depreciation expenses increased by approximately RMB 783,000 or 20.3% and RMB 293,000 or 3.2% respectively. The increase is mainly due to the additional depreciation charged on the office property which was acquired during the last financial year as approved during the Extraordinary General Meeting on 31 July 2017, partially offset by certain property, plant and equipment being fully depreciated during the current period under review.

Income tax expenses

The income tax expenses for 2Q2019 and 6M2019 were mainly related to the provision of withholding tax for undistributed profits of the subsidiary to the Group as well as the income tax expenses on the taxable profits of the subsidiary.

Statement of Financial Position

Property, plant and equipment decreased by approximately RMB 3.6 million, mainly due to the depreciation charged for the current period under review of approximately RMB 9.3 million which was partially offset by the acquisition of property, plant and equipment of approximately RMB 5.7 million.

Other assets, non-current relate to the Group's land use rights, which decreased by approximately RMB 1.4 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 14.7%, 23.1%, 9.0% and 53.2% respectively of our total current assets as at 30 September 2018.

Inventories decreased by approximately RMB 4.9 million or 15.3% to RMB 27.2 million as at 30 September 2018, as compared to RMB 32.1 million as at 31 March 2018. The decrease in inventories is mainly to lower finished goods as at 30 September 2018.

During the current quarter under review, trade and other receivables decreased by approximately RMB 12.2 million or 22.3% to RMB 42.5 million as at 30 September 2018.

Other assets, current comprising the Group's prepayments, increased by approximately RMB 7.4 million or 79.6% to RMB 16.6 million as at 30 September 2018 mainly due to higher prepayments for raw materials as at 30 September 2018.

Non-current liabilities relates to the long-term payable at amortised cost for the purchase of office property from a related party which was approved during the Extraordinary General Meeting on 31 July 2017 of approximately RMB 18.9 million and deferred tax liabilities of RMB 2.3 million for the withholding tax on the dividend payable by our subsidiary in China.

As at 30 September 2018, our current liabilities comprised of withholding tax payable of RMB 250,000, trade and other payables of approximately RMB 77.4 million, other current financial liabilities of approximately RMB 59.7 million and other liabilities of RMB 7.5 million.

Withholding tax payable of RMB 250,000 relates to the withholding tax payable to China tax authority for the declaration of dividend by our China subsidiary to Singapore holding company.

Trade and other payables, current decreased marginally by approximately RMB 261,000 or 0.3% during 6M2019.

As at 30 September 2018, other current financial liabilities of RMB 59.7 million relates to the secured bank loans of Yinguang Technology.

Other liabilities of RMB 7.5 million relate to the Group's provision for safety expenses, advances from customers and a deferred government grant. The increase of approximately RMB 2.9 million is mainly due to increase in advances from customers of approximately RMB 3.0 million.

Cash flow

For 2Q2019, the Group has net cash from operating activities of approximately RMB 15.3 million and net cash used in investing activities and financing activities of approximately RMB 2.4 million and RMB 897,000 respectively.

For 6M2018, the Group has net cash from operating activities of approximately RMB 16.3 million and net cash used in investing activities and financing activities of approximately RMB 5.6 million RMB 1.7 million respectively.

The net cash from operating activities for 2Q2019 and 6M2019 was mainly due to the lower trade and other receivables and decreased in inventories during the period under review.

The net cash used in investing activities of approximately RMB 2.4 million and RMB 5.6 million during 2Q2019 and 6M2019, respectively were mainly due to the acquisition of property, plant and equipment.

The net cash used in financing activities during 2Q2019 and 6M2019 was 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 will be gradually scaling up the production capabilities of this second automated boosters production line.

The Group has also started the design of our third automated boosters production line and barring any unforeseen circumstances, 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.

On 18 June 2018, the Company announced the proposed acquisition of Shandong Laizhou Ping'an Commercial Explosives Co., Ltd. ("Laizhou Ping'an"). For more information on the proposed acquisition of Laizhou Ping'an, please refer to the announcement on 18 June 2018.

The Company will continue to make the appropriate announcements as and when there is any material development with respect to any potential material acquisition.


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