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Revenue for the 3-month period ended 30 June 2019 (“1Q2020”) decreased by approximately RMB 15.7 million or 34.9%, to RMB 29.3 million from RMB 45.1 million for the 3-month period ended 30 June 2018 (“1Q2019”) , as lower sales were registered in all of our product segments. In particular, sales of explosive devices and industrial fuse and initiating explosive devices decreased by 44.1% and 42.2% respectively.
Sales of explosive devices decreased mainly due to the temporary shortage of explosives raw materials which affected our production schedule and lowering our production of explosive devices. Sales of industrial fuse and initiating explosive devices decreased as some of our customers' mining operations were affected by additional safety measures implemented by the local authorities since the second quarter of FY2018, as disclosed in our earlier announcements.
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 1Q2020 and 1Q2019 are as follows:
Sales within PRC decreased by approximately RMB 5.7 million or 19.8% to RMB 23.1 million in 1Q2020, as compared to RMB 28.8 million in the previous corresponding period. The dip in PRC sales was mainly due to lower sales of industrial fuse and initiating explosive devices as mentioned earlier.
Sales to Australia increased by approximately RMB 1.1 million of 20.2% from RMB 5.2 million during 1Q2019 to RMB 6.3 million during 1Q2020. The higher sales to Australia was mainly due to shipment to a new customer in Australia.
There were no export sales through export distributor and other countries as there was no scheduled shipment to these overseas customers during the current period under review.
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”).
During 1Q2020, the Group's gross profit margin improved by approximately 14.2 percentage points, from 13.2% in 1Q2019 to 27.4% in 1Q2020. With the impairment allowance made on the property, plant and equipment during the last financial year, depreciation expenses that were charged to costs of sales decreased significantly during 1Q2020, resulting in the improvement of the Group's gross profit margin.
Interest income remained relatively unchanged at RMB 70,000 in 1Q2020.
Finance costs increased by approximately RMB 184,000 mainly due to slightly higher imputed interest expense on financial liabilities measured at amortised cost of approximately RMB 324,000 and higher bank lending interest rates in the general market during 1Q2020 as compared to 1Q2019.
For 1Q2020, other gains include the reversal of allowance for impairment on trade receivables of RMB 275,000, foreign exchange adjustment gain of approximately RMB 27,000 and government grants of approximately RMB 28,000. For 1Q2019, other gains include the reversal of allowance for impairment on trade receivables of RMB 145,000, foreign exchange adjustment gain of approximately RMB 195,000 and government grants of approximately RMB 106,000. Government grants relate to the miscellaneous grants from governments on an ad hoc basis. Foreign exchange adjustment gain or loss arises from foreign exchange rate changes between Renminbi (RMB), US Dollars and Singapore Dollars.
In line with lower revenue registered, the Group's distribution expenses decreased by 29.1% from RMB 4.4 million during 1Q2019 to RMB 3.1 million during 1Q2020. Administrative expenses increased by approximately RMB 0.6 million or 9.7% mainly due to the professional fees incurred for the mandatory conditional cash offer as announced by the Company on 18 March 2019.
Amortisation expense decreased by approximately RMB 297,000 or 42.6% mainly due to disposal of land use rights during the last financial year.
Depreciation expenses decreased by approximately RMB 3.4 million or 71.8% mainly due to the impairment allowance made on the property, plant and equipment during the last financial year.
The income tax expenses was mainly due to the provision of withholding tax for the Group.
Property, plant and equipment increased by approximately RMB 1.6 million, mainly due to purchases of property, plant and equipment during the current period under review, partially offset by the depreciation charged for the current period under review.
Other assets, non-current relate to the Group's land use rights, which decreased by approximately RMB 0.4 million 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.
Assets held for sales, inventories, trade and other receivables, other assets and cash and cash equivalents, represented approximately 2.0%, 16.5%, 16.6%, 9.2% and 55.7% respectively of our total current assets as at 30 June 2019.
Assets held for sales of approximately RMB 3.1 million relate to certain land and building that were not being in use but held for sale before December 2019.
Inventories increased by approximately RMB 2.4 million or 10.4% to RMB 25.3 million as at 30 June 2019, as compared to RMB 22.9 million as at 31 March 2019. The increase in inventories was due to more finished goods as at 30 June 2019.
During the current quarter under review, trade and other receivables decreased by approximately RMB 5.6 million or 18.0% to RMB 25.4 million as at 30 June 2019 due mainly to recovery of debts from customers.
Other assets, current comprising the Group's prepayments, increased slightly by approximately RMB 1.0 million or 7.7% to RMB 14.1 million as at 30 June 2019.
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 19.8 million and deferred tax liabilities of RMB 2.4 million for the withholding tax on the dividend payable by our subsidiary in China.
As at 30 June 2019, our current liabilities comprised of trade and other payables of approximately RMB 57.3 million, other current financial liabilities of approximately RMB 58.0 million and other liabilities of RMB 8.0 million.
Trade and other payables increased marginally by approximately RMB 0.8 million or 1.4% during 1Q2020.
As at 30 June 2019, other current financial liabilities of RMB 58.0 million relates to the secured bank loans of Yinguang Technology.
Other liabilities of approximately RMB 8.0 million relate to the Group's provision for safety expenses and advances from customers. The increase of approximately RMB 3.6 million or 82.2% from approximately RMB 4.4 million as at 31 March 2019 to approximately RMB 8.0 million as at 30 June 2019 is mainly due to more advances from customers for the purchase of our commercial explosives products.
For the current quarter ended 30 June 2019, the Group's net cash from operating activities amounted to approximately RMB 6.1 million, while net cash used in investing activities and financing activities, continuing operations amounted to approximately RMB 2.9 million and RMB 951,000, respectively.
The net cash from operating activities of approximately RMB 6.1 million was mainly due to lower trade and other receivables and increase in other liabilities.
The net cash used in investing activities of approximately RMB 2.9 million was mainly due to the purchase of property, plant and equipment.
The net cash used in financing activities of approximately RMB 951,000 was due 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, for safety measures and precautions, the management is gradually scaling up the production capabilities of this second automated boosters production line. As our automated boosters production line is developed based on our own in-house technology with no other comparable, we are constantly monitoring and calibrating the technology to improve safety and production efficiency, hence it is difficult for the Group to estimate the duration required to fully scale-up the second production line given the sensitive product-nature of commercial explosives.
As mentioned in our FY2019 results announcement, the Group's third automated boosters production line is expected to be completed during the third quarter of our financial year, i.e. by 1 October 2019.
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”). On 31 January 2019, the Company released an announcement to update the status of the acquisition. For more information on the proposed acquisition of Laizhou Ping'an, please refer to the announcement on 18 June 2018 and 31 January 2019.
The Company will continue to make the appropriate announcements as and when there is any material development with respect to any potential material acquisition.