Financials
UNAUDITED SECOND HALF FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE FINANCIAL PERIOD/YEAR ENDED 31 MARCH 2021
Financials Archive
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UNAUDITED SECOND HALF FINANCIAL STATEMENT AND DIVIDEND ANNOUNCEMENT FOR THE FINANCIAL PERIOD/YEAR ENDED 31 MARCH 2021
Income Statement
Comprehensive Income
NM: Not Meaningful
Balance Sheet
Review of Income Statement of the Group
Second-Half FY2021 ("2H FY2021") vs Second-Half FY2020 ("2H FY2020")
Revenue
Group revenue increased by 63.3% to RMB626.6 million in 2H FY2021 as compared to RMB383.7 million in 2H FY2020. Revenue increases in 2H FY2021 as business activity resume normalcy compared to 2H FY2020 when most of China's factories were in pandemic lockdown mode during the first quarter of 2020. Nonetheless, with COVID- 19 under control in the PRC, certain back-log deliveries were fulfilled during the period under review. The Group's major markets, i.e. Singapore and Hong Kong has also gradually resumed activities since September 2020.
As a result, revenue from sales of tower cranes and components increased by RMB230.9 million from RMB311.1 million in 2H FY2020 to RMB543.0 million in 2H FY2021. Rental and service income has also increased by RMB12.0 million during the period under review.
Due to the resurgence of economy in the PRC, revenue in the PRC has increased by RMB197.8 million in 2H FY2021 as compared to RMB456.2 in 2H FY2020. Revenue in Asia (outside of the PRC) and the USA & Europe increased by RMB11.7 million and RMB39.0 million respectively. The increase was partly offset by the decrease in revenue from the Middle East and others amounting to RMB5.6 million.
Overall, sales in the PRC and Asia (outside the PRC) contributed to 53.5% and 35.0% respectively of the Group revenue in 2H FY2021.
Gross profit and gross profit margin
In line with higher revenue, gross profit increased by 85.8% to RMB151.7 million in 2H FY2021 from RMB81.6 million in 2H FY2020.
Average gross profit margin increased to 24.2% in 2H FY2021 from 21.3% in 2H FY2020.
The lower gross profit margin in 2H FY2020 was arising from the consolidation of Beijing Yongmao's plant to Fushun. The Group recorded a one off obsolescence stocks adjustment and an adjustment for an under charged of cost of goods sold in the first half of the financial year ended 31 March 2020. The lower gross profit in 2H FY2020 was also attributable to high production overhead cost absorbed during the first quarters of year 2020 with government containment measures implemented in the PRC amid the rapid spread of the COVID-19 pandemic.
Other income
Other income decreased by RMB0.6 million to RMB12.1 million in 2H FY2021 as compared to RMB12.7 million in 2H 2020 was mainly due to lower government subsidies and rebates/grants of RMB2.1 million. The government subsidies and rebates in 2H FY2021 were received from various authorities, as part of the financial assistance to help businesses tide through the pandemic. Whilst the government grant received in 2H FY2020 mainly pertains to grant received for the relocation of Beijing Yongmao's factory.
Other income also includes rental income of RMB1.3 million, compensation income of RMB0.9 million and interest income of RMB0.8 million reported in 2H FY2021. Rental income pertains to sub-rental income from Hong Kong yard while interest income mainly derived from deposit placed to secure trade facility.
Operating expenses
Total operating expenses increased 39.9% to RMB119.7 million in 2H FY2021 as compared to RMB85.6 million in 2H FY2020.
Distribution costs increased 38.8% to RMB48.2 million in 2H FY2021 as compared to RMB34.7 million in 2H FY2020 mainly due to higher freight and transportation charges in line with higher sales. Other than higher sales, land transportation and sea freight had also increased significantly during the period under review due to supply shortage against high demand.
Administrative expenses increased 3.3% to RMB38.9 million in 2H FY2021 as compared to RMB37.7 million in 2H FY2020 mainly due to higher legal fee provision, offset by lower depreciation during the period under review.
Other operating expenses increased significantly to RMB25.2 million in 2H FY2021 as compared to RMB5.1 million in 2H FY2020. The increase in mainly due to impairment provision for expected credit loss ("ECL") of RMB18.7 million in 2H FY2021 as compared to RMB2.1 million in 2H FY2020. Following the Covid19 pandemic and in view of the Group's higher receivables and longer turnover days reported as at 31 March 2021 as compared to 31 March 2020, higher provision of ECL was provided based on a general credit risk assessment. Besides, the Group also reported an exchange loss of RMB5.8 million in 2H FY2021 as compared to RMB0.5 in 2H FY2020.
The exchange loss for 2H FY2021 arose mainly from:
- the weakening of USD against RMB due to net USD assets in the PRC subsidiary's book;
- the weakening of Singapore Dollars ("SGD") and Hong Kong Dollars ("HKD") against Chinese Yuan ("RMB")
due to net RMB liabilities in the Singapore subsidiary's book and Hong Kong subsidiary's book; and
- the weakening of HKD against RMB and SGD due to net HKD assets in the Company's book and the Singapore subsidiary's book
Finance costs decreased 8.6% to RMB7.4 million in 2H FY2021 as compared to RMB8.1 million in 2H FY2020 due mainly to lower letter of credit discounting charges in 2H FY2021 and lower effective interest rate.
Taxation
Income tax expense increased to RMB9.3 million in 2H FY2021 as compared to RMB4.2 million in 2H FY2020 is in line with higher profits for the financial period under review.
Profit before taxation and Net profit attributable to equity holders of the Company
The Group recorded a profit before taxation of RMB44.0 million in 2H FY2021 as compared to RMB8.7 million in 2H FY2020 mainly due to higher gross profit from higher revenue, partly offset by higher operating expenses.
Net profit attributable to equity holders of the Company increased to RMB30.0 million in 2H FY2021 from RMB8.4 million in 2H FY2020. This was mainly due to higher profit before taxation, offset by tax expense.
Full Year FY2021 ("FY2021") vs Full Year FY2020 ("FY2020")
Revenue
The COVID-19 outbreak halted economic activities in the PRC and disrupted global supply chains. Amidst the COVID-19 pandemic, strict government containment measures were implemented in the PRC in the first quarter of 2020 to contain the spread of COVID-19 including cities lockdowns, travel restrictions, quarantine measures. Similar government containment measures and restrictions of movement were also implemented in many countries globally subsequently. The effect of these government containment measures meant that the business operations of many of our local and overseas customers and freight forwarders were also inadvertently disrupted, resulting in delays and/or postponement of deliveries of our products in the 1H of FY2021. With the COVID-19 under control in the PRC and Singapore, the Group's revenue saw significant increase in 2H FY2021 with certain back-log orders being fulfilled.
With the strong delivery in 2H FY2021, the Group's revenue increased by 6.8% y-o-y to RMB1,028.0 million in FY2021 as compared to RMB823.0 million in FY2020. Revenue from sales of tower cranes and components increased by RMB47.8 million from RMB702.4 million in FY2020 to RMB870.8 million in FY2021. Rental and service income has also increased by RMB17.8 million during the year under review.
Aided by strict virus containment measures and emergency relief for businesses, the economy in PRC had recovered steadily from the steep slump in early 2020. In this regard, revenue in the PRC has increased by RMB145.7 million to RMB 601.9 million in FY2021 as compared to RMB456.2 million in FY2020. Following a mega size tower crane was sold to Russia, revenue in the USA & Europe has also increased by RMB29.8 million in FY2021 as compared to FY2020. Other sales segments reported significantly lower sale, with the biggest dropped in Asia (outside of PRC) by RMB91.0 million and Middles East & Others decreased by RMB18.9 million.
With the improvement in the PRC sales it formed the bulk of the Group's revenue at 58.5% while Asia (outside of PRC) contributed 30.8% of the revenue in FY2021.
Gross profit and gross profit margin
In line with increase in revenue, gross profit increased by 2.5% to RMB255.0 million in FY2021 from RMB248.8 million in FY2020.
However, average gross profit margin decreased to 24.8% in FY2021 from 25.9% in FY2020.
The decrease can be explained by the lower average selling price resulting from the price sensitivity and slack market condition. Furthermore, it was also attributable to higher production overhead cost absorbed due to lower production activities during the 1H of FY2021. The margin was further affected by the increase in steel price during 2H FY2021.
Other income
Other income increased by RMB1.9 million to RMB18.4 million in FY2021 as compared to RMB16.5 million in FY2020 was due to higher government subsidies & rebates/grants and higher compensation income. The government subsidies and rebates in FY2021 were received from various authorities, as part of the financial assistance to help businesses tide through the pandemic. Whilst the government grant received in FY2020 mainly pertains to grant received for the relocation of Beijing Yongmao's factory.
Rental income pertains to sub-rental income from Hong Kong yard.
Other income also includes interest income of RMB1.6 million reported in FY2021 which is mainly derived from deposit placed to secure trade facility.
Operating expenses
Total operating expenses slightly decreased RMB1.4 million from RMB197.1 million in FY2020 to RMB195.7 million in FY2021.
Distribution costs increased 0.4% to RMB80.0 million in FY2021 as compared to RMB79.7 million in FY2020 mainly due to higher freight and transportation charges in line with higher sales. Other than higher sales, land transportation and sea freight had also increased significantly during the year under review due to supply shortage against high demand. The increased was partly offset by lower sales services expenses due to lower activities and lower employee benefit costs. Lower employee benefit costs resulted from waiver of employees' contribution fund by the PRC authorities as part of the financial aid to help companies tide through the pandemic. The decrease is also due to lower bonus and commission.
Administrative expenses decreased 15.2% to RMB72.0 million in FY2021 as compared to RMB84.8 million in FY2020 mainly due to lower employee benefit costs, lower depreciation, lower transportation cost and lower entertainment cost. Lower employee benefit costs resulted from lower bonus provision and waiver of employees' contribution fund by the PRC authorities as part of the financial aid to help companies tide through the pandemic. Transportation and entertainment expenses were also lower as activities were reduced during the year under review.
Other operating expenses increased by RMB13.3 million to RMB28.9 million in FY2021 as compared to RMB15.7 million in FY2020. The increase is mainly due to impairment provision for ECL of RMB18.7 million in FY2021 as compared to RMB2.1 million in FY2020. Following the Covid19 pandemic and in view of the Group's higher receivables and longer turnover days reported as at 31 March 2021 as compared to 31 March 2020, higher provision of ECL was provided based on a general credit risk assessment. Besides, the Group also reported an exchange loss of RMB8.2 million in FY2021 as compared to an exchange gain of RMB5.0 in FY2020. The operating expenses in FY2020 is mainly consists of employee compensation of RMB11.4 million for the relocation of Beijing's manufacturing plant and property, transportation expenses of RMB4.2 million incurred for the relocation and plant and equipment written off of RMB0.8 million.
The exchange loss for FY2021 arose mainly from:
- the weakening of USD against RMB due to net USD assets in the PRC subsidiary's book;
- the weakening of Singapore Dollars ("SGD") and Hong Kong Dollars ("HKD") against Chinese Yuan ("RMB")
due to net RMB liabilities in the Singapore subsidiary's book and Hong Kong subsidiary's book; and
- the weakening of HKD against RMB and SGD due to net HKD assets in the Company's book and the Singapore subsidiary's book
Finance costs decreased 12.6% to RMB14.8 million in FY2021 as compared to RMB16.9 million in FY2020 due mainly to lower letter of credit discounting charges in FY2021 and lower effective interest rate.
Taxation
Income tax expense decreased to RMB16.0 million in FY2021 as compared to RMB19.3 million in FY2020 despite profit before taxation for FY2021 was higher. This is mainly due to losses from Beijing Yongmao in FY2020.
Profit before taxation and Net profit attributable to equity holders of the Company
The Group recorded a profit before taxation of RMB77.7 million in FY2021 as compared to RMB68.3 million in FY2020 mainly due to higher gross profit from higher revenue, partly offset by higher operating expenses.
Net profit attributable to equity holders of the Company decreased to RMB54.9 million in FY2021 from RMB59.7 million in FY2020.
Non-current Assets
Non-current assets decreased by RMB26.5 million to RMB547.0 million as at 31 March 2021 mainly due to lower property, plant and equipment and lower financial assets, partly offset by higher deferred tax assets. The decrease of RMB20.1 million in the Group's net carrying amount of property, plant and equipment was mainly attributable to the net depreciation charges and disposals, partially offset by increase in rental fleet.
Financial assets, at FVOCI decreased with fair value loss of RMB11.0 million as at 31 March 2021.
Deferred tax assets arose mainly from provisions and elimination of unrealised profits in intragroup sales.
Current Assets
Current assets increased by RMB191.5 million to RMB1,255.2 million as at 31 March 2021 mainly due to higher inventories and higher trade and other receivables, partly offset by lower amount owing by related parties and cash and cash equivalents.
Inventories increased by RMB108.2 million to RMB500.4 million as at 31 March 2021 as compared to RMB392.2 million as at 31 March 2020. This higher inventory mainly due to the postponement in deliveries of our products affected by the pandemic, especially the export sales as well as delivery for 1H FY2022. Delivery to Singapore, one of our major market outside of the PRC, has resumed in September 2020. However, due to the shortage in supply for sea transportation, certain shipment to Asia (other than China) and the Europe were affected.
Trade and other receivables increased by RMB192.7 million to RMB624.9 million as at 31 March 2021. The increase is due to higher sales in 2H FY2021 and slower repayment from customers.
Amount owing by related parties decreased by RMB53.0 million to RMB15.5 million as at 31 March 2021 due to higher repayments over sales from related parties.
Non-current Liabilities
Non-current liabilities decreased by RMB1.6 million to RMB54.7 million as at 31 March 2021 as compared to RMB56.4 million as at 31 March 2020 mainly due repayments of borrowings and lower trade and other payables; partly offset by higher deferred tax liabilities.
Deferred tax provision was mainly made for withholding tax levied on dividends of undistributed earnings of PRC subsidiaries and accelerated tax depreciation on inter-company sales of tower cranes used as rental fleet.
Current Liabilities
Current liabilities increased by RMB135.7 million to RMB887.8 million as at 31 March 2021 as compared to RMB752.1 million as at 31 March 2020 mainly due to higher trade and other payables, partly offset by lower amount owing to shareholders of subsidiaries and lower bank borrowings.
During the year under review, the Group had acquired of all the 34% of the issued and paid-up share capital of Beijing Yongmao from Beijing Construction Group Co., Ltd. Amount owing to shareholders of subsidiaries presented in 31 March 2020, is included under trade and other payable as at 31 March 2021.
Trade and other payables increased by RMB177.8 million mainly due to higher purchases over payment, higher advances from customers of RMB78.3 million and a reclassification of amount owing to shareholder as explained above.
Amount owing to shareholder of subsidiaries pertains to an interest-bearing loan from shareholders of Yongmao Cambodia. The loan is for working capital purposes.
Total Equity
As at 31 March 2021, the Group's total equity amounted to RMB859.7 million. The increase was mainly due to total comprehensive income of RMB38.1 million for FY2021 offset by dividend paid and changes in equity from the acquisition of non-controlling interest.
Review of Cash Flow Statement
2H FY2021 vs 2H FY2020
The Group reported a net decrease in cash and cash equivalents amounting to RMB28.7 million in 2H FY2021 mainly due to:
- Net cash used in operating activities of RMB45.4 million resulted from increase in operating receivables,
increase in inventories, interest and taxes paid, partly offset by operating profit before working capital
changes and increase in operating payables.
- Net cash used in investing activities of RMB8.9 million from acquisition of property, plant and equipment
and cash outflow on acquisition of subsidiary, partly offset by interested received and proceeds from
disposal of property, plant and equipment; and
- Net cash generated from financing activities of RMB25.6 million mainly from net proceed from bank borrowings and finance lease creditors and advances from a Director, partly offset by higher restricted bank balances, repayment to related parties and dividend paid.
Full Year FY2021 vs Full Year FY2020
The Group reported a net decrease in cash and cash equivalents amounting to RMB39.1 million in Full Year FY2021 mainly due to:
- Net cash used in operating activities of RMB31.9 million resulted from increase in operating receivables,
increase in inventories, interest and taxes paid, partly offset by operating profit before working capital
changes and increase in operating payables.
- Net cash used in investing activities of RMB11.9 million from acquisition of property, plant and equipment
and cash outflow on acquisition of subsidiary, partly offset by interested received and proceeds from
disposal of property, plant and equipment; and
- Net cash generated from financing activities of RMB4.7 million mainly from advances from a Director, partly offset by net repayment of bank borrowings and finance lease creditors and higher restricted bank balances and dividend paid.
Commentary
China's economy grew a record 18.3% in the first quarter of 2021 compared to the same quarter last year. However, the strong numbers are distorted because they are compared to 2020, when most of China's factories were in pandemic lockdown. Instead of comparing to 2020, Industrial output was up 16.9% compared with the first two months of 2019, highlighting the stronger output. A rebound in foreign demand has helped push export growth higher for China. The Chinese government has set a modest annual economic growth target for 2021, at above 6%, even though analysts are tipping growth of around 8%.
Outside China, Covid-19 epidemic is still spreading globally and the international landscape is complicated with high uncertainties and instabilities.
Meanwhile, in the Group's major markets, i.e. Singapore and Hong Kong, have kept the COVID-19 pandemic largely under controls. Delivery of goods has gradually resumed in September 2020. With a sudden increased in cases in recent weeks, this may dampen recovery if more stringent lockdown measures are implemented.
The Group remains vigilant and committed in exercising cost discipline and will take necessary remedial actions, where possible.
With reference to the announcement made on SGX-ST on 10th February 2021, the Company wishes to update that the Company and its subsidiary, Yongmao Machinery Pte. Ltd. ("Yongmao Machinery") had submitted the Notice of Intention to Defend on 18 March 2021 in response to the receipt of writ of summon. As of today, the Company and its subsidiary, Yongmao Machinery are awaiting the plaintiff's reply to the defence.
The Company will provide further updates as and when there are any material developments.