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FINANCIAL HIGHLIGHTS
FY2014 Results at a Glance
 
 
 
 
Revenue
The Group reported revenue of S$92.7 million in FY2014 compared to S$83.3 million in FY2013.

Revenue from the general segment increased by S$2.7 million or 5.7% from S$47.7 million during FY2013 to S$50.4 million during FY2014. Decrease in residential unit resale transactions after a series of property market cooling measures during FY2014 resulted in general sales volume to only increase slightly in FY2014.

Revenue from the project segment increased by S$5.8 million or 16.5% from S$35.4 million during FY2013 to S$41.3 million during FY2014. The increase in project sales is largely driven by the higher volume of deliveries of tiles for use in Housing Development Board (“HDB”) residential estate development projects.
Cost of Sales
Cost of sales increased by S$7.9 million or 15.9% from S$49.6 million during FY2013 to S$57.5 million during FY2014. The gross profit margin of 37.3% for FY2014 was lower than 40.3% for FY2013. The decrease was due to the higher proportion of project sales, where margins are more competitive, undertaken during FY2014.
Other Credits
The decrease in other credits by S$22.4 million from S$24.1 million during FY2013 to S$1.7 million during FY2014. Other credits was higher in FY2013 mainly due to recognition of a one-time gain on disposal of development property at 82 Lorong 23 Geylang Singapore 388409 (Former address: 79 Aljunied Road Singapore 389822) amounting to S$23.8 million.
Employee Benefits Expenses
The decrease in employee benefits expenses by S$0.2 million or 1.3% from S$13.1 million during FY2013 to S$12.9 million during FY2014 was due to lower allowance for directors’ performance bonus made for FY2014. Higher directors’ performance bonus made for FY2013 as a result of better financial performance mainly attributable to a onetime gain on sale of development property at 82 Lorong 23 Geylang.
Depreciation Expense
Depreciation expense increased by S$1.2 million or 87.0% from S$1.4 million during FY2013 to S$2.6 million during FY2014. The increase was mainly due to commencement of depreciation for the refurbished marble processing facility at 18C Sungei Kadut Street 4 Singapore 729066 and leasehold properties at 3 Changi North Street 1 Singapore 498824 and 105 Eunos Avenue 3 Singapore 409836.
Impairment Losses
Impairment losses decreased by S$4.4 million from S$4.7 million during FY2013 to S$0.3 million during FY2014. Impairment losses were high during FY2013 mainly due to impairment allowance on investment in an associate, Hunan Cappuccino Construction Materials Co., Limited (“HCCM”), amounting to S$4.0 million.

In February 2014, the Group sold its entire shareholding in wholly-owned subsidiary, Hafary China Pte. Ltd., which holds a 45% equity stake in HCCM at a consideration of RMB5.0 million (equivalent to S$1.0 million). The investment in HCCM was fully impaired during FY2013. Gain on disposal of the subsidiary of S$1.0 million was recognised under ‘Other Credits’.
Other Charges
Other charges incurred during FY2014 comprised of losses on disposal of plant and equipment amounting to S$0.3 million and losses on derivative financial instruments amounting to S$0.3 million.
Finance Costs
Finance costs increased by S$0.6 million or 47.8% from S$1.2 million in FY2013 to S$1.8 million in FY2014. The increase was mainly attributable to interest expense on bank loans relating to acquisition and development of 105 Eunos Avenue 3 and 3 Changi North Street 1. Finance costs for the above loans were capitalised in property, plant and equipment before development of these premises were completed.
Other Expenses
Other expenses increased by S$1.4 million or 19.4% from S$7.3 million during FY2013 to S$8.7 million during FY2014. The increase was mainly attributable to increase in hire of motor vehicles and machinery, upkeep, repair and maintenance costs, casual labour, utilities and travelling expenses, inventorised assets for new premises, advertising and promotions, entertainment and other selling expenses, land rental and property tax of certain leasehold properties. The above increase was partially offset by decrease in rental expenses.
Share of Profit from Equity-Accounted Associate and Joint Venture
These relate to share of profit from associate, Viet Ceramics International Joint Stock Company (“VCI”), and from joint venture, Melmer Stoneworks Pte. Ltd. (“MSPL”).
Profit Before Income Tax
The high profit before income tax for FY2013 was contributed largely by recognition of a one-time gain on disposal of development property (net of impact on directors’ performance bonus) amounting to S$22.7 million. The Group also recognised net share of losses from associates and joint venture amounting to S$1.7 million (FY2014: Share of profit amounting to S$0.8 million) and impairment allowance on investment in HCCM amounting to S$4.0 million.

Excluding the effects of the above items and fair value gain on investment in listed shares, profit before income tax generated from recurring activities was S$8.7 million for FY2014 and S$11.0 million for FY2013. The decrease was mainly due to the lower gross profit margin derived during FY2014 and commencement of depreciation of leasehold properties after development of these premises were completed.
Income Tax Expense
The effective tax rate (excluding share of profit or loss from equity-accounted associates and joint venture company) for FY2014 was 20.4% (FY2013: 15.2%).
 
Non-Current Assets
Non-current assets increased by S$21.9 million or 39.7% from S$55.1 million as at 30 June 2013 to S$77.0 million as at 30 June 2014.

Property, plant and equipment increased by S$15.1 million or 29.0% from S$52.1 million as at 30 June 2013 to S$67.2 million as at 30 June 2014. The increase was due to acquisition and set-up costs of a warehouse premise in Foshan, China amounting to S$5.3 million, acquisition costs of leasehold property at 18 Sungei Kadut Street 2, Sungei Kadut Industrial Estate, Singapore 729236 amounting to S$9.1 million, renovation and air-conditioners for new corporate headquarters and main showroom at 105 Eunos Avenue 3 and the refurbished showroom at Balestier amounting to S$1.7 million, construction of a 2-storey ancillary warehouse at 18C Sungei Kadut Street 4 amounting to S$1.4 million, motor vehicles and forklifts amounting to S$0.3 million, plant and equipment amounting to S$0.3 million. The above increase was partially offset by depreciation expense amounting to S$2.6 million and plant and equipment written off amounting to S$0.4 million.

The increase in investments in associates and joint venture was due to recognition of share of profi t from VCI and MSPL during FY2014.

Other non-current assets as at 30 June 2014 pertains to land use right in Foshan, China, where warehouse premise is located, acquired in April 2014 and investment in listed shares of SMJ International Holdings Ltd.
Current Assets
Current assets decreased by S$3.5 million or 4.4% from S$80.8 million as at 30 June 2013 to S$77.3 million as at 30 June 2014.

The decrease was mainly attributable to decrease in trade and other receivables by S$3.1 million, other assets by S$1.8 million, cash and cash equivalents by S$4.7 million and derivative financial instruments by S$0.2 million. The above decrease was partially offset by increase in inventories by S$6.3 million.

The decrease in trade and other receivables was mainly due to decrease in receivables from purchasers of development property at 82 Lorong 23 Geylang (30 June 2013: S$6.5 million). As at 30 June 2014, the amount was fully received. The above decrease was partially offset by S$1.4 million increase in trade receivables and S$0.7 million increase in other receivables. The increase in trade receivables was in line with the revenue growth in FY2014. Trade receivables turnover of 93 days as at 30 June 2014 was comparable to 90 days as at 30 June 2013. In March 2014, the Group grant its associate, VCI, a loan amounting to US$1.0 million (equivalent to S$1.3 million) with interest of 4.5% per annum (FY2013: NIL).

Other assets decreased by S$1.8 million from S$6.0 million as at 30 June 2013 to S$4.3 million as at 30 June 2014. This was mainly due to decrease in advance payment to suppliers by S$1.2 million, decrease in non- refundable deposits by S$0.6 million. Non-refundable deposits as at 30 June 2013 comprised deposits amounting to S$0.6 million paid for renovation of corporate headquarters and main showroom at 105 Eunos Avenue 3. These deposits were reversed to ‘Property, Plant and Equipment’ after the renovation services were completed as at 30 June 2014.

The increase of inventories was in response to the increase in sales volume during FY2014. Inventory turnover of 251 days as at 30 June 2014 is comparable to 248 days as at 30 June 2013.
Shareholders’ Equity
Shareholders’ equity, comprising share capital and retained earnings, decreased by S$7.0 million. The decrease was mainly attributable to dividend payments to shareholders amounting to S$15.0 million which was partially offset by net profit attributable to shareholders amounting to S$8.0 million.
Non-Current Liabilities
Non-current liabilities increased by S$19.8 million or 112.2% from S$17.6 million as at 30 June 2013 to S$37.4 million as at 30 June 2014 mainly due to net drawdowns of bank loans during FY2014.
Current Liabilities
Current liabilities increased by S$5.0 million or 7.0% from S$71.6 million as at 30 June 2013 to S$76.6 million as at 30 June 2014.

The increase was mainly attributable to increase in other financial liabilities by S$7.5 million, other liabilities by S$0.2 million, income tax payable by S$0.4 million and derivative financial instruments by S$0.1 million. The above increase was partially offset by decrease in trade and other payables by S$3.2 million.

The decrease in trade and other payables was mainly due to the payment of interim dividend (declared in May 2013) amounting to S$6.4 million in July 2013 and decrease in retention sums pertaining to development of 3 Changi North Street 1 and 105 Eunos Avenue 3 by S$0.8 million. These decreases were partially offset by increase in trade and other payables (including accrued liabilities) by S$2.5 million, advances from substantial shareholders of the Company to subsidiary, World Furnishing Hub Pte. Ltd., amounting to S$1.3 million to finance the acquisition and development of 18 Sungei Kadut Street 2, rental deposits received from tenants of excess space in 105 Eunos Avenue 3 amounting to S$0.2 million (30 June 2013: NIL).

Total amount of trade payables and trust receipts and bills payable to banks was S$31.4 million (30 June 2013: S$36.2 million). The turnover of the aforesaid items (based on cost of sales) of 215 days as at 30 June 2014 is comparable to 228 days as at 30 June 2013.

Other financial liabilities (current) increased by S$7.5 million due to net drawdowns of bank loans during FY2014.