Investor Relations

Financials

Unaudited Financial Statements And Dividend Announcement For The First Quarter Ended 31 March 2019

Financials Archive

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For the 3 months ended 31 March 2019 ("1Q2019") and 3 months ended 31 March 2018 ("1Q2018")

Consolidated Statement of Comprehensive Income

Comprehensive Income Statement

Balance Sheet

Balance Sheet

Review of Performance

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Review of Group's performance for the 3 months ended 31 March 2019 ("1Q2019") as compared to the 3 months ended 31 March 2018 ("1Q2018")

Revenue

The Group's revenue decreased by approximately RM34.3 million, or 40.3%. This was mainly attributable to:

  1. the decrease in the number of container loaded with products ("40-ft containers") sold from 1,681 40-ft containers in 1Q2018 to 1,115 40-ft containers in 1Q2019 as a result of lower demand from the Group’s customers mainly from the United States of America ("US"); and

  2. the decrease in the average selling price per 40-ft container from RM50,000 in 1Q2018 to RM46,000 in 1Q2019 was mainly due to:
    1. discounts being offered on some of the products (mainly veneer laminated) to our customers due to the drop in demand for such products in the market; and

    2. different product mix whereby the Group sells more paper laminated products which have lower selling prices as compared to veneer laminated and/or spray-painted products.

Cost of sales and gross profits

The cost of sales decreased by approximately RM26.3 million, or 36.3% mainly due to the decrease in raw materials purchased, labour costs and subcontractors’ costs. The decrease in these costs was mainly due to the lower level of production during 1Q2019 as a result of a drop in demand from the Group’s customers.

The gross profit decreased by approximately RM8.0 million, or 62.6% as a result of the decrease in the average selling price and drop in the number of containers sold. The overall gross profit margin decreased from 15.1% in 1Q2018 to 9.4% in 1Q2019 mainly due to discounts being offered on some of the models to our customers.

Interest income

Interest income increased by approximately RM0.09 million, or 82.9% mainly due to more cash being placed under fixed deposits in 1Q2019 as compared to 1Q2018.

Other income

Other income comprised mainly sales of timber, boards, hardware and scrap; charges for services provided such as transportation; rental received and gain on disposal of property, plant and equipment.

Other income decreased by approximately RM0.8 million, or 65.5% mainly due to the following:

  1. the Company selling lesser boards to LP Global Resources Sdn Bhd (“LP Global”) to manufacture front drawer for most of our models (including lamination services) in 1Q2019 as compared to 1Q2018 due to the drop in demand from the Group’s customers; and
  2. drop in the gain on disposal of property, plant and equipment whereby there were less disposals of plant and equipment in 1Q2019 as compared to 1Q2018.
Selling and administrative expenses

Selling and administrative expenses decreased by approximately RM0.1 million, or 2.4% mainly due to the decrease in wastage disposal costs, utilities, gift and donation.

Finance costs

Finance costs decreased by approximately RM0.1 million, or 60.9% due to the decrease in the interest charged for lower amount of outstanding bank borrowings and hire purchase.

Listing expense

The absence of listing expenses in 1Q2019 is due to the one-off listing fees in relation to the IPO in FY2018.

Other expense

Other expense decreased by approximately RM2.1 million, or 75.4% mainly due to lower net foreign exchange loss recorded in the books of the Company in 1Q2019 as compared to 1Q2018 due to the appreciation of the US$ against RM as the Company holds some of their cash in US$ for daily operating purposes.

Loss for the period

As a result of the foregoing, the Group’s net loss for 1Q2019 decreased by approximately RM1.8 million, or 65.2% as compared to 1Q2018.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Review of the Group’s financial position as at 31 March 2019 as compared to 31 December 2018

Non-current assets

Property, plant and equipment increased by approximately RM4.8 million, or 4.0% mainly due to the purchase of machinery and equipment and motor vehicles in 1Q2019.

Leasehold land decreased by approximately RM0.09 million, or 0.6% due to the amortisation of the leasehold land.

Intangible assets of approximately RM3.8 million consists of trademarks and goodwill arising from provisional purchase price allocation from the completion of the Acquisition of Business (as defined under Section 10 below) on 25 January 2019.

Right of use assets of approximately RM0.9 million comprised the right to use the properties by the Group over the respective lease period.

Current assets

Inventories decreased by approximately RM2.0 million, or 5.8% mainly due to the overall improvement in inventory management by the Group.

Trade and other receivables of approximately RM18.1 million comprised trade receivables, receivables from related parties, deposit and other receivables. The decreased in trade and other receivables by approximately RM5.3 million, or 22.9% was mainly due to the decrease of sales towards the end of 1Q2019.

Contract assets of approximately RM5.6 million comprised the right to consideration for goods produced but not yet billed as at 31 March 2019 for sale of goods. The decrease in contract assets by approximately RM5.1 million, or 47.7% was mainly due to the decrease in the completion of goods produced expected to be delivered in the second quarter of 2019.

Prepaid operating expense of approximately RM1.0 million comprised mainly of expenses paid in advance as at 31 March 2019. The decrease in the prepaid operating expense as at 31 March 2019 as compared to 31 December 2018 was due to expenses being paid in advance were being expensed off to the income statement as at 31 March 2019.

Current liabilities and non-current liabilities

Loans and borrowings comprised of obligations under finance leases and bankers’ acceptance. The increase in loans and borrowings by approximately RM0.1 million, or 4.4% was mainly due to the increase in the usage of bankers’ acceptance towards the end of 1Q2019.

Trade and other payables of approximately RM19.7 million comprised trade payables, amount due to related parties and sundry payables. The decrease in trade payables and other payables of RM3.1 million, or 13.4% was mainly due to the decrease in purchase of raw materials towards the end of 1Q2019.

Contract liabilities of approximately RM0.2 million comprised the Group’s obligation to transfer goods or services to customers for which the Group has received consideration from customers as at 31 March 2019.

Lease liabilities of approximately RM1.0 million comprised the liabilities that the Group has to pay over the life of the leases for the use of the properties.

Accrued expenses of approximately RM0.3 million comprised accrued operating expenses. The decrease in accrued expenses of RM0.2 million, or 41.3% was mainly due to lesser accrued expenses as at 31 March 2019 as a result of lesser allowances and performance incentives being provided.

REVIEW OF THE GROUP'S CASH FLOW STATEMENT

Review of the Group’s cash flow statement for the 3 months ended 31 March 2019 (“1Q2019”) as compared to the 3 months ended 31 March 2018 (“1Q2018”)

The Group recorded net cash flows from operating activities of approximately RM9.0 million in 1Q2019 which was lower as compared to approximately RM13.8 million in 1Q2018 mainly due to the decrease in the sales of the Group during the 1Q2019.

The Group recorded net cash flows used in investing activities of approximately RM8.9 million mainly due to the purchase of new and used machineries as well as motor vehicles.

The Group recorded net cash flows from financing activities of approximately RM0.05 million mainly due to the proceeds from short term financing offset by repayment of loans and borrowings.

Commentary

  1. Our exports to US have reduced in the financial year ended 31 December 2018 as many US customers have exercised more caution in their purchases due to the uncertainties in the trade war between China and US. As the trade war is still on–going, there is still uncertainty as to how this trade war will impact our Group in the financial year ending 31 December 2019 ("FY2019").

  2. We had on 20 December 2018, through our wholly–owned subsidiary, Leyo Holdings Sdn. Bhd. ("Leyo Holdings"), entered into an asset purchase agreement ("APA") with Cubo Sdn. Bhd. ("CSB"), a company incorporated in Malaysia, and Mr Ng Teck Lai ("NTL") (collectively referred to as "Vendors"), pursuant to which the Vendors have agreed to sell the assets comprising intellectual properties, plants & machineries, fixed assets and other assets (the "Assets") to Leyo Holdings in accordance with the terms and conditions as stipulated in the APA ("Acquisition"). The Acquisition was completed on 25 January 2019.

    Concurrently with the signing of the APA on 20 December 2018, we had also entered into a shareholders’ agreement ("SHA") with Lebo Design Sdn. Bhd. ("Lebo Design") and Leyo Holdings to give effect to our and Lebo Design’s intentions to co–operate with each other to carry on business of manufacture, sell, market and distribute furniture under the brand names EZBO and CUBO ("Business") and to regulate their relations inter se and in the conduct of the business and affairs of Leyo Holdings.

    Through the Acquisition, we are expanding into a new business involved in the original brand manufacturing ("OBM") of furniture products. As the trade names are new in the market, we intend to further promote them in various countries and thus far, the response from potential customers have been positive. Based on the product designs and innovations and with the right marketing strategies, we are cautiously optimistic on the performance of the Business in the second half of FY2019.