BH Global Corporation Ltd

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FIRST QUARTER FINANCIAL STATEMENTS ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2018

Financials Archive

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Income Statement

Statement of Comprehensive Income

Balance Sheet
Review Of The Performance

Revenue

(1Q2018 Vs 1Q2017)

Supply Chain Management

Supply Chain Management Division accounts for 94% of the Group's turnover in 1Q2018, of which marine cables and accessories contributed 56%, marine lighting equipment and accessories 31% and others 14%. Revenue from the division decreased by 15% due to continuing slowdown in activities in marine and offshore sectors.

Security

Security Division mainly provides security products and solutions relating to information technology. The division accounts for 5% of the Group's turnover in 1Q2018.

Engineering Services

Services Division decreased by 98% due mainly to termination of an engineering contract by a customer in 4Q2017. There is no other significant contract in 1Q2018.

1Q2018 vs 1Q2017

Geographical segment

Revenue derived from Singapore decreased by $2.6 million or 39% from $6.6 million in 1Q2017 to $4.0 million in 1Q2018 due mainly to continuing slowdown in activities in marine and offshore sectors.

Revenue derived from overseas decreased by $1.5 million or 32% from $4.8 million in 1Q2017 to $3.3 million in 1Q2018 due mainly to termination of an engineering contract by a customer in 4Q2017.

Gross profit

The Group's overall gross profit decreased by $1.8 million or 43% from $4.3 million in 1Q2017 to $2.4 million in 1Q2018 due to lower revenue. The Group's overall gross margin decreased marginally by 5% from 38% in 1Q2017 to 33% in 1Q2018 due to product mix.

Operating expenses

The Group's operating expenses comprise of mainly selling & distribution and administrative expenses. Selling & distribution expenses increased by 33% to $2.7 million due to higher provision for doubtful debts and stock obsolescence. Administrative expenses decreased by 9% to $1.3 million is a result of the cost cutting measures implemented by the Group.

Share of results of associated companies

The higher Group's share of loss in associated companies is due mainly to performance of assocaied companies. In particular, the performance of GL Lighting Holding Pte Ltd ("GLH") was affected by supplier-related issues which disrupted production and the associate company's ability to meet its sales orders.

Interest on borrowing

Interest on borrowings remains comparable.

Depreciation

The lower depreciation is due mainly to cessation of depreciation of the Group's Batam Land which was reclassified as disposal group assets as held for sale in 4Q2017.

Foreign exchange loss

The Group reported a foreign exchange loss of $342k in 1Q2018 is due mainly to the depreciation of IDR against S$ of a subsidiary's payables denominated in S$ and translation of US$ denominated bank balances and receivables as a result of weaker US$ against S$.

Provision for stock obsolescence

The higher provision for stock obsolescence is in accordance to the Group's stock policy.

Provision for doubtful debts

In view of the weak marine and offshore markets where payment from customers are slower coupled with poor performance announced by certain customers, the Group has provided a higher provision for doubtful debts.

Net (loss)/profit for the period

The Group registered a net loss of $2.36 million in 1Q2018 as compared to a net profit of $0.26 million in 1Q2018 due mainly to lower revenue, higher provision for doubtful debts and stock obsolescence.

Balance Sheet and Cash Flow Analysis

Investment in associated companies

The increase in investment in associated companies is due mainly to a loan to GLH offset by the share of loss in GLH.

Intangible assets

Intangible assets remain comparably unchanged.

Purchase deposit to a supplier

The purchase deposit is paid to a main cable supplier which will be offset from future purchases over a fiveyear period (refer to the Group's announcement on 9 June 2015 to the SGX). The decrease is due to a weaker USD against SGD as the purchase deposit is denominated in USD.

Inventories

Inventories decreased by $137k from $24.7 million in FY2017 to $24.6 million in 1Q2018 is due mainly to higher provision for stock obsolescence.

Trade receivables

Trade receivables decreased by $1.5 million from $8.9 million in FY2017 to $7.4 million in 1Q2018 due mainly to lower sales and higher provision for doubtful debts.

Other receivables

The increase in other receivables of $800k is due mainly to deposit paid to suppliers and deferred cost.

Tax payable

The decrease in tax payable is due to repayment made in 1Q2018.

Disposal group assets classified as held for sale

Asset held for sale relate to the Batam Land where the Group subsequently disposed in 2Q2018.

Convertible loan notes

One of the Group's subsidiary, Omnisense Systems Pte Ltd ("OMS") and its shareholders entered into a convertible loan agreement ("CLA") dated 7 September 2017, pursuant to which its shareholders have agreed, subject to the terms of the CLA, to grant a convertible note of up to aggregate principle amount of up to $4 million to the Company at an interest rate at 6.0% per annum. Subscription of the convertible loan closed on 30th December 2017.

Trade payables

The lower trade payables is due mainly to lower purchases as a result of lower revenue.

Other payables

The increase in other payables of $306k is due mainly to deferred revenue billed in advance to customer and deposits from customer.

Provisions

The decrease in provisions of $1.2 million is due mainly to settlement of provision for liabilities in GSSI.

Cash flow

Net cash used in operating activities amounted to $2.1 million in 1Q2018 as compared to a net cash generated from operating activities of $1.0 million in 1Q2017. Net cash and cash equivalent decreased by $5.1 million in 1Q2018 compared to a decrease of $2 million in 1Q2017. The decrease is due mainly to loan to an associated company and settlement of provision for liabilities.

Commentary

The Group aims to focus on enhancing its business functions and maintaining a lean operating structure which will help stabilize and subsequently bolster performance in the long run.

The Security division was formed in 2Q2016 and focuses on cybersecurity, enterprise IT operation management and sensing security products for both public and private sectors in Singapore and the region. This division has shown considerable growth and potential with orders from both government agencies and private companies. The Group aims to further its exposure in regional markets.

The Group's associated company, GLH, continues to face supplier-related issues which affected production and resulted in lower sales to major customers. The construction of the new factory is poised to be completed by 2Q2018. The Group will focus on ramping up production and sales once the factory is operational.

The Group's galvanized steel wire factory in Oman showed no improvement and the Group has made the necessary provisions in its FY2017 financial statements. In 1Q2018, the Group has entered into a non-binding Letter of intent ("LOI") to dispose its 51% equity interest in GSSI subject to fulfillment of certain terms and conditions outlined in the LOI. The proposed disposal is expected to be completed within 12 months from the end of previous financial year end.

On its Engineering Services division, the liquidation of OGS remains ongoing. On PTE, the Group has disposed the Batam Land in 2Q2018 (refer to the Group's announcements on 4 May 2018 and 9 May 2018).