BH Global Corporation Ltd

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FIRST QUARTER FINANCIAL STATEMENTS ANNOUNCEMENT FOR THE PERIOD ENDED 31 MARCH 2017

Financials Archive

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Income Statement

Statement of Comprehensive Income

Balance Sheet
Review Of The Performance

Revenue

(1Q2017 Vs 1Q2016)

Supply Chain Management

Supply Chain Management division accounts for 91% of the Group's turnover in 1Q2017, of which marine cables and accessories contributed 57%, marine lighting equipment and accessories 27% and others 16%. Revenue from the Division decreased by 36% due to slowdown in activities in the marine and offshore sectors as a result of weak shipping markets and low oil prices.

Security

Security division was established in 2Q2016 and mainly provides products and solutions relating to cyber security and security systems. The division accounts for 9% of the Group's turnover in 1Q2017.

1Q2017 Vs 1Q2016

Geographical segment

Revenue derived from Singapore decreased by $1.2 million or 17% from $7.7 million in 1Q2016 to $6.4 million in 1Q2017 due mainly to the slowdown in activities in the marine and offshore sectors.

Revenue derived from overseas decreased by $2.5 million or 50% from $5 million in 1Q2016 to $2.5 million in 1Q2017 due mainly to weak global shipping markets.

Gross profit

The Group's overall gross profit decreased by $0.1million or 2% from $4.3million in 1Q2016 to $4.1million in 1Q2017 due to lower revenue. The Group's overall gross margin increased by 13% from 33% in 1Q2016 to 46% in 1Q2017 due to lower sales of marine cables and accessories as the gross margin from this items are generally lower.

Operating expenses

The Group's operating expenses comprise mainly selling & distribution and administrative expenses. Selling & distribution and administrative expenses decreased by 12% and 37% respectively, as a result of the cost cutting measures implemented by the Group. The lower administrative expenses is also due to a provision for liabilities in 1Q2016.

Share of results in associated company

The Group's associated companies registered a loss of $354k in 1Q2017 due mainly to lower sales to major customers. In particular, the performance of GLH was affected by supplierrelated issues which disrupted production and the associate company's ability to meet its sales orders.

Share of results of joint ventures

The increase in share of results in joint venture is due to no further share of loss in GSSI in 1Q2017 as the Group has made provision for losses in 4Q2016.

Interest on borrowing

The decrease in interest on borrowings in 1Q2017 as compared to 1Q2016 is due mainly to lower usage of trade facilities by the Supply Chain Management division.

Depreciation

The depreciation in 1Q2017 remain comparably unchanged.

Provision for Stock Obsolescence

The increase in provision for stock obsolescence is in accordance to the provision for stock obsolescence policy of the Group.

Profit from continuing operations, net of tax

A profit after tax from continuing operation of $439k was recorded in 1Q2017 as compared to a loss of $775k in 1Q2016 due mainly to lower operating expenses.

Net profit for the period

The Group registered a net profit for the period of $259k against a loss of $1.2million in 1Q2016 as a result of a profit from continuing operations and higher share of result from a joint venture.

Discontinued Operations

The Group recorded a loss from discontinued operations, net of tax, of $180k as stated in detail below:

Discontinued Operations registered a higher revenue of $2.54million in 1Q2017 due mainly to higher progressive recognition of revenue of an existing project of BOS Offshore & Marine Pte Ltd ("BOS") currently in its procurement phase as compared to 1Q2016 where the project was still in its engineering phase.

Discontinued Operations registered a gross profit of $169k in 1Q2017 as compared to $23k in 1Q2016 due mainly to higher revenue.

The other operating expenses remain comparatively unchanged.

The lower selling & distribution and administrative expenses in 1Q2017 is due mainly to the cost cutting measures implemented by the Group.

Balance Sheet and Cash Flow Analysis

Investment in associated companies

The decrease in investment in associated company is due mainly to the share of loss in GL Lighting Holding Pte Ltd.

Intangible assets

Intangible assets remain comparably unchanged.

Purchase deposit to a supplier

The purchase deposit is paid to a main cable supplier which is offset from future purchases over a five-year period (refer to the Group's announcement on 9 June 2015 to the SGX). The decrease is due to a partial repayment from the supplier during the year.

Trade receivables

Trade receivables remain comparatively unchanged.

Other receivables

The decrease in other receivables of $1.2million is due mainly to offsetting of deposits paid to trade payables for project procurement upon receipts of such supplies.

Due to customers on construction contracts

The decrease in due to customers on construction contracts is due mainly to recognition of revenue from advance billing of a project by BOS.

Trade payables

Trade payables increased by $1 million from $2.5million to $3.5million in 1Q2017 due mainly to higher purchase from Engineering division.

Other payables

Other payables remain relatively unchanged.

Bank borrowings

The decrease in bank borrowing by $2.8million is due mainly to repayment of trade facilities by Supply Chain Management division.

Cash flow

Net cash generated from operating activities amounted to $914k in 1Q2017 as compared to a net cash used in operating activities of $3.0million in 1Q2016. Net cash and cash equivalent decreased by $2.0million in 1Q2017 compared to an increase of $78k in 1Q2016. The decrease is due mainly to the decrease in amount due to customers on construction contracts and higher repayment of bank borrowings for 1Q2017 offset by an increase in payables.

Commentary

Our core business, the Supply Chain Management division, is still facing difficult market conditions and low oil prices due to the continuing slowdown in the marine and offshore industries as a result of low oil prices. This has severely affected the sales and profitability of the division. The Group will strive to strengthen its core business and is working on various initiatives to improve its performance.

The operations of GLH, the Group's associated company, has been adversely affected due to supplier-related issues resulting in lower sales to major customers in FY2016. However, GLH has since sourced for alternative suppliers. In addition, the construction of the new factory is expected to complete by end 2017 which will enhance production capacity significantly.

The performance of the Group's galvanized steel wire factory in Oman continues to be very challenging as production and sales volumes are still below breakeven levels. Besides lower sales, the business is further affected by lower selling prices as a result of lower commodity prices and high fixed costs. The Group continues to work closely with its Omani joint venture partner to improve operational performance and explore all possible options with regards to the viability of this business.

On its Engineering Services division (reported under Discontinued Operations), the Group has previously announced to the Singapore Exchange ("SGX") on 4 September 2015 that its subsidiary, Oil & Gas Solutions Pte. Ltd. ("OGS"), has initiated creditors' voluntary liquidation proceedings. The liquidation of OGS remains ongoing.

The Security division was formed in 2Q2016 and focuses on cyber security, enterprise IT operation management and sensing security products for both public and private sectors in Singapore and the region. The Group is enthusiastic on the prospects for this division and will strive to help it gain traction.

On its discontinued operations under PTE, the Group continues to search for potential buyers to dispose the land.