BH Global Corporation Ltd

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SECOND QUARTER FINANCIAL STATEMENTS ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2017

Financials Archive

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Income Statement

Statement of Comprehensive Income

Balance Sheet
Review Of The Performance

Revenue

(2Q2017 Vs 2Q2016)

Supply Chain Management

Supply Chain Management division accounts for 87% of the Group's turnover in 2Q2017, of which marine cables and accessories contributed 39%, marine lighting equipment and accessories 34% and others 27%. 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 13% of the Group's turnover in 2Q2017.

1H2017 Vs 1H2016

Supply Chain Management

Supply Chain Management division accounts for 89% of the Group's turnover in 1H2017, of which marine cables and accessories contributed 49%, marine lighting equipment and accessories 30% and others 21%. Revenue from the Division decreased by 33% due to slowdown in activities in the marine and offshore sectors as a results of weak shipping markets and low oil prices.

Security

Security division was set up in 2Q2016. This division mainly provide security products and solutions relating to information technology. The division accounts for 11% of the Group's turnover in 1H2017.

2Q2017 vs 2Q2016

Geographical segment

Revenue derived from Singapore decreased by $3.4 million or 38% from $9.0 million in 2Q2016 to $5.6 million in 2Q2017 due mainly to the slowdown in activities in the marine and offshore sectors.

Revenue derived from overseas decreased by $1.0 million or 31% from $3.2million in 2Q2016 to $2.2 million in 2Q2017 due mainly to weak global shipping markets.

Gross profit

The Group's overall gross profit decreased by $1.7million or 36% from $4.6million in 2Q2016 to $2.9million in 2Q2017 due to lower revenue. The Group's overall gross margin decreased marginally by 1% from 38% in 2Q2016 to 37% in 2Q2017.

Other operating income

The increase in other operating income in 2Q2017 as compared to 2Q2016 is due mainly to gain in foreign exchange.

Operating expenses

The Group's operating expenses comprise mainly selling & distribution and administrative expenses. Selling & distribution increased by 17% mainly due to reversal of provision for doubtful debt in 2Q2016 and administrative expenses decreased by 38% is a result of the cost cutting measures implemented by the Group.

Share of results in associated companies

The increase in losses of the associated companies is mainly due to higher provision for stock obsolescence and certain cost relating to the construction of the factory were expensed off.

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 2Q2017 as the Group has made provision for losses in 4Q2016.

Interest on borrowing

The decrease in interest on borrowings in 2Q2017 as compared to 2Q2016 is due mainly to lower usage of trade facilities by the Supply Chain Management division.

Depreciation

The decrease in depreciation in 2Q2017 as compared to 2Q2016 is due mainly to cessation of depreciation of certain fixed assets approaching the end of the depreciation period.

Foreign exchange gain/(loss)

The Group registered a foreign exchange gain in 2Q2017 as compared to a foreign exchange loss in 2Q2016 is due mainly to translation of US$ denominated receivables and cash at bank as a result of the strengthening of USD against SGD.

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 lower profit after tax from continuing operation of $116k was recorded in 2Q2017 as compared to a profit of $413k in 2Q2016 due mainly to lower revenue.

Net profit for the period

The Group registered a lower net profit of 23k for the period 2Q2017 as compared to $1.1m for the period 2Q2016 mainly due to lower revenue and reversal of provision for impairment for a project in discontinued operation in 2Q2016.

Discontinued Operations

The Group recorded a loss from discontinued operations, net of tax, of $93k as stated in detail below:

Discontinued Operations registered a higher revenue of $0.9 million in 2Q2017 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 2Q2016 where the project was still in its engineering phase.

Discontinued Operations registered a gross profit of $51k in 2Q2017 as compared to $743k in 2Q2016 due mainly to reversal of provision for impairment for a project as a result of approval of various variation orders from a client and better project management in 2Q2016.

Discontinued Operations registered an other operating expenses in 2Q2017 as compared to an income in 2Q2016 is due mainly to a foreign exchange loss as a result of depreciation of Indonesian Rupiah against SGD in 2Q2017 as its payables are dominated in SGD.

The lower selling & distribution and administrative expenses in 2Q2017 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 companies is due mainly to the share of loss in GL Lighting Holding Pte Ltd.

Intangible assets

Decrease in intangible assets is mainly due to amortization of research and development cost.

Purchase deposit to a supplier

The purchase deposit is paid to a main cable supplier which is 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 partial repayment from the supplier during the period.

Trade receivables

Trade receivables remain comparatively unchanged.

Other receivables

The decrease in other receivables of $1.1million is due mainly to offsetting of deposits paid to suppliers 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 $0.9k from $2.5million in 4Q2016 to $3.4million in 2Q2017 due mainly to higher purchases made by Security division as a result of higher revenue from this division.

Other payables

Other payables remain relatively unchanged.

Bank borrowings

The decrease in bank borrowing by $3.2million is due mainly to repayment of bank loan and trade facilities by Supply Chain Management division.

Cash flow

Net cash generated from operating activities amounted to $0.8million in 2Q2017 as compared to a net cash used in operating activities of $1.4million in 2Q2016. Net cash and cash equivalent increased by $0.8million in 2Q2017 compared to a decrease of $1.8million in 2Q2016. The increase is due mainly to dividend received from a joint venture, increase in payables and decrease in receivables offset by decrease in amount due to customers on construction contracts and higher repayment of bank borrowings in 2Q2017

Commentary

Our Supply Chain Management division is still facing difficult market conditions due to the continuing slowdown in the marine and offshore industries as a result of low oil prices. There were fewer new build projects as reflected by the significant decrease in our revenue from marine cables and accessories. This has severely affected the profitability of this division. The Group has implemented certain cost cutting measures. At the same time, the Group is exploring industrial and petro-chemical sectors.

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. This division has since gained traction securing orders from both government agencies and private sectors. The Group remains enthusiastic on the prospect of this division.

The operations of GLH, the Group's associated company, has been adversely affected due to supplierrelated 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.

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.

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