Kimlun Corporation Berhad Annual Report 2018

FINANCIAL REVIEW Group Revenue and Profitability Revenue recorded in FY2018 was RM1.01 billion which was RM26.79 million or 2.7% higher compared to the revenue achieved in FY2017. The higher revenue achieved in FY2018 was mainly attributable to higher revenue achieved by the manufacturing and trading (“M&T”) division, partly offset by the decline in revenue from the construction division. Our Group’s gross profit (“GP”) margin achieved in FY2018 of 12.7% was lower compared to 14.1% in FY2017 mainly due to lower GP margins achieved by both the construction and M&T divisions. Despite of the higher revenue achieved in FY2018, our Group’s GP decreased by RM11.27 million or 8.1% against FY2017 due to the lower GP margin achieved in FY2018. The selling and administrative expenses in FY2018 decreased by RM7.83 million compared to FY2017, mainly due to the net decrease in provision for doubtful debts by RM8.99 million. Finance costs were higher in FY2018 against FY2017 due to the drawdown of finance lease facilities during the period to finance capital expenditures, and higher utilization of working capital financing facilities to meet the requirement of higher scale of operation, as well as part payment toward purchase consideration of new land. The Group acquired property, plant and equipment (“PPE”) amounting to RM63.93 million during FY2018, mainly comprised of heavy machineries such as motor graders, excavators and compactors, trucks, formworks and cranes to meet the requirements of construction projects, in particular the Pan Borneo Highway project in Sarawak (“PBH”). There was no significant variance in share of profit of joint ventures and other income in the period under review compared to FY2017. Due to the variances in gross profit, share of profit of joint ventures, other income and expenses as explained above, profit before taxation (“PBT”) and profit after taxation (“PAT”) of FY2018 of RM81.67 million and RM61.07 million respectively were lower than FY2017. This was 9.3% and 10.6% lower compared to the PBT and PAT of RM90.03 million and RM68.34 million achieved in FY2017, respectively. Our net profit attributable to owners of the Company for FY2018 was RM61.14 million. Segmental Revenue and Gross Profit* * : The segmental revenue and gross profit stated in the commentary in relation to the respective segment was inclusive of inter-segment transactions. Kimlun Corporation Berhad 19 MANAGEMENT DISCUSSION AND ANALYSIS Construction Division The construction division’s revenue of RM801.12 million was RM71.31 million or 8.2% lower compared to RM872.43 million recorded in FY2017. The decline in construction revenue was mainly due to: - (i) the substantial completion of a few projects towards end of FY2017; and (ii) a large size project contributed lower revenue in FY2018 compared to FY2017 as the project was substantially completed in FY2018, which collectively contributed about 27% of the revenue of FY2017. The construction division’s GP margin declined from 12.2% in FY2017 to 11.0% in FY2018. The decline in GP margin was mainly due to the Group’s projects mix with higher composition of lower margin projects. Consequential upon lower revenue and lower GP margin, GP declined by 17.7% from RM106.86 million in FY2017 to RM87.92 million in FY2018. M&T Division The M&T division achieved a higher revenue of RM252.66 million in FY2018 compared to RM118.47 million recorded in FY2017. The improvement in M&T revenue by RM134.19 million or 113.3% was due to the following: Operation Revenue Main reasons for (RM’ mil) variance FY2018 FY2017 Precast 203.89 92.94 Higher revenue from concrete KVMRT line 2 project, and products revenue contribution from a contract in relation to the supply of Industrialised BuildingSystemcomponents to Singapore Quarry 48.77 25.53 Higher volume of quarry products products supplied to the PBH project The M&T division’s GP margin declined from 22.7% in FY2017 to 15.2% in FY2018. The decline in GP margin was mainly due to: - (i) larger proportion of the precast concrete products revenue was contributed by lower margin supply contracts; and (ii) sales of lower margin quarry products On the back of higher revenue, GP increased by RM11.55 million in FY2018 against FY2017. (cont’d)