SCB Prospectus - Announcements - Bursa Malaysia

Company No. 462648-V
10. FINANCIAL INFORMATION (CONT’D)
long term projects secured during the said financial year, which contributed RM37.95
million of revenue for that financial year. The increase was mainly due to the
aggressive sales and marketing efforts and the result of government stimulus
packages in Singapore, which resulted in an increase in spending in the infrastructure
segment especially in power distribution and security of public buildings. This resulted
in a substantial growth in the power and electric utility and construction industries
which requires SCADA systems in the transmission and distribution of electricity and
for monitoring and operation of the surveillance system.
The Willowglen Group recorded a lower revenue of RM27.66 million for the six (6)
months ended 30 June 2010 or a decrease of 11.51% as compared to the
corresponding period in 2009. The decrease in revenue was mainly due to the fact
that most of the projects have been completed in 2009 as a result of the stimulus
package announced by the Singapore Government, resulting in a general reduction in
the number of projects awarded during the beginning of the year. However,
management expects that earnings growth from its Singapore operations will be
supported by the fact that the overall economic conditions are improving in
Singapore.
Gross Profit
Despite the increased in revenue, the Willowglen Group’s gross profit margin was
reduced from 44.25% to 33.95% as compared to the FYE 31 December 2006. This
was mainly due to increased competition in the water, housing and power industry.
The competition that exists in the market has caused players in the industry to reduce
prices to attract customers to engage their services. To mitigate this risk, our Group
implemented cost cutting strategies which include sourcing for contractors that offer
better pricing and terms. We had also reduced the amount of work sub-contracted out
to third parties in order to preserve our operating margins. Management is of the
opinion that, based on the industry survey as well as from the past engagements of
the Group, the average margins by segments should are:-
Segments GP Margin (%)
Oil & gas utilities, power utilities and railroads 30 - 40
Sewerage & drainage utilities, water utilities and infrastructure
monitoring
15 - 20
Despite the decrease in revenue, the Willowglen Group’s gross profit margin for the
FYE 31 December 2008 increased from 33.95% to 38.57% as compared to the FYE
31 December 2007 as a result of the Group’s cost cutting measures. Our
procurement team had been aggressively sourcing for better sub-contractors and
products and to negotiate for better pricing and terms, resulting in substantial cost
savings for our Group. Our management estimates that the Group has managed to
save around RM1.42 million as a result of the implementation of cost cutting
measures.
Gross profit increased from RM19.73 million in the FYE 31 December 2008 to
RM24.61 million in the FYE 31 December 2009, representing an increase of RM4.87
million, mainly due to an increase in revenue as explained above. Gross profit margin
for the FYE 31 December 2009 improved further to 39.69% as compared to 38.57%
in the FYE 31 December 2008. The continued increase in the profit margins was
primarily due to the management continued efforts to control cost in its operations.
For the FPE 30 June 2010, gross profit decreased by RM0.69 million from RM12.42
million in the FPE 30 June 2009 to RM11.73 million, mainly due to a decrease in
revenue as explained above. However, the gross profit margin for our Group during
the FPE 30 June 2010 was higher at 42.43% as compared to 39.74% in the same
FPE 30 June 2009. This is another improvement in our Group’s effort and
performance to reduce cost and to improve our Group’s profitability.
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