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Unaudited First Quarter Financial Statement Announcement for the Financial Period Ended 31 March 2017
The Group recorded net profit attributable to equity holders of $2.8 million for Q1 2018 as compared to a loss of $78.9 million for Q1 2017. In Q1 2018, the Group transformed into one of Singapore's leading logistics management service providers with the acquisition of 100% interest in the equity of Cogent Holdings Limited.
The Group recorded profit from continuing operations in logistics, dry bulk shipping and other businesses of $2.9 million on turnover of $40.6 million for Q1 2018.
Group turnover from continuing operations increased by 256.1% to $40.6 million for Q1 2018 as compared to Q1 2017 mainly due to turnover of $32.1 million from newly acquired logistics businesses, offset by a decrease in shipping revenue from a reduced fleet of 3 bulk carriers.
Other gains and losses for Q1 2018 were gains of $3.0 million (Q1 2017: losses of $7.3 million) mainly due to foreign exchange gain of $3.0 million.
The increase in cost of sales, distribution, administrative and finance expenses were mainly due to the newly acquired logistics businesses. The increase in expenses was also due to incremental increase in depreciation and amortisation expenses of $2.6 million based on provisional fair values of assets of the newly acquired subsidiaries and interests on borrowings to finance the business acquisition in Q1 2018.
Share of profit of an associated company of $0.6 million was mainly due to share of profit from newly acquired 40% shareholdings in PT Ocean Global Shipping.
The Group recorded loss from discontinued operations of $134.6 million for Q1 2017. The discontinued operations relates to the Group's shipyard business in China which was disposed in Q4 2017.
(31 March 2018 vs 31 December 2017)
Cash and cash equivalents increased from $58.5 million to $355.0 million mainly due to the proceeds from the disposal of subsidiaries and increase in borrowings, partially offset by the net cash out flow for the acquisition of newly acquired logistics businesses.
Trade and other receivables decreased $219.9 million to $89.0 million mainly due to decrease in amount due from fellow subsidiaries following the receipt of the proceeds from the disposal of subsidiaries, offset by trade and other receivables acquired for the newly acquired subsidaries.
Property, plant and equipment increased by $492.3 million to $532.9 million mainly due to the fair values of the property, plant and equipment acquired for the newly acquired subsidiaries.
Intangible assets include goodwill of $99.2 million and other intangible assets of $37.4 million. The Group has recognised a provisional goodwill of $99.2 million based on provisional fair values of assets and liabilities of Cogent Holdings Limited. In accordance with SFRS(I) 103 "Business Combinations", the Group is required to perform a purchase price allocation ("PPA") exercise within 12 months after completion of the acquisition of Cogent Holdings Limited. The fair values of the acquired identifiable assets and liabilities have been provisionally determined pending finalisation of the PPA exercise.
Trade and other payables increased by $32.5 million to $79.2 million mainly due to the trade and other payables assumed for the newly acquired subidiaries.
Total borrowings increased by $484.6 million to $484.6 million mainly due to the borrowings procured to finance the acquisition of Cogent Holdings Limited and borrowings assumed for the newly acquired subsidiaries.
Shareholder's equity increased by $1.5 million mainly due to the profits in Q1 2018, offset by a decrease in currency translation reserves.
With the completion of the compulsory acquisition of Cogent Holdings Limited ("Cogent") and the acquisition of approximately 40% stake in PT Ocean Global Shipping, the Company has established a logistics network in Singapore, Malaysia and Indonesia through these subsidiaries.
The Company, which is developing into a market leader for integrated logistics solutions in South and Southeast Asia marks the first step of its new journey in the logistics business. Cogent's new chemical logistics project in Jurong Island, which will complement the Company's logistics business when completed, is progressing as scheduled.
The Company aims to expand its logistics network in South and Southeast Asia through acquisitions and investments and is researching on potential targets to acquire and investment opportunities, taking into consideration the targets' business scale and scope, historical performance, growth potential and synergy with the Group's operations.
The Company's ultimate holding company, China COSCO Shipping Corporation Limited, has a well-established logistics business network throughout the People's Republic of China ("PRC"), which the Company will be able to leverage on this existing logistics business platform to potentially develop new business opportunities in the logistics sector in South and Southeast Asia, taking advantage of the "Belt and Road Initiative" formulated by the PRC Government in 2013. The Company will also be able to offer end-to-end services to its customers with logistical needs in Singapore and Malaysia, thereby increasing the Company's competitive edge in relation to its global competitors and entrenching its customers.
A claim was filed by Borneo Motors (Singapore) Pte Ltd ("Plaintiff") against Cogent Automotive Logistics Pte Ltd ("CAL"), a subsidiary of Cogent, in High Court Suit No. 224 of 2018 ("Suit"). In the Suit, the Plaintiff claims for the sum of loss and expense amounting to S$2,355,951.35 or damages to be assessed, which was allegedly incurred due to the adherence of man-made artificial particles in the surroundings, to the exterior of 207 vehicles stored in CAL's outdoor storage facilities, interest, costs and such other relief as the Court deems fit. Although the Plaintiff first notified CAL of the existence (but not quantum) of this alleged damage in or around April 2015, the Plaintiff only formally commenced the Suit in the High Court almost 3 years later, on 1 March 2018. The Company is presently in communication with the previous majority shareholders of Cogent to understand the origin and/or nature of the claim. In the meantime, Cogent is also in communication with CAL's insurers on the matter. The claim is in the preliminary stage and the outcome of the claim is uncertain at this point in time. In light of the foregoing, it is presently difficult to quantify the eventual financial impact of the Suit. Cogent has sought legal advice on the claim by the Plaintiff and will vigorously defend the claim. The Company will make announcements of any significant development in this matter at the appropriate junctures.
With respect to the Group's shipping business, the Company's subsidiary, COSCO Singapore Pte Ltd, currently has a total of 3 vessels with a total tonnage of 163,000 tons and with an average age of 12.3 years. In the first quarter of 2018, the international dry bulk shipping market showed an improvement over the same period in 2017. The Baltic Dry Index averaged 1,175 points in the first quarter of 2018, an increase of 24.2% from the average of 945 points in the first quarter of 2017, with the highest point for the quarter being 1,395 and the lowest point being 1,055. Industry peers generally believe that the dry bulk market in 2018 will show a slight improvement over 2017.
Moving forward as one team, the Group is expected to create overall synergy by engaging in cross sales and business optimization with its related companies. This will also help the Group to achieve economies of scale and scope.