Straco Corporation Limited

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Third Quarter Ended 30 September 2018 Unaudited Financial Statement And Dividend Announcement

Financials Archive

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Income Statement

Income Statement

Statement Of Comprehensive Income

Comprehensive Income Statement

Balance Sheet

Balance Sheet

Review of the performance

Revenue

In the third quarter of FY2018, the Group achieved sales of $48.49 million, 5.2% higher than the corresponding period in 3Q2017, mainly due to higher revenues achieved by Shanghai Ocean Aquarium ("SOA"), Underwater World Xiamen ("UWX") and Lixing Cable Car, partially offset by lower revenue achieved by our Singapore Flyer. Reversal of value-added tax ("VAT") on ticket revenue were being accounted for in this quarter by SOA, as the tax waiver on ticket revenue for Shanghai educational bases for three years from 2018 to 2020 has been issued and SOA will be applying for the refund for the net VAT paid for January to June this year.

Cumulatively, overall revenue for the first nine months of FY2018 amounted to $95.55 million, 8.0% lower than the corresponding period in FY2017, mainly attributable to the more than two months suspension of rides on our Singapore Flyer during the first quarter due to a technical issue.

Overall visitation to all our attractions was 2.01 million visitors for the quarter, 5.5% higher than the corresponding period in 3Q2017, as all three attractions in China reported higher visitor numbers.

Operational Results

Total Expenses (excluding finance cost) for 3Q2018 was 18.56 million, an increase of $2.2 million, or 13.4% from 3Q2017. Depreciation and amortization expense was lower than corresponding period, mainly due to certain assets being fully depreciated assets at Singapore Flyer and UWX. Sales and marketing expenses for the quarter increased, as higher service charge were incurred by UWX on more tickets sold by ferry operators as well as higher advertising and promotion expenses incurred. Loss on disposal of property, plant and equipment amounted to $0.64 million this quarter, as construction in progress relating to amounts for the conceptual design fees and expenses for the previously intended phase 2 developments of SOA and UWX were written off. Repair and maintenance expenses for 3Q2018 increased significantly over corresponding period, mainly due to expenses incurred in relation to the technical issue which resulted in the rides suspension at Singapore Flyer, as well as higher expenses incurred for the general maintenance of the Giant Observation Wheel, while SOA, UWX and Lixing Cable Car also incurred higher maintenance expenses. Other operating expenses increased over corresponding period, as SOA accounted for the non-claimable input taxes previously claimed for January to June 2018 in the current quarter when the tax waiver on ticket revenue were granted.

Profit before tax was $31.55 million for the current quarter, 0.9% higher than the profit before tax of $31.28 million for 3Q2017.

Balance Sheet items

Intangible assets decreased 17.7% from $2.59 million at 31 December 2017 to $2.13 million at 30 September 2018, due to the amortization of intangible assets for the period.

Trade and other receivables increased 15.1% from $5.11 million at 31 December 2017 to $5.88 million at 30 September 2018, mainly due to increase in trade receivables at SLPL and UWX, as well as increase in other receivables arising from the net VAT refundable to SOA upon the tax waiver for 2018 being granted, partially offset by decrease in fixed deposits interest receivables as certain RMB fixed deposits placed on two years tenure had matured in this quarter.

Other current assets increased 33% from $0.94 million at 31 December 2017 to $1.25 million at 30 September 2018, mainly due to increase in prepayments.

Reserves decreased 22.6% from $17.46 million at 31 December 2017 to $13.51 million at 30 September 2018, mainly due to the translation loss of $4.03 million arising from the weaker RMB currency against SGD at the end of current period compared to the end of last year, net increase in treasury shares from share buyback of $1.12 million and treasury shares reissued of $0.92 million, loss on treasury shares reissued of $0.39 million; partially offset by increase in share option reserves of $0.56 million during the period arising from share options granted in 2017 and 2018 and increase in general reserves of $0.11 million.

Deferred income decreased 25.5% from $0.18 million at 31 December 2017 to $0.14 million at 30 September 2018, mainly due to the periodic recognition of deferred income to profit & loss in the current period.

Trade and other payables increased 11.9% from $11.21 million at 31 December 2017 to $12.54 million at 30 September 2018, mainly due to increase in trade and other payables at SOA and UWX.

Current tax liabilities increased 212.6% from $2.45 million at 31 December 2017 to $7.67 million at 30 September 2018, mainly due to the provision of income taxes for 3Q2018 profits at our subsidiaries, partially offset by the payments of 4Q2017 income taxes of China subsidiaries and 2017 (YA2018) income taxes of Singapore entities in the current period.

Cash flow Statement

The Group generated net cash from operating activities amounting to $32.54 million for 3Q2018. During the quarter, the Group paid out $1.72 million to a non-controlling shareholder for dividend declared by SOA in June 2018; and the Company used $0.46 million for share buyback from the open market. As at 30 September 2018, the Group's cash and cash equivalent balance amounted to $203.15 million.

Commentary

The National Bureau of Statistics of China reported that China's gross domestic product ("GDP") grew 6.5% in the third quarter of 2018, as the country's trade war with the United States puts pressure on growth. For the first nine months of 2018, the economy grew 6.7% year-on-year.

In a press release from Ministry of Culture and Tourism of the People's Republic of China, it was reported that the domestic travel market has increased steadily, with 2.826 billion domestic tourists in the first half of 2018, an increase of 11.4% over the corresponding period, while domestic tourism income reached 2.45 trillion Yuan, an increase of 12.5% over same period last year.

In Singapore, the economy grew 2.6% year-on-year in 3Q2018, based on advance estimates from the Ministry of Trade and Industry. On the tourism sector, it was reported that visitor arrivals to Singapore increased 7.7% year-on-year to 9.2 million in the first half of 2018, with about 15% of visitors here for business travel and meeting, incentive travel, conventions and exhibitions (BTMICE). Singapore was also named "Best BTMICE City 2018" by TTG Travel Awards in September this year. The country is working to enhance its overall attractiveness as a destination by investing in quality attractions and reinventing tourism offerings, attracting new visitor segments and increasing their spending, and forging strong partnerships with industry stakeholders to co-create innovative solutions.