HSS Engineering

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Quarterly Report For The Financial Period Ended 31 March 2018

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Unaudited Condensed Consolidated Statement Of Profit Or Loss And Other Comprehensive Income For The First Quarter Ended 31 March 2018



Unaudited Condensed Consolidated Statement Of Financial Position As At 31 March 2018

Review of Performance

For the current quarter under review, the Group recorded revenue of RM34.0 million, increased by RM4.7 million or 16.2% as compared to previous quarter ended 31 March 2017. The detailed analysis of revenue are as follows:

  1. Analysis of our revenue by activities is as follows:-

  2. Engineering design

    Engineering design revenue increased by RM3.71 million or 38.8% during the 3 months ended 31 March 2018. This is attributable to the major on-going projects which includes East Coast Rail Line ("ECRL") detailed design and preliminary design, Kuala Lumpur-Singapore High Speed Rail (Reference Design Consultants 05), Consultant for External Infrastructure Works for Bukit Bintang City Centre and Proposed Tun Razak Exchange (TRX) External Roads have contributed to the major proportion of engineering design revenue. However, this was compensated by the completion of few projects including ECRL scheme design and Temporary Common Camp Facilities and Infrastructure for Refinery and Petrochemicals Integrated Development ("RAPID") Project.

    Construction supervision

    Our major on-going supervision projects including Maju Expressway Extension To KLIA, Sungei Besi-Ulu Kelang Elevated Expressway and West Coast Expressway, ECRL supervision which are progressing well in line with the construction stage of these projects continued to contribute majority of the supervision revenue during current period ended 31 March 2018. However, this was offsetted by completed project, i.e. LRT Ampang Line Extension and Kuantan Port Expansion in line with their completion status.

    Project management

    The revenue from project management for current quarter is fairly consistent with the previous quarter in the same corresponding period. On-going project management projects include MRT Line 2 –Jajaran Sg. Buloh-Serdang-Putrajaya, Kwasa Damansara Township Development and Projek Membaikpulih dan Menariktaraf Landasan Keretapi di Sektor Pantai Timur are progressing as per schedule.

    BIM services

    BIM services accounted for small proportion of the Group’s revenue. The reduction in revenue for current quarter was mainly due to the completion of certain BIM projects.

    Reimbursable income

    Reimbursable income is recognised on a back to back basis with sub-consultant and allowances claimed by supervision staff and therefore it has no significant impact on the financial performance of the Group regardless of the decline or rise in reimbursable income.



  3. Analysis of our revenue by geographical locations is as follows:-

  4. Local market continued to contribute significant portion of revenue amounting to 98.0% of the Group’s total revenue. The higher revenue posted by Malaysia segment was attributed to local projects explained in section (a) above.

  5. Profit after tax ("PAT")
  6. The PAT of RM3.40 million for current period (excluding one-off expenses totalling RM2.51 million incurred for our multiple corporate exercises for the acquisition of SMHB Engineering Sdn Bhd which were completed in March 2018) grew by 7.3% or RM0.2 million as compared to the previous quarter in the same corresponding period mainly attributable to higher gross profit achieved for the current period coupled with lower other operating expenses.

    The PAT recorded for the current quarter ended 31 March 2018 is RM6.0 million mainly attributable to gross profit of RM16.7 million achieved and no significant increase in the total operating expenses in the current quarter.

  7. Our unbilled order book which includes order book from SMHB Engineering Sdn Bhd as at 31 March 2018 is as follows:
  8. The above unbilled order book will be billed progressively on average over the next two (2) to five (5) years.

Prospects

  1. As disclosed in section A13, we had completed the acquisition of SMHB Engineering Group on 28 March 2018. SMHB Engineering Group is principally providing engineering consultancy services primarily in water infrastructure sector with more than 35 years of expertise and experiences in the water sector. In view of this, the Board of Directors is of the view that through SMHB Engineering Group, our enlarged Group will be able to leverage on their expertise and track record in the water sector to win tenders for any of the water-related contracts which we foresee the government will accelerate the spending on water services sector given their strategic importance to the country. Post acquisition, we expect the synergy created from both leading engineering consultancy firms will take our Group to greater heights which shall translate into record revenue and profits.
  2. As disclosed in our announcement to Bursa Securities on 6 February 2018, the Group has put in place a series of future plans as follows:-
    1. Continuous enhancement on its Building Information Modeling ("BIM") services which will be made mandatory in 2019 for public projects worth RM100 million in Malaysia;
    2. Proposed venture into a fourth (4th) core service i.e. facility management to develop a steady long term income business model;
    3. Geographical expansion into ASEAN and India regions; and
    4. Venturing into the provision of support services to the power generation sector which is expected to receive strong government support.

Premised on the aforesaid plans (i) and (ii), the Group expects to perform satisfactorily in the financial year 2018 given the strong order book, underpinned by the positive outlook in the construction and water industry both locally & regionally, driven largely by government continued spending on infrastructure projects.

Barring any unforeseen circumstances, the Board of Directors of the Company is of the opinion that the prospects for the remaining period to the end of the financial year ending 31 December 2018 will remain favourable.