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SECOND QUARTER AND HALF YEAR FINANCIAL STATEMENTS ANNOUNCEMENT FOR THE PERIOD ENDED 30 JUNE 2019

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STATEMENT OF PROFIT OR LOSS FOR THE SECOND QUARTER AND SIX MONTHS ENDED 30 JUNE 2019


STATEMENT OF COMPREHENSIVE INCOME FOR THE SECOND QUARTER AND SIX MONTHS ENDED 30 JUNE 2019


STATEMENTS OF FINANCIAL POSITION

REVIEW OF GROUP PERFORMANCE

Revenue

6 months 2019 vs 6 months 2018

For the six months ended 30 June 2019, the fish and accessories activities continued to be our core business segments, which together accounted for approximately 85.1% of the total revenue. Our overall revenue registered of $38.1 million for the six months ended 30 June 2019 was approximately $5.5 million or 12.6% lower than that of its corresponding period in 2018.

On a geographical basis, revenue from Singapore grew by approximately 1.5% in the 1st half of 2019, while revenue from overseas dipped by 18.0% as compared to its corresponding period in 2018.

2Q 2019 vs 2Q 2018

Our overall revenue decreased by approximately $2.7 million or 12.5% in the 2nd quarter of 2019 as compared to its corresponding period in 2018. All business segments registered a reduction in revenue contributions during the current quarter.

Fish

With the improved revenue generated from the aquaculture business in the Hainan Province (China), as well as our continuous efforts to increase our export of ornamental fish by diversifying to more customers and more countries around the world from our export hubs in Singapore, Malaysia, Thailand and Indonesia, it had given rise to a positive growth in our fish revenue contribution. The improvement, however, was offset by the intense price competition from the sales of Dragon Fish since the previous financial year, which had resulted in a continuous decline in its selling price throughout the year. This had, to some extent, affected the overall fish revenue contribution in the current quarter as compared to its corresponding period in 2018.

Nonetheless, with more efforts focused on the emerging aquaculture busines, we envisage that the revenue and profitability of the Group’s fish business will gradually revive in the coming quarters.

Accessories

The revenue contribution from our accessories business plunged by approximately $1.3 million or 12.5% in the current quarter as compared to its corresponding period in 2018. This was mainly a result of the disposal of our subsidiary in Shanghai during the 4th quarter of 2018, with the intention to consolidate and streamline the Group’s accessories operations in China, so as to trim down operating costs and work towards a more efficient and effective inventory management and logistic system.

In addition, despite our conscientious efforts made to focus on selling more of our proprietary brand of innovative products, our revenue from the accessories export activities was affected by the weakening purchasing sentiments experienced globally. Our customers grew to be more vigilant in their procurement requirements citing the volatility of the trading currencies and sentiments were further compounded by the unpredictable outcome of the on-going trade war during the current quarter.

Plastics

Revenue from our plastics activities registered a reduction of approximately $0.1 million or 4.4% in the 2nd quarter of 2019 as compared to its corresponding period in 2018, mainly due to the softening of demand from the domestic market. We managed to focus on generating revenue through selling products with sustainable margins instead of entering into price war with our competitors.

2Q 2019 vs 1Q 2019

Although the revenue from our fish activities registered a reduction of $0.8 million or 9.1% quarter-on-quarter, the increase in our accessories revenue by approximately $1.2 million or 15.6% has resulted in an increase in overall revenue by approximately $0.4 million or 1.9% in the current quarter as compared to the previous quarter.

Fish

Moving into 2nd quarter of 2019, despite improved revenue generated from the aquaculture business in the Hainan Province (China), we saw a reduction in our fish revenue contribution by $0.8 million or 9.1% as compared to the previous quarter. This is mainly due to the summer holidays in Europe, which started in June and will extend till early September. Our ornamental fish export was affected as it has been the norm that our European customers will mostly take off for their own vacation and do not actively make ornamental fish related purchases during the duration of the holiday season.

Accessories

Traditionally, during the 1st quarter of each year, revenue contribution is lower from our China operations as they are closed for operations during the week-long Chinese New Year holidays. This had attributed to the lower accessories revenue in the previous quarter. In the current quarter, our accessories export business continued its leverage on the Group’s existing overseas distribution bases & network and infrastructure available to explore more untapped markets with growth potential. This had resulted in an increase in revenue contribution registered by this business segment of approximately $1.2 million or 15.6% in the current quarter as compared to the previous quarter.

Plastics

Revenue from our plastic business remained relatively consistent in the current quarter, comparable to that of the previous quarter in 2019.

Profitability

6 months 2019 vs 6 months 2018

Despite the lower revenue contribution registered, our overall operating profit for the six months ended 30 June 2019 was comparable to its corresponding period in 2018. The decline in profitability from our accessories business was offset by the considerable improvement in profit generated from our plastics business.

2Q 2019 vs 2Q 2018

Notwithstanding the higher profit contribution from our fish business, the reduction in operating profit generated from the accessories business segment has partially slashed the profitability registered in the 2nd quarter of 2019 as compared to its corresponding period in 2018.

Fish

The improvement in the operating profit from our fish business in the current quarter as compared to its corresponding period in 2018 was mainly due to the difference in sales mix recorded in both periods (by focusing more on the sales of edible fish while gradually downsizing our Dragon Fish activities), coupled with the improved revenue contribution and better margin yielded from our aquaculture business.

Accessories

Operating profit from our accessories business decreased by approximately $0.2 million or 26.4% in the current quarter as compared to the corresponding period in 2018 due to lower revenue contribution mainly a result of the disposal of our subsidiary in Shanghai during the 4th quarter of 2018, with the intention to consolidate and streamline the Group’s accessories operations in China, as well as our on-going efforts to capture more sales, which had sliced off the profit margin of our accessories business in the current quarter.

Plastics

Despite the lower revenue contribution in the current quarter, the improved profit margins and the difference in sales mix recorded in both periods had given rise to the surge in profit contribution from the plastics business by approximately $0.1 million or 56.8% in the 2nd quarter of 2019 as compared to the corresponding period in 2018.

Unallocated corporate expenses

These were staff costs and corporate/administrative expenses incurred in relation to the overseeing of both the Group’s local and overseas operations.

2Q 2018 vs 1Q 2018

Fish

As mentioned above, the substantial growth in profitability, despite a reduction in revenue registered by the fish business in the 2nd quarter of 2019 as compared to its previous quarter, was a result of the difference in sales mix, coupled with the improved revenue contribution and better margin yielded from our aquaculture business in the current quarter.

Accessories

The better profit yielded from our accessories activities were in accordance with the steady increase in revenue from 1st quarter 2019 to 2nd quarter of 2019 as well as the sales of more proprietary brand of innovative products with better margins.

Plastics

The profitability of the plastics business was lifted by the improved profit margins due to the difference in sales mix recorded in both quarters, despite the flat growth in revenue contribution in the current quarter, as compared to the previous quarter in 2019.

VARIANCE FROM PROSPECT STATEMENT

There is no variance from the previous prospect statement.

PROSPECTS

The visions of our Group are:
  1. - to be the world’s Number 1 ornamental fish exporter;
  2. - to breed Ornamental Fish of the highest value;
  3. - to establish our “Ocean Free” and “OF” brands as the most recognisable amongst aquarium accessories brands in Asia;
  4. - to be an innovative technology company; and
  5. - to produce antibiotic-free, sustainable edible fish for the benefit of our consumers and the environment.
The above-mentioned visions of the Group were announced in detail in our Full Year Financial Statements and Dividend Announcement dated 11 January 2019.

The business landscape continues to be challenging, requiring us to be continually innovative, nimble and agile. We believe that we have the right combination of quality products, an innovative and creative mindset, a strategic roadmap and a strong business network that will drive our performance. Over the years, we have shown ourselves to be resilient, sparing no effort to transform ourselves so as to stay ahead of the competition and to strengthen our business fundamentals. We will continue to focus on innovation to expand our pipeline of compelling products particularly in the areas of filtration, fish nutrition and genetic breeding of unique Dragon Fish, as well as the sustainable farming of edible fish fingerlings for the China consumer market while actively increasing the number of export markets for seafood products. These initiatives will continue to position us favourably as we move ahead to achieve our vision of being the world’s largest ornamental fish company.