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Financial Results

INTERIM FINANCIAL INFORMATION AS AT AND FOR THE HALF YEAR ENDED 30 JUNE 2022

Financials Archive

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CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE HALF YEAR ENDED 30 JUNE 2022


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE HALF YEAR ENDED 30 JUNE 2022


STATEMENTS OF FINANCIAL POSITION

REVIEW OF GROUP PERFORMANCE

Consolidated Statement of Profit or Loss

Revenue by business segment

6 months ended 30 June 2022 vs 6 months ended 30 June 2021

In the 1st half of 2022, our fish and accessories activities continued to be the core business segments, which together accounted for 89.9% of the total revenue. The overall revenue registered in the 1st half of 2022 of $38.1 million was approximately $1.6 million or 4.0% lower than its corresponding period in 2021. The reduction in revenue contribution from both the fish and accessories segments have resulted in a decrease in the overall revenue.

On a geographical basis, revenue from Singapore grew by 6.5%, while revenue from overseas dipped by 8.5% in the 1st half of 2022 as compared to its corresponding period in 2021.

Fish

During the 1st half of 2022, our aquaculture business, revolved around our farms in the Hainan Province in China, was impacted by the massive lockdown in China since January 2022 in order to suppress the escalation of its Covid-19 pandemic situation, which has dampened domestic demand and has resulted in depressed fish fry prices, notwithstanding that it was mitigated by the improved in revenue contribution from outside China (such as in Singapore and Malaysia) following the ease of Covid-19 restrictions in the region. In addition, the extensive reduction in air cargo capacity and flight frequencies amidst the pandemic has severely hindered our export business activities from China.

On the ornamental fish front, the extraordinary set of co-ordinated economic sanctions imposed against Russia in response to the political crisis in Ukraine has also affected our fish exports to the country and dampened the purchase sentiments of our customers in the surrounding region to a certain extent.

Although the above had drove down the revenue contribution from our fish segment by $0.9 million or 6.0% in the current financial period as compared to its corresponding period in 2021, we will continue our 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.

Accessories

Similarly for the accessories segment, our business activities in China were affected by the pandemic lockdown imposed by the local government to help limit the spread of Covid-19 infections, coupled with the weakened and conservative purchasing sentiments globally due to trade disruptions, geo-political tensions and economic uncertainties, had resulted in the dip in our accessories revenue by approximately $0.7 million or 3.5% in the current financial period as compared to its corresponding period in 2021.

Plastics

Revenue from our plastics activities registered flat growth in the current quarter as compared its corresponding period in 2021. We managed to stabilise our customer base, focusing on generating revenue through selling products with sustainable margins, such as essential items used to enhance hygiene protocols for the food and beverage packing and healthcare sectors.

Other income mainly consists of handling income derived from the handling of transhipments in relation to our aquaculture business. The increase in handling income was in tandem with the increase in aquaculture business activities during the current financial period.

The increase in selling and distribution expenses by approximately $0.1 million or 9.4% in the 1st half of 2022 as compared to its corresponding period in 2021 was in tandem with more marketing and promotion activities undertaken by the Group following the full resumption of business activities around the globe, coupled with the rising business costs during the current financial period.

Notwithstanding the higher personnel expenses as a result of the increase in headcount and annual salary revision, coupled with the broad-spectrum increase in operating costs as a result of elevated inflationary pressure, the overall general and administrative expenses for the six months ended 30 June 2022 remained stable at approximately $12.2 million as compared to its corresponding period in 2021 as the increases were offset by lower allowance for inventory obsolescence and depreciation charge during the current financial period.

The impairment losses on trade receivables were derived at by ascertaining the amount of expected credit losses that would result from all possible default events over the expected life of these receivables during both periods, which was in compliance with SFRS(I) 9 Financial Instruments.

The marginal decrease in net finance costs by $11K or 9.0% for the six months ended 30 June 2022 as compared to the corresponding period in 2021 was mainly due to lower interest expenses on lease liabilities. The reduction was partially offset by the increase in interest expenses on bank borrowings, following the rising interest rates charged by the financial institutions, despite lower outstanding amounts during the current financial period.

The effective tax rate registered for the 1st half ended 30 June 2022 was lower than the amount obtained by applying the statutory tax rate of 17% on profit before tax mainly due to the utilisation of tax credits.

The tax expense was mainly in relation to the operating profits registered by the profitable entities within the Group.

Profit before tax by business segment

6 months ended 30 June 2022 vs 6 months ended 30 June 2021

The reduction in operating profit from our accessories and plastic activities were mitigated by the considerable improvement in profit generated from our fish and aquaculture activities during the 1st half of 2022 as compared to its corresponding period in 2021.

Fish

Despite the slide in revenue registered by the fish business, the noticeable higher handling fees derived from the handling of transhipments in relation to our aquaculture business, has lifted the profitability of this segment in the 1st half of 2022 as compared to its corresponding period in 2021.

Accessories

The decrease in operating profit from our accessories business by approximately $0.2 million or 27.6% in the 1st half of 2022 as compared to its corresponding period in 2021 was in line with the reduction in revenue contribution during the current financial period.

Plastics

The profitability of our plastic activities dipped by approximately $0.2 million or 44.5% in the 1st half of 2022 as compared to its corresponding period in 2021 mainly due to the relatively higher raw material prices and a gradual increase in overall operational costs.

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.

Consolidated Statement of Financial Position

Total assets (Group) as at 30 June 2022 were $76.1 million, increased by approximately $1.3 million from $74.8 million as at 31 December 2021.

The increase was due to –

The above increases were partially offset by the decrease in cash and cash equivalents of $1.3 million.

Total liabilities (Group) as at 30 June 2022 were $25.0 million, increased by approximately $0.8 million from $24.2 million as at 31 December 2021.

The increase was mainly due to an increase in loans and borrowings by approximately $1.2 million with the increase in lease liabilities resulting from the recognition of additional ROU assets during the current financial period, despite there were repayments made on lease liabilities on a monthly basis.

The above increase was offset by –

Consolidated Statement of Cash Flows

The reduction in net cash from operating activities for the six months ended 30 June 2022 as compared to its corresponding period in 2021 was mainly due to marginally lower operating profit registered, coupled with the increase in trade receivables balance which was in line with the higher credit sales generated during the current financial period.

Net cash used in investing activities was mainly related to capital expenditure incurred for the purchase of equipment, as well as ongoing enhancements made to the farm and other facilities in Singapore and overseas. In addition, there was an unsecured convertible loan granted to AquaEasy Pte Ltd in January 2022.

Net cash used in financing activities was for the settlement of lease liabilities, as well as the servicing of interest payments on a monthly basis. In addition, there was payment of dividend made to the shareholders of the Company in April 2022.

VARIANCE FROM PROSPECT STATEMENT

There is no variance from the previous prospect statement, included in the full year results announcement for the year ended 31 December 2021, released via the SGXNET on 12 January 2022.

PROSPECTS

Moving into 2nd half of 2022, our Group expects the overall business landscape to be challenging.

The on-going Russia-Ukraine conflict had caused trade interruptions and sanctions. Such uncertainties and business disruptions had resulted in the reduction in economic activities in Europe, which calls for the acceleration in the diversification of our supply chains towards greater resilience. Closer to home, China’s zero-Covid policy and pandemic lockdowns had also led to significant supply chain and transportation network disruptions, and port congestions, which could dampen our business outlook. The inflationary pressure arising from these widespread disruptions had escalated the cost of doing business, such as higher inventory costs, rising finance costs, as well as the surge in energy costs, etc; which could affect our short-term profitability.

Despite all these extreme challenges, Qian Hu continues to preserve and focus on our core businesses which have remained resilient, a testament of our enduring strength and versatility, as our strong fundamentals help us to navigate through such turbulent times. Over the past two years, we had worked on strengthening our balance sheet, and we will continue to do so. Cautiously optimistic that we will be able to overcome the adverse external impacts to our business environment, we will persist on seizing opportunities for growth, developing new capabilities and becoming more competitive while remain focused on our core strengths and the long-term prospects of our business.
(More information on the Group’s plans were announced in detail in our Full Year Results Announcement dated 12 January 2022)

Barring unforeseen circumstances, the Group expects to grow its revenue while achieving profitability in the 2nd half of 2022.


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