Financial Results
INTERIM FINANCIAL INFORMATION FOR THE SECOND HALF AND FINANCIAL YEAR ENDED 31 DECEMBER 2023
Financials Archive
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CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE SECOND HALF AND FINANCIAL YEAR ENDED 31 DECEMBER 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE SECOND HALF AND FINANCIAL YEAR ENDED 31 DECEMBER 2022
STATEMENTS OF FINANCIAL POSITION
REVIEW OF GROUP PERFORMANCE
Consolidated Statement of Profit or Loss
Revenue by business segment
Financial Year 2022 vs Financial Year 2021
For the year ended 31 December 2022, the fish and accessories activities continued to be our core business segments, which together accounted for approximately 89.4% of the total revenue. The overall revenue registered of $75.3 million in FY 2022 was approximately $4.7 million or 5.9% lower than that reported in FY 2021. The reduction in revenue contribution from both the fish and accessories segments have resulted in a decrease in the Group’s overall revenue.
On a geographical basis, revenue from Singapore grew by 9.8%, while revenue from overseas dipped by 12.9% in FY 2022 as compared to FY 2021.
6 months ended 31 December 2022 vs 6 months ended 31 December 2021
On the ornamental fish front, the on-going Russia-Ukraine conflict and the geopolitical landscape continued to affect our fish exports to Russia and dampened the purchase sentiments of our customers in the surrounding region to a certain extent has resulted in a relatively lower revenue reported during the 2nd half of 2022 as compared to the pre-war days in FY 2021.
Nonetheless, our aquaculture business, revolved around our farms in the Hainan Province in China, which was previously impacted by the extensive reduction in air cargo capacity and flight frequencies amidst the pandemic, saw a recuperation of revenue from this business segment with a stable flow of customers’ orders in the 2nd half of 2022 following the gradual resumption of air traffic since June 2022. This has alleviated the impact of the reduction in revenue contribution from the export of ornamental fish as mentioned above.
Although the above has given rise to an overall decline in the revenue contribution from our fish segment by $0.4 million or 2.3% 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.
AccessoriesSimilarly for the accessories segment, our business activities in Guangzhou (China) were severely 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, geopolitical tensions and economic uncertainties, had resulted in the dive in our accessories revenue by approximately $3.1 million or 14.3% in the current financial period as compared to its corresponding period in 2021.
PlasticsRevenue from our plastics activities registered stable growth of $0.3 million or 6.9% in the current financial period 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 year.
The decrease in selling and distribution expenses by approximately $0.7 million or 34.6% and $0.6 million or 18.7% in the 2nd half of 2022 and for the financial year ended 31 December 2022 respectively as compared to the corresponding periods in 2021 was in tandem with the reduction in revenue contribution in FY 2022, and that there were also fewer marketing and promotion activities undertaken by the Group during the current financial year.
Notwithstanding the higher personnel expenses due to the increase in headcount and annual salary revision, the adverse foreign currency exchange rates, coupled with a broad-spectrum increase in operating costs as a result of elevated inflationary pressure, the overall general and administrative expenses remained relatively stable at approximately $12 million and $24 million in the 2nd half of 2022 and for the financial year ended 31 December 2022 respectively as compared to its corresponding periods in 2021, as the increases were offset by lower amount of allowance for inventory obsolescence, lower impairment loss recognised on trade receivables, as well as lower depreciation charge incurred during the current financial year.
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 increase in net finance costs by $106K or 106.0% and $96K or 43.2% in the 2nd half of 2022 and for the financial year ended 31 December 2022 respectively as compared to the corresponding periods in 2021 was mainly due to 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 financial year ended 31 December 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
Financial Year 2022 vs Financial Year 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 in FY 2022 as compared to FY 2021.
6 months ended 31 December 2022 vs 6 months ended 31 December 2021
Fish
Despite the marginal reduction 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 2nd half of 2022 as compared to its corresponding period in 2021.
Accessories
The decrease in operating profit from our accessories business by approximately $0.3 million or 36.2% in the 2nd half of 2022 as compared to its corresponding period in 2021 was in line with the decline in revenue contribution during the current financial period.
Plastics
With the higher revenue registered in the 2nd half of 2022, the profitability of the plastics business improved gradually as compared to its corresponding period in 2021.
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. The higher unallocated corporate expenses incurred in the 2nd half of 2022 as compared to its corresponding period in 2021 was mainly due to the increase in corporate headcount, escalating finance costs, adverse foreign currency exchange rates, coupled with resources invested to enhance and consummate the Group’s sustainability reporting efforts.
Consolidated Statement of Financial Position
Total assets (Group) as at 31 December 2022 were $72.4 million, decreased by approximately $2.4 million from $74.8 million as at 31 December 2021.
The reduction was due to –
- decrease in property, plant and equipment and biological assets by approximately $0.5 million as a result of depreciation charge during the financial year, despite there were capital expenditure incurred in relation to the purchase of equipment and ongoing enhancements made to the farm and other facilities in Singapore and overseas, as well as the recognition of additional right-of-use (ROU) assets in accordance with the Singapore Financial Reporting Standards (International) (“SFRS(I)”) 16 Leases.
- decrease in trade and other receivables outstanding by $0.6 million as a result of our conscientious efforts made in the monitoring and collection of trade receivables outstanding throughout the financial year. Accordingly, the trade receivables turnover days has improved from 61 days as at 31 December 2021 to 59 days as at 31 December 2022. This was, however, partially offset by the outstanding proceeds from the liquidation of a subsidiary completed in end December 2022 of approximately $0.2 million.
- decrease in inventory by $0.7 million as a result of the continuous review carried out to streamline our inventory management process so as to better and effectively manage our inventory holding.
- decrease in cash and cash equivalents of approximately $1.6 million utilised for the repayment of bank borrowings during the current financial year.
The above decreases were partially offset by the increase in unsecured convertible loan amounted to $1.0 million granted to AquaEasy Pte Ltd in January 2022.
Total liabilities (Group) as at 31 December 2022 were $20.8 million, decreased by approximately $3.3 million from $24.1 million as at 31 December 2021.
The reduction was due to –
- decrease in loans and borrowings by approximately $2.7 million resulting from the repayment of bank borrowings of $3.0 million in FY 2022, partially offset by the increase in lease liabilities upon the recognition of additional ROU assets during the current financial year, despite there were repayments made on lease liabilities on a monthly basis.
- decrease in trade and other payables by approximately $0.6 million upon the settlement of trade liabilities and non-trade suppliers during the current financial year.
Consolidated Statement of Cash Flows
The reduction in net cash from operating activities during the 2nd half of 2022 and for the financial year ended 31 December 2022 as compared to its corresponding periods in 2021 was mainly due to lower operating profit registered, coupled with a lower amount of trade receivables realised into cash during the current financial year.
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 bank loans and lease liabilities, payment of dividend to the non-controlling shareholder of a subsidiary, 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 released via the SGXNET on 19 July 2022.
PROSPECTS
Having pandemic issues pretty much out of the way, the world is now grappling with geopolitical issues, such as the Russia-Ukraine conflict and serious macro-economic concerns such as inflation, which brought about interest rate interventions from the US Federal Reserve and other central banks around the world. This resulted in significantly higher business costs, such as increasing inventory costs, rising finance expenses, as well as the surge in energy prices, etc, which could continue to affect the Group’s short-term profitability.
Nonetheless, we envisage that the growth momentum of our business segments will continue into Year 2023 as markets gradually recover.
Aquaculture business
Our Aquaculture business continues to make progress and we hope to explore for more opportunities in expanding our trading of seafood aquaculture products, particularly in Southeast Asia.
The Group’s Aquaculture business is based on our patented Hydro-Pure technology whose superlative filtration capability is able to develop a super-intensive shrimp farming model which achieves higher levels of success in shrimp production compared to traditional methods. Furthermore, with our strategic partnership with Bosch’s AquaEasy Pte Ltd (“AquaEasy”), we are able to further enhance our system’s predictability and productivity, not only for shrimp farming, but also to other aquaculture species, ornamental fish and aquaponics.
AquaEasy uses artificial intelligence (AI) and Internet of Things (ioT)-based solutions to facilitate increased productivity, predictivity and implement sustainable aquaculture practices while reducing risks and costs. Apart from Qian Hu, AquaEasy’s AI solution has also been successfully deployed at other aquaculture farms in Vietnam and Indonesia. Our collaboration with AquaEasy will also enable us to cross-sell to our markets in Malaysia, Thailand and China where we have domain expertise.
Ornamental Fish business
Meanwhile, ornamental fish will continue to be an important core business of the Group, as we grow our export of ornamental fish to more than 80 cities and countries from our export hubs in Singapore, Malaysia, Thailand, Indonesia and China. As these countries together account for between 60% to 70% of the world’s ornamental fish, we believe that Qian Hu is the region’s biggest exporter of ornamental fish, capturing more than 5% of the global market share in terms of ornamental fish export.
We are committed to our long-term goal of expanding our export footprint to more than 100 cities and countries, focusing on high-growth regions such as the Middle East, Eastern Europe, China and India, and gradually increasing our global market share to 10%, thereby securing our vision of being the top ornamental fish exporter in the world.
Aquarium and Pet Accessories business
Strong R&D capabilities
With our stronghold in innovation and new product development across the Group, we continue to strive
for breakthroughs in developing new varieties of nutrition and cutting-edge accessories products.
Focus on own-brands
Our proprietary brands “Ocean Free” and “OF”, with their extensive range of fish tanks, lightings,
filtration systems and other aquarium paraphernalia, have led the growth of our accessories segment,
and we strive to increase our reach to more than 60 cities and countries.
Develop fish nutrition & medications
We are also committed to developing the best-in-class products in nutritional and healthcare products
for ornamental and edible fish/seafood. We are working with researchers in developing yeast-based fish
nutritional products that complement our existing antibiotic-free feeds.
Expand pet accessories segment
Since the start of the pandemic, the dog, cats and small animals’ segment within the pet industry has
been growing significantly, partly due to the work-from-home trend. As such, we intend to ride on this
rising demand by expanding the range of our pet foods, medications and accessories products for export
and the domestic markets. Over the years, Qian Hu has since developed a few pet accessories brands,
but they have largely been complementary to our mainstay ornamental fish business. With the growing
interests in this space, the pet accessories segment is likely to be another growth driver for the Group,
focusing primarily on Singapore and Southeast Asia region.
OUTLOOK
As we move into FY 2023, we expect the overall business environment to remain challenging, with uncertainties such as when and how the Russia-Ukraine war end and how inflation would pan out globally. We are, however, hopeful that the recent steps that China has taken to relax its zero-Covid policies and border measures are positive signals that the country is reopening its economy. These are encouraging for businesses, such as Qian Hu, as China’s zero-Covid policies had significantly hampered our operations in the country.
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 three 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 sustainability of our business.
Barring unforeseen circumstances, the Group expects to achieve profitability in FY 2023.