Lee Metal : Second Quarter and/ or Half Yearly Results

LEE METAL GROUP LTD REG. No. 198205439C Second Quarter and Half Year Financial Statements And Dividend Announcement 1(a)(i) The Board of Directors of Lee Metal Group Ltd is pleased to announce the unaudited results of the Group for the Second Quarter and Half Year ended 30 June 2017. INCOME STATEMENT FOR SECOND QUARTER AND HALF YEAR ENDED 30 JUNE 2017 2nd Quarter ended 30 June Half Year ended 30 June

2017	2016	+/(-)	2017	2016	+/(-)
Notes	$'000	$'000	%	$'000	$'000	%
Turnover	78,666	72,703	8.2%	160,039	149,221	7.2%
Other operating income	A	92	130	(29.2%)	159	390	(59.2%)
Changes in inventories of finished	(63,995)	(54,254)	18.0%	(129,434)	(114,988)	12.6%

goods and work-in-progress, raw materials and consumables used and finished goods purchased

Employee benefits expense	B	(4,951)	(5,206)	(4.9%)	(10,039)	(10,946)	(8.3%)
Depreciation and amortisation	C	(2,541)	(2,631)	(3.4%)	(5,109)	(5,159)	(1.0%)
Insurance, freight and transportation	D	(459)	(908)	(49.4%)	(1,389)	(1,834)	(24.3%)
Rental and utilities	E	(1,582)	(1,602)	(1.2%)	(3,065)	(3,430)	(10.6%)
Repair and maintenance	F	(656)	(749)	(12.4%)	(1,378)	(1,598)	(13.8%)
Other operating expenses	G	(2,333)	(2,389)	(2.3%)	(4,533)	(3,851)	17.7%
Financial expense	H	(583)	(315)	85.1%	(947)	(866)	9.4%
Financial income	I	54	38	42.1%	95	84	13.1%
Share of results of associate	J	29	87	(66.7%)	13	131	(90.1%)
Profit before tax	1,741	4,904	(64.5%)	4,412	7,154	(38.3%)
Income tax expense	(295)	(894)	(67.0%)	(791)	(1,216)	(35.0%)
Profit attributable to equity holders of the	Company	1,446	4,010	(63.9%)	3,621	5,938	(39.0%)

STATEMENTS OF COMPREHENSIVE INCOME FOR SECOND QUARTER AND HALF YEAR ENDED 30 JUNE 2017 2nd Quarter ended 30 June Half Year ended 30 June

2017 $'000	2016 $'000	+/(-) %	2017 $'000	2016 $'000	+/(-) %
Profit attributable to equity holders of the Company	1,446	4,010	(63.9%)	3,621	5,938	(39.0%)
Other comprehensive income (Item that may be
reclassified subsequently to profit or loss):-
- Foreign currency translation reserve	(189)	52	n.m	(613)	(1,045)	(41.3%)
Total comprehensive income attributable to equity holders of the Company	1,257	4,062	(69.1%)	3,008	4,893	(38.5%)

1(a)(ii) Notes to the Income Statement 2nd Quarter ended 30 June Half Year ended 30 June

1. Other operating income comprises the following:

   2017 2016 +/(-) 2017 2016 +/(-) $'000 $'000 % $'000 $'000 %

   - Reversal of impairment loss on trade receivables	7	14	(50.0%)	7	14	(50.0%)
   - Gain on disposal of property, plant and equipment,net	23	-	n.m	-	-	n.m
   - Rental income	35	35	0.0%	70	70	0.0%
   - Sundry income	27	81	(66.7%)	82	306	(73.2%)
   92	130	(29.2%)	159	390	(59.2%)

2. Employee benefits expense decreased by 4.9% in 2nd Quarter 2017 and 8.3% in half year ended 30 June 2017 mainly due to reduction in employee headcount in line with lower volume in Fabrication & Manufacturing business.

3. Depreciation and amortisation expense decreased slight by 3.4% in 2nd Quarter 2017 and 1.0% in half year ended 30 June 2017 due to reduction in acquisition of fixed assets.

4. Insurance, freight and transportation decreased by 49.4% in 2nd Quarter 2017 and 24.3% in half year ended 30 June 2017 due to decrease in transportation cost in line with lower tonnage delivered as well as lower costs from outsourcing of transport service.

5. Rental and utilities decreased by 1.2% in 2nd Quarter 2017 and 10.6% in half year ended 30 June 2017 as the Group streamlined its warehouse operations in the Fabrication & Manufacturing business.

6. Repair and maintenance decreased by 12.4% in 2nd Quarter 2017 and 13.8% in half year ended 30 June 2017 due to lower costs incurred for upkeeping and servicing machineries and motor vehicles in the Fabrication & Manufacturing business.

   2nd Quarter ended 30 June Half Year ended 30 June

   2017	2016	+/(-)	2017	2016	+/(-)
   $'000	$'000	%	$'000	$'000	%

7. Other operating expenses include:

   - Worker's dormitories and related costs	165	403	(59.1%)	313	824	(62.0%)
   - Tools and consumables	406	363	11.8%	1,152	652	76.7%
   - Insurance	454	292	55.5%	658	657	0.2%
   - Bank charges	25	19	31.6%	57	44	29.5%
   - Trade commission	154	48	220.8%	208	159	30.8%
   - Professional fees	100	120	(16.7%)	156	222	(29.7%)
   - Travelling	117	165	(29.1%)	233	319	(27.0%)
   - Printing and stationery	190	178	6.7%	244	227	7.5%
   - Net loss in foreign exchange	45	463	(90.3%)	266	38	600.0%
   - Property, plant and equipment written off	-	-	n.m	-	3	(100.0%)
   - Impairment loss of trade receivables	314	-	n.m	356	6	5833.3%
   - Loss on disposal of property, plant and equipment, net	-	-	n.m	18	-	n.m
   - Other miscellaneous expenses	363 338 7.4%			872 700 24.6%
   2,333 2,389 (2.3%)			4,533 3,851 17.7%

8. Financial expense increased by 85.1% in 2nd Quarter 2017 and 9.4% in half year ended 30 June 2017 mainly due to higher trade financing in Fabrication & Manufacturing business.

9. Financial income increased by 42.1% in 2nd Quarter 2017 and 13.1% in half year ended 30 June 2017 due to increase in interest income from banks in line with higher fixed desposits and cash and bank balances.

10. Share of results of associate decreased by 66.7% in 2nd Quarter 2017 and 90.1% in half year ended 30 June 2017. This was due to the last unit of our joint venture executive condominium project, Austville Residences being sold in April 2017 compared to 3 units sold in the first half of last year.

11. n.m means not meaningful

    1(b)(i) STATEMENTS OF FINANCIAL POSITION	Group		Company
    30.06.2017	31.12.2016	30.06.2017	31.12.2016
    ASSETS	Notes	$'000	$'000	$'000	$'000
    Non-current assets Properties, plant and equipment	51,959	53,750	3,899	3,976
    Investment property	1,897	1,918	-	-
    Investment in subsidiaries Investment in associate	- 1,759	- 1,745	17,681 -	20,381 -
    Club memberships	410	440	122	127
    Deferred tax assets	693	693	-	-
    56,718	58,546	21,702	24,484
    Current assets Inventories	1	115,417	79,177	-	-
    Trade receivables	57,392	57,129	-	-
    Other receivables and deposits	2	2,281	250	8	8
    Prepayments	773	635	16	4
    Asset held for sale	3	16,716	14,424	-	-
    Forward exchange contracts Due from subsidiaries (non trade)	600 -	600 -	- 19,420	- 18,509
    Fixed deposits	20,715	28,758	5,565	8,500
    Cash and bank balances	80,195	69,081	852	1,272
    294,089	250,054	25,861	28,293
    Total assets	350,807	308,600	47,563	52,777

    Group 30.06.2017 31.12.2016		Company 30.06.2017 31.12.2016
    Notes	$'000	$'000	$'000	$'000
    EQUITY AND LIABILITIES
    Current liabilities
    Trade payables	4,695	4,383	23	23
    Bills payable to banks (secured)	1	126,989	77,311	-	-
    Other payables and accruals	8,056	9,854	209	283
    Advance payment from customers	259	354	-	-
    Provision for onerous contracts	13,287	14,287	-	-
    Hire purchase creditors	4,423	4,802	-	-
    Bank term loans (secured)	1,083	2,708	-	-
    Income tax payable	4,417	5,231	310	316
    163,209	118,930	542	622
    Net current assets	130,880	131,124	25,319	27,671
    Non-current liabilities Hire purchase creditors	5,128	4,514	-	-
    Deferred tax liabilities	278	277	278	278
    5,406	4,791	278	278
    Total liabilities	168,615	123,721	820	900
    Net assets	182,192	184,879	46,743	51,877
    Equity attributable to equity holders of the Company
    Share capital	46,473	46,473	46,473	46,473
    Retained earnings	140,538	142,612	270	5,404
    Foreign currency translation reserve	(4,819)	(4,206)	-	-
    182,192	184,879	46,743	51,877

    1(b)(ii) Notes to the Statements of Financial Position

12. Inventories increased by $36.2m mainly due to higher stock position in Fabrication & Manufacturing business. Correspondingly, bills payable to banks have also increased.

13. Other receivables and deposits increased by $2.0m mainly due to trade credit insurance claim receivables.

14. Asset held for sale increased by $2.3m due to the additional costs incurred on redevelopment of a new luxury bungalow.

    1(b)(iii) Group's borrowings and debt securities

    Amount repayable in one year or less, or on demand

    As at 30.06.2017		As at 31.12.2016
    Secured	Unsecured	Secured	Unsecured
    $'000	$'000	$'000	$'000
    132,495	-	84,821	-

    Amount repayable after one year

    As at 30.06.2017		As at 31.12.2016
    Secured	Unsecured	Secured	Unsecured
    $'000	$'000	$'000	$'000
    5,128	-	4,514	-

    Details of collateral

    The Group's bills payable and bank term loans are secured by the following:

15. corporate guarantees given by the Company and certain subsidiaries to the banks;

16. letters of negative pledges on the assets of the Company and certain subsidiaries, with the exception of property, plant and equipment under hire purchase arrangements;

17. a deed of charge and assignment of inventories and floating charge over trade receivables; and

18. the bank term loan is secured by legal mortgages over the Group's properties, plant and equipment with net book value of

$16.2m (31 Dec 2016: $17.8m).

1(c) CONSOLIDATED STATEMENT OF CASH FLOWS FOR SECOND QUARTER AND HALF YEAR ENDED 30 JUNE 2017 2nd Quarter ended 30 Half Year ended 30 June

Notes		2017 $'000	2016 $'000	2017 $'000	2016 $'000
Operating activities Profit before tax		1,741	4,904	4,412	7,154
Adjustments for:
Amortisation of club memberships		15	17	31	33
Depreciation of property, plant and equipment		2,515	2,603	5,056	5,104
Depreciation of investment property		11	11	22	22
Property, plant and equipment written off		-	-	-	3
(Gain)/loss on disposal of property, plant and equipment, net		(23)	-	18	-
Interest expense		583	315	947	866
Interest income		(54)	(38)	(95)	(84)
Foreign currency translation adjustments		(358)	54	(665)	(896)
Share of results of associate		(29)	(87)	(13)	(131)
Impairment loss of trade receivables		314	6	356	6
Write-back of provision for onerous contracts		(1,000)	-	(1,000)	-
Operating cash flows before changes in working capital		3,715	7,785	9,069	12,077
(Increase)/decrease in:
Inventories		9,524	23,677	(36,244)	55,607
Trade receivables		8,221	435	(619)	9,675
Other receivables, deposits and prepayments		(1,402)	1,432	(2,168)	366
Increase/(decrease) in:
Trade payables	865	1,267	313	(20,975)
Other payables and accruals	(5,009)	(253)	(1,893)	(1,572)
Cash flows from operations	15,914	34,343	(31,542)	55,178
Interest paid	(583)	(315)	(947)	(866)
Interest received	54	38	95	84
Income taxes paid	(1,582)	(1,388)	(1,604)	(1,485)
Net cash flows from/(used in) operating activities	4	13,803	32,678	(33,998)	52,911
Investing activities
Purchase of property, plant and equipment	(510)	(1,528)	(646)	(2,286)
Proceeds from disposal of property, plant and equipment	87	-	235	-
Addition to asset held for sale	(1,638)	(150)	(2,292)	(287)
Net cash flows used in investing activities	5	(2,061)	(1,678)	(2,703)	(2,573)
Financing activities
Increase/(decrease) in bills payable to banks (secured)	15,096	(31,800)	49,678	(46,092)
Repayment of bank term loans	(812)	(5,572)	(1,625)	(12,525)
Repayment of hire purchase	(1,293)	(1,332)	(2,640)	(2,677)
Dividends paid on ordinary shares	(5,695)	(5,695)	(5,695)	(5,695)
Net cash flows from/(used in) financing activities	6	7,296	(44,399)	39,718	(66,989)
Net decrease in cash and cash equivalents		19,038	(13,399)	3,017	(16,651)
Effect of exchange rate changes on cash and cash equivalents		173	-	53	(160)
Cash & cash equivalents at beginning of the year		81,699	92,595	97,840	96,007
Cash & cash equivalents at end of the period 7		100,910	79,196	100,910	79,196

1(c)(i) Notes to the Consolidated Statement of Cash Flows

19. Net cash flows from operating activities in 2nd Quarter 2017 decreased by $18.9m, from $32.7m to $13.8m mainly due to the increase in inventories. For half year ended 30 June 2017, net cash flows used in operating activities was $34.0m compared to net cash flows from operating activities of $52.9m. This was mainly due to the increase in inventories and decrease in trade payables.

20. Net cash flows used in investing activities in 2nd Quarter 2017 increased by $0.4m, from $1.7m to $2.1m. For half year ended 30 June 2017, net cash flows used in investing activities increased by $0.1m, from $2.6m to $2.7m. These were due to addition to asset held for sale but partially offset by reduction in purchase of property, plant and equipment and proceeds from disposal of plant and equipment.