Captii Limited - Financials

Investor Relations.

Financial Statements And Related Announcement - First Quarter Results

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Consolidated Statement of Comprehensive Income

	Group
	Quarter ended 31 March
	2018	2017	Inc/(dec)
	S$'000	S$'000	%
Revenue	6,035	4,999	20.7
Cost of Sales	(3,364)	(2,377)	41.5
Gross profit	2,671	2,622	1.9
Other Items of Income:
Interest Income	13	33	(60.6)
Other Gains	2	-	100.0
Other Items of Expense:
Technical Support Expenses	(750)	(780)	(3.8)
Distribution Costs	(432)	(446)	(3.2)
Administrative Expenses	(590)	(566)	4.2
Other Losses	(186)	(51)	264.7
Finance Costs	(1)	-	100.0
Profit Before Income Tax	727	812	(10.4)
Income Tax Expenses	(237)	(198)	19.5

Profit, Net of Tax	490	614	(20.2)

Profit, Net of Tax, Attributable to:
Owners of the Company	237	410	(42.2)
Non-Controlling Interest	253	204	23.9
Profit, Net of Tax	490	614	(20.2)

Consolidated Statement of Comprehensive Income

	Group
	Quarter ended 31 March
	2018	2017	Inc/(dec)
	S$'000	S$'000	%
Profit, Net of Tax	490	614	(20.2)
Other Comprehensive Income:
Item that may be reclassified subsequently to profit or loss:
Exchange Differences on Translating Foreign Operations, Net of Tax	892	(718)	224.2
Total Comprehensive Income for the period	1,382	(104)	1,429.2

Total Comprehensive Income for the period Attributable to:
Owners of the Company	1,047	(252)	515.4
Non-Controlling interest	335	148	126.1
Total Comprehensive Income for the year	1,382	(104)	1,429.2

Balance Sheet

	Group	Group
	As at	As at
	31/3/2018	31/12/2017
	S$'000	S$'000

ASSETS
Non-Current Assets
Plant and Equipment	1,720	1,694
Investment Property	2,733	2,660
Intangible Assets	11,970	11,646
Investments in Subsidiaries	-	-
Investment in an Associate	2,049	1,860
Other Financial Assets	7,914	7,439
Deferred Tax assets	953	933
Total Non-Current Assets	27,339	26,232

Current assets
Inventories	13	45
Trade and Other Receivables	17,133	20,061
Other Assets	283	320
Cash and Cash Equivalents	6,991	7,391
Total Current Assets	24,420	27,817

Total Assets	51,759	54,049

EQUITY AND LIABILITIES
Equity
Share Capital	31,948	31,948
Retained Earnings	13,666	13,429
Foreign Currency Translation Reserve	(7,512)	(8,322)
Equity, Attributable to Owners of the Parent	38,102	37,055
Non-Controlling Interest	3,486	3,151
Total Equity	41,588	40,206

Non-Current Liabilities
Deferred Tax Liabilities	305	305
Total Non-Current Liabilities	305	305

Current Liabilities
Income Tax Payables	208	359
Trade and Other Payables	6,603	11,604
Other Liabilities	3,055	1,575
Total Current Liabilities	9,866	13,538

Total Liabilities	10,171	13,843

Total Equity and Liabilities	51,759	54,049

Review of results for the financial period ended 31 March 2018 as compared to corresponding financial period ended 31 March 2017

Revenue

The Group achieved consolidated revenue of S$6.035 million for the quarter ended 31 March 2018 (“Q1 2018”), an increase of 20.7% against the revenue recorded in the corresponding quarter ended 31 March 2017 (“Q1 2017”). The increase in Group revenue for Q1 2018 is attributable to the improved revenue performance by GlobeOSS.

GlobeOSS posted revenue of S$3.170 million in Q1 2018, an increase of 55.3% from the S$2.041 million recorded in Q1 2017. This improvement in revenue was mainly driven by higher system sale contracts delivered in Q1 2018.

Unifiedcomms however recorded revenue of S$2.865 million in Q1 2018, a decrease of 3.1% from the S$2.958 million recorded in Q1 2017. This decrease in revenue was due to lower system sale contracts which was however partly mitigated by higher revenue from managed service contracts.

The Group's sales mix in Q1 2018 showed a decrease in the proportionate contribution of revenue of a recurring nature, with revenue from managed service contracts representing 57.6% of the Group's total revenue in Q1 2018 as compared to 61.2% in Q1 2017. The lower contribution of managed service contracts to the Group's sales mix in Q1 2018 was mainly contributed by the improvement in system sale contract revenues of the Group, which had improved 31.6% from S$1.942 million in Q1 2017 to S$2.556 million in Q1 2018.

Gross Profit and Gross Profit Margins

The Group posted gross profit of S$2.671 million in Q1 2018, an increase of 1.9% from the S$2.622 million recorded in Q1 2017. Gross profit margin was lower at 44.3% as compared to 52.5% in Q1 2017. The decline in gross profit margin is mainly attributable to the higher proportionate contribution of system sale contract revenues by GlobeOSS, which generally yield lower gross profit margin as a result of its typically higher third party costs.

Gross profit margin recorded by the Group on its managed service contract revenues also decreased to 54.6% in Q1 2018 from 56.5% in Q1 2017. This decrease in gross profit margin was mainly due to higher third-party costs on certain managed service contracts, coupled with the lower revenue contribution of certain mature, higher-margin managed service contracts.

Interest Income

The Group recorded interest income of S$0.013 million in Q1 2018, 60.6% lower against the S$0.033 million recorded in Q1 2017. This is mainly attributable to lower cash and cash equivalents as a result of on-going investment in other financial assets by the Group's venture investment subsidiary, Captii Ventures Pte Ltd.

Other Items of Expense

The Group recorded total expenses of S$1.959 million in Q1 2018, 6.3% higher than the S$1.843 million incurred in Q1 2017. This is mainly attributable to a higher foreign exchange loss recorded in Q1 2018, as a result of unfavourable exchange rate movements of USD, PKR and MYR against the Group's reporting currency in SGD.

Net Profit and EBITDA

The Group recorded lower net profit of S$0.490 million and EBITDA of S$0.986 million in Q1 2018 as compared to the S$0.614 million in net profit and S$1.048 million in EBITDA recorded by the Group in Q1 2017. The lower net profit and EBITDA results recorded in Q1 2018 are mainly attributable to the flow-down effects of higher total expenses recorded in Q1 2018.

Detailed Segmental Breakdown of Group Revenue and Gross Profit

The detailed segmental breakdown of the Group's revenue and gross profit for Q1 2018, together with comparative results for Q1 2017 is provided below:

Group revenue as analysed by business unit for the quarter ended 31 March

	2018 S$'000	Sales mix %	2017 S$'000	Sales mix %
Unifiedcomms	2,865	47.5	2,958	59.2
GlobeOSS	3,170	52.5	2,041	40.8
Captii Ventures	-	-	-	-
Others	-	-	-	-
Total	6,035	100.0	4,999	100.0

Unifiedcomms - Segment for content-driven mobile VAS, messaging and signaling systems, solutions and managed services.

GlobeOSS - Segment for mobile network operation support systems, solutions and managed services.

Captii Ventures - Segment for strategic investment in early and late-stage technology ventures.

Others - Segment for operational headquarters of the Group and investment holding.

Group revenue as analysed by geographical segment for the quarter ended 31 March

External Sales	2018
External Sales	Unifiedcomms S$'000	GlobeOSS S$'000	Others S$'000	Group S$'000
South East Asia (SEA)	2,604	3,166	-	5,770
South Asia (SA)	190	-	-	190
Middle East & Africa (MEA)	71	-	-	71
Others	-	4	-	4
Total	2,865	3,170	-	6,035

External Sales	2017
External Sales	Unifiedcomms S$'000	GlobeOSS S$'000	Others S$'000	Group S$'000
South East Asia (SEA)	2,675	2,037	-	4,712
South Asia (SA)	201	-	-	201
Middle East & Africa (MEA)	82	-	-	82
Others	-	4	-	4
Total	2,958	2,041	-	4,999

Group revenue as analysed by contract type for the quarter ended 31 March

External Sales	2018			2017
External Sales	System Sale⁽¹⁾	Managed Service⁽²⁾	Group	System Sale⁽¹⁾	Managed Service⁽²⁾	Group
Revenue	2,556	3,479	6,035	1,942	3,057	4,999
Gross Profit	770	1,901	2,671	895	1,727	2,622
Gross Profit (%)	30.1%	54.6%	44.3%	46.1%	56.5%	52.5%

⁽¹⁾ System Sale - this refers to contracts that involve the outright purchase by customers of systems comprising the Group's products and technologies, and where these systems are in turn delivered as turnkey solutions. The scope of work for a system sale contract includes system design, implementation, testing and commissioning services.

⁽²⁾ Managed Service - this refers to contracts that involve the provision of both systems comprising the Group's products and technologies as well as the Group's professional services, on a recurring, revenue sharing, software-as-a-service, pay-per-use or monthly or quarterly fixed and variable fee basis. Also treated as a managed service contract are system maintenance and technical support contracts with existing customers of the Group.

Review of the Group's financial position as at 31 March 2018 as compared to the Group's financial position as at 31 December 2017

Non-cash current assets of the Group decreased from $20.426 million as at 31 December 2017 to S$17.429 million as at 31 March 2018. This 14.7% decrease in non-cash current assets was mainly due to the decrease in trade and other receivables of the Group, as a result of higher collections relating to trade receivables from late 2017.

Total non-current assets of the Group increased from S$26.232 million as at 31 December 2017 to S$27.339 million as at 31 March 2018. This 4.2% increase in non-current assets is mainly attributable to:-

* An increase in investment in other financial assets and an associate, made by the Group's venture investment subsidiary, Captii Ventures Pte Ltd; and
* An increase in the Group's MYR denominated intangible assets and investment property caused by the effect of foreign exchange movements.

Total liabilities of the Group decreased from S$13.843 million as at 31 December 2017 to S$10.171 million as at 31 March 2018. This 26.5% decrease in total liabilities is attributable to the decrease in trade and other payables.

Review of the Group's cash flow for the quarter ended 31 March 2018 as compared to the corresponding quarter ended 31 March 2017

The Group's net cash flow from operations for Q1 2018 was S$0.457 million, as compared to S$3.161 million for Q1 2017, a decrease of 85.5%. This significant decrease was primarily due to an unfavourable working capital change of S$0.529 million for Q1 2018, in contrast with the favourable working capital change of S$2.112 million for Q1 2017, which was mainly caused by lower collections of trade receivables for Q1 2018 as compared to the corresponding quarter in 2017.

The Group's net cash flow used in investing activities for Q1 2018 was S$1.034 million, as compared to S$0.961 million for Q1 2017. The higher net cash used in investing activities was mainly due to the higher investment cost on certain venture investment portfolio companies (classified as other financial assets and an associate).

The Group's net cash flow used in financing activities for Q1 2018 was S$0.516 million, as compared to S$0.750 million for Q1 2017. The lower net cash used in financing activities was mainly due to absence of dividend payout by a subsidiary to Non-Controlling Interest.

Commentary

The directors and management of the Group expect the financial year 2018 to be challenging but remain optimistic about growth prospects.

Although the growth in system sale business of GlobeOSS in 2017 had significantly augmented the slower than desired growth of the Group's managed service contract portfolio, uncertainty and hence lumpiness is still to be expected in the contribution of system sale contracts to the Group's future results.

The need for management to continue to strengthen the Group's managed service contract portfolio and to continue to grow its venture investment portfolio as the basis for delivering steady, if not rapid yet sustainable future growth, remains.

The growing interest and opportunity in internet-driven application services for enterprises, fintech as well as internet and handset-app delivered digital media will guide the Group's venture investment activities. The Group's venture investment plans in the year ahead will continue to focus primarily on these growth businesses in the SEA region and will complement the organic growth strategy in place for the Unifiedcomms and GlobeOSS businesses.