Captii Limited - Financials

Investor Relations.

Financial Statements And Related Announcement - Third Quarter Results

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Consolidated Statement of Comprehensive Income

	Group
	Quarter ended 30 September
	Q3 2018	Q3 2017	Inc/(dec)
	S$'000	S$'000	%
Revenue	9,041	4,372	106.8
Cost of Sales	(5,494)	(1,907)	188.1
Gross profit	3,547	2,465	43.9
Other Items of Income:
Interest Income	12	33	(63.6)
Other Gains	198	942	(79.0)
Other Items of Expense:
Technical Support Expenses	(941)	(831)	13.2
Distribution Costs	(475)	(466)	1.9
Administrative Expenses	(682)	(646)	5.5
Other Losses	23	(258)	(108.8)
Finance Costs	(0)	-	0.0
Profit Before Income Tax	1,682	1,239	35.8
Income Tax Expenses	(417)	(283)	47.4

Profit, Net of Tax	1,265	956	32.3

Profit, Net of Tax, Attributable to:
Owners of the Company	782	778	0.5
Non-Controlling Interest	483	178	171.3
Profit, Net of Tax	1,265	956	32.3

	Group
	9 months ended 30 September
	2018	2017	Inc/(dec)
	S$'000	S$'000	%
Revenue	22,710	13,723	65.5
Cost of Sales	(14,179)	(6,300)	125.1
Gross profit	8,531	7,423	14.9
Other Items of Income:
Interest Income	37	106	(65.1)
Other Gains	200	945	(78.8)
Other Items of Expense:
Technical Support Expenses	(2,485)	(2,344)	6.0
Distribution Costs	(1,337)	(1,354)	(1.3)
Administrative Expenses	(1,919)	(1,869)	2.7
Other Losses	(17)	(438)	(96.1)
Finance Costs	(1)	-	100.0
Profit Before Income Tax	3,009	2,469	21.9
Income Tax Expenses	(676)	(587)	15.1

Profit, Net of Tax	2,333	1,882	24.0

Profit, Net of Tax, Attributable to:
Owners of the Company	1,504	1,404	7.1
Non-Controlling Interest	829	478	73.4
Profit, Net of Tax	2,333	1,882	24.0

Consolidated Statement of Comprehensive Income

	Group
	Quarter ended 30 September
	Q3 2018	Q3 2017	Inc/(dec)
	S$'000	S$'000	%
Profit, Net of Tax	1,265	956	32.3
Other Comprehensive Income:
Item that may be reclassified subsequently to profit or loss:
Exchange Differences on Translating Foreign Operations, Net of Tax	(711)	88	(908.3)
Total Comprehensive Income for the period	554	1,044	(46.9)

Total Comprehensive Income for the period Attributable to:
Owners of the Company	148	858	(82.8)
Non-Controlling interest	406	186	118.3
Total Comprehensive Income for the year	554	1,044	(46.9)

	Group
	9 months ended 30 September
	2018	2017	Inc/(dec)
	S$'000	S$'000	%
Profit, Net of Tax	2,333	1,882	24.0
Other Comprehensive Income:
Item that may be reclassified subsequently to profit or loss:
Exchange Differences on Translating Foreign Operations, Net of Tax	62	10	(517.4)
Total Comprehensive Income for the period	2,395	1,892	26.6

Total Comprehensive Income for the period Attributable to:
Owners of the Company	1,573	1,414	11.3
Non-Controlling interest	822	478	72.0
Total Comprehensive Income for the year	2,395	1,892	26.6

Balance Sheet

	Group	Group
	As at	As at
	30/9/2018	31/12/2017
	S$'000	S$'000

ASSETS
Non-Current Assets
Plant and Equipment	1,718	1,694
Investment Property	2,662	2,660
Intangible Assets	11,605	11,646
Investments in Subsidiaries	-	-
Investment in an Associate	1,919	1,860
Other Financial Assets	8,179	7,439
Deferred Tax assets	1,157	933
Total Non-Current Assets	27,240	26,232

Current assets
Inventories	370	45
Trade and Other Receivables	19,592	20,061
Other Assets	506	320
Cash and Cash Equivalents	6,193	7,391
Total Current Assets	26,661	27,817

Total Assets	53,901	54,049

EQUITY AND LIABILITIES
Equity
Share Capital	31,948	31,948
Retained Earnings	14,534	13,429
Foreign Currency Translation Reserve	(8,253)	(8,322)
Equity, Attributable to Owners of the Parent	38,229	37,055
Non-Controlling Interest	3,874	3,151
Total Equity	42,103	40,206

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

Current Liabilities
Income Tax Payables	334	359
Trade and Other Payables	8,832	11,604
Other Liabilities	2,327	1,575
Total Current Liabilities	11,493	13,538

Total Liabilities	11,798	13,843

Total Equity and Liabilities	53,901	54,049

Review of results for the third quarter ended 30 September 2018 as compared to corresponding quarter ended 30 September 2017

Group Revenue

The Group achieved consolidated revenue of S$9.041 million for the quarter ended 30 September 2018 ("Q3 2018"), an increase of 106.8% against the revenue recorded in the corresponding quarter ended 30 September 2017 ("Q3 2017"). The increase in Group revenue for Q3 2018 is attributable to the improved revenue performance of both GlobeOSS and Unifiedcomms.

GlobeOSS posted revenue of S$5.996 million in Q3 2018, an increase of 310.7% from revenue of S$1.460 million recorded in Q3 2017. This increase was driven by higher revenues from both system sale and managed service contracts.

Unifiedcomms posted revenue of S$3.045 million in Q3 2018, an increase of 4.6% from the S$2.912 million recorded in Q3 2017. This increase was driven by higher revenue from managed service contracts

The Group's sales mix in Q3 2018 showed a decrease in the proportionate contribution of revenue of a recurring nature, with revenue from managed service contracts representing 42.7% of the Group's total revenue in Q3 2018 as compared to 78.4% in Q3 2017. The lower relative contribution of managed service contracts to the Group's sales mix in Q3 2018 is mainly attributable to the significant improvement in system sale contract revenues of the Group, which had increased 449.6% from S$0.943 million in Q3 2017 to S$5.183 million in Q3 2018.

Group Gross Profit and Gross Profit Margins

The Group posted gross profit of S$3.547 million in Q3 2018, an increase of 43.9% from the S$2.465 million recorded in Q3 2017, however gross profit margin was lower at 39.2% as compared to 56.4% in Q3 2017. This was primarily due to lower gross profit margin realised on Group's system sale contract revenues, which declined from 73% in Q3 2017 to 28.1% in Q3 2018. The decline in gross profit margin is mainly attributable to the higher proportionate contribution of system sale contract revenues by GlobeOSS, which generally delivers 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 however increased to 54.2% in Q3 2018 from 51.8% in Q3 2017. This increase in gross profit margin was mainly due to lower third-party costs on certain managed service contracts.

Interest Income

The Group recorded interest income of S$0.012 million in Q3 2018, 63.6% lower against the S$0.033 million recorded in Q3 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 gains

The Group recorded other gains of S$0.198 million in Q3 2018, 79% lower against the S$0.942 million recorded in Q3 2017. This was mainly due to lower fair value gain assessed on the Group's venture investment portfolio.

Other Items of Expense

The Group recorded total expenses of S$2.075 million in Q3 2018, 5.7% lower than the S$2.201 million incurred in Q3 2017. This is mainly attributable to lower net foreign exchange loss as a result of a favourable exchange rate movement of USD and MYR against SGD, the Group's reporting currency.

This decrease in foreign exchange loss was partly offset by:-

* Higher technical support expenses recorded in Q3 2018, due to an increase in technical support headcounts; and
* Higher administrative recorded in Q3 2018, as a result of higher professional fees incurred.

Group Net Profit and EBITDA

The Group recorded higher net profit of S$1.265 million and EBITDA of S$1.953 million in Q3 2018 as compared to S$0.956 million in net profit and S$1.504 million in EBITDA recorded by the Group in Q3 2017. The higher net profit and EBITDA results recorded in Q3 2018 are mainly attributable to the flow-down effects of higher revenue and lower total expenses recorded in Q3 2018.

Detailed Segmental Breakdown of Group Revenue and Gross Profit

The detailed segmental breakdown of the Group's revenue and gross profit for Q3 2018, together with comparative results for Q3 2017 is provided below:

Group consolidated revenue as analysed by business unit for the quarter ended 30 September

	Q3 2018 S$'000	Sales mix %	Q3 2017 S$'000	Sales mix %
Unifiedcomms	3,045	33.7	2,912	66.6
GlobeOSS	5,996	66.3	1,460	33.4
Captii Ventures	-	-	-	-
Others	-	-	-	-
Total	9,041	100.0	4,372	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.

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

Group consolidated revenue as analysed by geographical segment for the quarter ended 30 September

External Sales	Q3 2018
External Sales	Unifiedcomms S$'000	GlobeOSS S$'000	Others S$'000	Group S$'000
South East Asia (SEA)	2,717	5,992	-	8,709
South Asia (SA)	187	-	-	187
Middle East & Africa (MEA)	141	-	-	141
Others	-	4	-	4
Total	3,045	5,996	-	9,041

External Sales	Q3 2017
External Sales	Unifiedcomms S$'000	GlobeOSS S$'000	Others S$'000	Group S$'000
South East Asia (SEA)	2,605	1,456	-	4,061
South Asia (SA)	199	-	-	199
Middle East & Africa (MEA)	108	-	-	108
Others	-	4	-	4
Total	2,912	1,460	-	4,372

Group consolidated revenue as analysed by contract type for the quarter ended 30 September

External Sales	Q3 2018			Q3 2017
External Sales	System Sale⁽¹⁾	Managed Service⁽²⁾	Group	System Sale⁽¹⁾	Managed Service⁽²⁾	Group
Revenue	5,183	3,858	9,041	943	3,429	4,372
Gross Profit	1,455	2,092	3,547	688	1,777	2,465
Gross Profit (%)	28.10%	54.20%	39.20%	73.00%	51.80%	56.40%

⁽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 results for the nine months ended 30 September 2018 as compared to corresponding period ended 30 September 2017

Group Revenue

The Group achieved consolidated revenue of S$22.710 million for the nine months ended 30 September 2018 ("9M 2018"), an increase of 65.5% against the revenue recorded in the corresponding period ended 30 September 2017 ("9M 2017"). The increase in Group revenue for 9M 2018 is attributable to the improved revenue performance of GlobeOSS.

GlobeOSS posted revenue of S$14.066 million in 9M 2018, an increase of 186.6% from the S$4.908 million recorded in 9M 2017. This improvement in revenue was driven by higher revenues from both system sale and managed service contracts.

Unifiedcomms however recorded revenue of S$8.644 million in 9M 2018, a decrease of 1.9% from the S$8.815 million recorded in 9M 2017. This decrease in revenue was due to lower revenue achieved from system sale contracts that was only partly mitigated by improved revenue from managed service contracts.

The Group's sales mix in 9M 2018 showed a decrease in the proportionate contribution of revenue of a recurring nature, with revenue from managed service contracts representing 47.8% of the Group's total revenue in 9M 2018 as compared to 70.6% in 9M 2017. The lower contribution of managed service contracts to the Group's sales mix in 9M 2018 was mainly contributed by the improvement in system sale contract revenues of the Group, which had increased 194.4% from S$4.028 million in 9M 2017 to S$11.857 million in 9M 2018.

Gross Profit and Gross Profit Margins

The Group posted gross profit of S$8.531 million in 9M 2018, an increase of 14.9% from the S$7.423 million recorded in 9M 2017. Gross profit margin was however lower at 37.6%, compared to 54.1% achieved in 9M 2017. This was primarily due to lower gross profit margin realised on Group's system sale contract revenues, which declined from 54.5% in 9M 2017 to 22.1% in 9M 2018 . The decline in gross profit margin is mainly attributable to the higher proportionate contribution of system sale contract revenues by GlobeOSS, which generally delivers 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 however increased to 54.5% in 9M 2018 from 53.9% in 9M 2017. This increase in gross profit margin was mainly due to lower third-party costs on certain managed service contracts.

Interest Income

The Group recorded interest income of S$0.037 million in 9M 2018, 65.1% lower against the S$0.106 million recorded in 9M 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 gains

The Group recorded other gains of S$0.2 million in 9M 2018, 78.8% lower against the S$0.945 million recorded in 9M 2017. This was mainly due to lower fair value gain assessed on the Group's venture investment portfolio.

Other Items of Expense

The Group recorded total expenses of S$5.759 million in 9M 2018, 4.1% lower than the S$6.005 million incurred in 9M 2017. This is mainly attributable to a lower foreign exchange loss recorded in 9M 2018, as a result of a favourable exchange rate movement of USD against SGD, the Group's reporting currency.

The decrease in foreign exchange loss was partly offset by:-

* Higher technical support expenses recorded in 9M 2018, due to an increase in technical support headcounts; and
* Higher administrative recorded in 9M 2018, as a result of higher professional fees incurred.

Net Profit and EBITDA

The Group recorded higher net profit of S$2.333 million and EBITDA of S$3.805 million in 9M 2018 as compared to S$1.882 million in net profit and S$3.217 million in EBITDA recorded by the Group in 9M 2017. The higher net profit and EBITDA results recorded in 9M 2018 are mainly attributable to the flow-down effects of higher revenue and lower total expenses recorded in 9M 2018.

Detailed Segmental Breakdown of Group Revenue and Gross Profit

The detailed segmental breakdown of the Group's revenue and gross profit for 9M 2018, together with comparative results for 9M 2017 is provided below:

Group revenue as analysed by business unit for the nine months ended 30 September

	2018 S$'000	Sales mix %	2017 S$'000	Sales mix %
Unifiedcomms	8,644	38.1	8,815	64.2
GlobeOSS	14,066	61.9	4,908	35.8
Captii Ventures	-	-	-	-
Others	-	-	-	-
Total	22,710	100.0	13,723	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 nine months ended 30 September

External Sales	2018
External Sales	Unifiedcomms S$'000	GlobeOSS S$'000	Others S$'000	Group S$'000
South East Asia (SEA)	7,802	14,054	-	21,856
South Asia (SA)	558	-	-	558
Middle East & Africa (MEA)	284	-	-	284
Others	-	12	-	12
Total	8,644	14,066	-	22,710

External Sales	2017
External Sales	Unifiedcomms S$'000	GlobeOSS S$'000	Others S$'000	Group S$'000
South East Asia (SEA)	7,949	4,897	-	12,846
South Asia (SA)	593	-	-	593
Middle East & Africa (MEA)	273	-	-	273
Others	-	11	-	11
Total	8,815	4,908	-	13,723

Group revenue as analysed by contract type for the nine months ended 30 September

External Sales	2018			2017
External Sales	System Sale⁽¹⁾	Managed Service⁽²⁾	Group	System Sale⁽¹⁾	Managed Service⁽²⁾	Group
Revenue	11,857	10,853	22,710	4,028	9,695	13,723
Gross Profit	2,615	5,916	8,531	2,196	5,227	7,423
Gross Profit (%)	22.10%	54.50%	37.60%	54.50%	53.90%	54.10%

Review of the Group's financial position as at 30 September 2018 as compared to the Group's financial position as at 31 December 2017

Non-cash current assets of the Group increased from $20.426 million as at 31 December 2017 to S$20.468 million as at 30 September 2018. This 0.2% increase in non-cash current assets was mainly due to increase in inventories and other asset. This increase was partly offset by decrease in trade and other receivables of the Group, as a result of collections received in 2018 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$27.240 million as at 30 September 2018. This 3.8% increase in noncurrent assets is mainly attributable to increase in investment in other financial assets and an associate, made by the Group's venture investment subsidiary, Captii Ventures Pte Ltd.

Total liabilities of the Group decreased from S$13.843 million as at 31 December 2017 to S$11.798 million as at 30 September 2018. This 14.8% decrease in total liabilities is attributable to the decrease in trade and other payables, following repayment made accordingly to the vendors. This impact was partly mitigated by increase in other liabilities.

Review of the Group's cash flow for the quarter and nine months ended 30 September 2018 as compared to the corresponding period ended 30 September 2017

The Group's net cash flow from operations for Q3 2018 was slightly higher at S$1.874 million, as compared to S$1.857 million for Q3 2017.

The Group's net cash flow from operations for 9M 2018 was S$2.292 million, as compared to S$3.936 million for 9M 2017, a decrease of 41.7%. This decrease was primarily due to an unfavourable working capital change of S$1.315 million for 9M 2018, in contrast with the favourable working capital change of S$1.654 million for 9M 2017, which was mainly caused by lower collections of trade receivables for 9M 2018 as compared to the corresponding period in 2017.

The Group's net cash flow used in investing activities for Q3 2018 was S$0.43 million, as compared to S$1.301 million for Q3 2017. The lower net cash used in investing activities was mainly due to the lower volume of venture investments made in the current quarter as compared to Q3 2017.

The Group's net cash flow used in investing activities for 9M 2018 was S$1.974 million, as compared to S$2.735 million for 9M 2017. The lower net cash used in investing activities was mainly due to the lower volume of venture investments and investment in plant and equipment for new managed service contracts made in 9M 2018 versus 9M 2017.

The Group's net cash flow used in financing activities for Q3 2018 amounted to S$0.489 million as compared to S$0.817 million for Q3 2017. The lower net cash used in financing activities was mainly due to the lower dividend payout to equity holders of the Company.

The Group's net cash flow used in financing activities for 9M 2018 was S$1.006 million, as compared to S$1.884 million for 9M 2017. The lower net cash used in financing activities was mainly due to lower dividend payout to both equity holders of the Company and Non-Controlling Interest.

Commentary

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

Although the growth in system sale business of GlobeOSS in 2017 and the current year to date 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.