Operational Review

Extracted from Annual Report 2018

Financial Performance

In the financial year ended 31 March 2018 ("FY2018"), Accrelist Ltd. ("Accrelist" and together with its subsidiary corporations, the "Group") registered a turnover of S$112.5 million. This represents a more than hundred-fold increase of S$111.6 million as compared to S$0.9 million in FY2017. The surge was mainly due to the increase in shareholdings in Jubilee Industries Holdings Ltd. ("Jubilee") which resulted in Jubilee being accounted for as a subsidiary corporation of Accrelist with effect from 29 June 2017 rather than an associated company. This accounting treatment is the result of converting the outstanding convertible loan into shares in Jubilee. Gross profit for FY2018 increased by S$4.6 million to S$4.7 million as compared to S$0.1 million in FY2017.

Other gains amounted to S$5.5 million for FY2018 as compared to other losses of S$3.7 million in FY2017. The increase of S$9.2 million in FY2018 was mainly due to net gain on bargain purchase of Jubilee amounting to S$5.6 million. Furthermore, there was an impairment of associated company of S$5.0 million in FY2017 which was not present in FY2018. The increase was offset by a one-off rise in bad debts written off which amounted to S$0.9 million. Excluding the one-off rise in bad debts written off, the Group would have achieved a higher net profit of $1.1 million in FY2018.

The Group's operating expenses rose to S$10.8 million in FY2018 from S$2.8 million in the previous corresponding year. Marketing and distribution expenses increased by S$1.0 million from S$0.08 million in FY2017 to S$1.0 million in FY2018. Administrative expenses increased by S$6.3 million from S$2.6 million in FY2017 to S$8.9 million in FY2018. This was due to increased staff cost incurred with Jubilee being accounted for as a subsidiary corporation of the Group. Finance costs increased from S$0.1 million in FY2017 to S$0.9 million in FY2018 mainly due to interest incurred by Jubilee. Share of profit of associated company was S$0.3 million in FY2018 as compared to a share of loss of associated company which amounted to S$2.1 million in FY2017.

BALANCE SHEET

The Group's non-current assets increased by 46% from S$20.4 million as at 31 March 2017 to S$29.8 million as at 31 March 2018. As mentioned above, the rise was mainly due to the increase in shareholdings in Jubilee, resulting in Jubilee being a subsidiary corporation rather than an associated company.

Current assets, which comprised of inventories, trade and other receivables, other assets, financial assets at fair value through profit or loss, available-for-sale financial assets and cash and cash equivalents, amounted to a total of S$59.9 million as at 31 March 2018. This represents an increase of S$29.7 million as compared to total current assets of S$30.2 million as at 31 March 2017. The rise in total current assets was mainly attributable to the increase in inventories of S$15.0 million, increase in trade and other receivables of S$18.6 million, increase in financial assets at fair value through profit or loss of S$1.1 million and increase in cash and cash equivalents of S$7.2 million. Overall, the increase was due to accounting for Jubilee as a subsidiary corporation rather than an associated company. .

Current liabilities, which consisted of income tax payable, trade and other payables as well as other financial liabilities, amounted to S$35.7 million as at 31 March 2018 as compared to S$4.8 million as at 31 March 2017. The increase of S$30.9 million was mainly due to an increase in trade and other payables as well as other financial liabilities which grew by S$25.9 million and S$5.0 million respectively due to accounting for Jubilee as a subsidiary corporation rather than an associated company.

Non-current liabilities, which comprised of deferred tax liabilities, convertible loan and other financial liabilities, amounted to S$5.0 million as at 31 March 2018 as compared to S$4.5 million as at 31 March 2017. The increase of S$0.5 million was mainly due to deferred tax of S$1.4 million recognised in relation to the gain on bargain purchase of Jubilee. This was offset by the fair value gain of the convertible loan amounting to S$0.8 million.

The Group's working capital was S$24.3 million as at 31 March 2018 as compared to S$25.5 million as at 31 March 2017. The decrease was due to the trade and other payables increasing at a greater rate than trade and other receivables, in line with the increase in cash and cash equivalents.

CASH FLOW STATEMENT

Net cash flow generated from operating activities for the financial year under review was S$4.4 million, comprising operating loss before working capital changes of S$2.8 million and working capital changes of S$7.2 million.

The working capital outflow was mainly due to the increase in inventories and other assets of S$2.1 million and S$0.2 million respectively, and the decrease in trade and other payables of S$16.0 million. This decline was offset by the decrease of trade and other receivables of S$25.6 million.

Net cash generated from investing activities for FY2018 of S$2.9 million was mainly due to net cash inflow on the acquisition of a subsidiary corporation which amounted to S$4.1 million and the subscription of rights shares of Jubilee by non-controlling interest which stood at S$1.1 million. This increase was offset by the addition of available-for-sale financial assets of S$2.3 million. Cash used in financing activities of S$2.8 million in FY2018 was mainly due to S$2.2 million in bank deposits pledged, S$0.4 million of interest paid and repayment of other financial liabilities which amounted to S$0.2 million.The Group's cash and cash equivalents were S$7.7 million as at 31 March 2018 as compared to S$3.2 million as of 31 March 2017, a net increase of S$4.5 million.