The company operates an engineering consultancy business to provide consulting service and project construction management service for various construction projects. The service offered is a long-term consultancy service which can be segregated into two categories as below:
Additionally, the company has started a business expansion to leverage the project construction management service expertise such as engineering design, project construction management service application development, and system support for example. The company has started to realize part of the revenue from the expansion. Moreover, the subsidiaries have won more oversea projects and started performing new business; total revenue of the company and the subsidiaries in year 2013 to 2015 were 293.79 million baht in 2013 but dropped to 266.81 million baht in 2014 and 238.93 million baht in 2015 respectively. The reasons for the revenue decline are the slowing down of Thailand economy, severe price competition and higher discontinuity than usual of project works. However during the last quarter of year 2015 the company has won a mega project from private sector which is in early stage and not fully generate and being realiz ed revenue.
The net profits (attributed to owners of the company) were 19.33 million baht in 2013, 17.72 million baht in 2014 and 3.39 million baht in 2015 respectively. The reduction in net profit decline is caused by under realization of revenue from expected especially from government sector projects resulting to discontinuity of some portion of revenue while the severe price competition is still being continued. As the company’s subsidiary is a new firm entering into information technology services and could not generate revenue and profit as planned target. All of these factors cause the dropping down of the total net profit.
The company and the subsidiaries have earned the revenue from providing consultancy and project construction management service. The accounting policy of the company to realize the revenue differs according to the 2 contract types as stated in section (A).
For the fiscal year of 2013-2015, the revenues of the company and the subsidiaries were 293.79 million baht in 2013, 266.81 million baht in 2014 and 238.92 million baht in 2015 respectively. The details can be shown as below.
|Year 2013||Year 2014||Year 2015|
|million Baht||%||million Baht||%||million Baht||%|
|Revenue from service||290.26||98.80%||263.65||98.82%||234.22||98.03%|
|Revenue from selling||0.84||0.28%||0.00||0.00%||0.00||0.00%|
For the fiscal year of 2012-2014, the revenue of the company and the subsidiaries were from 290.26 million baht in 2013 but dropped to 263.65 million baht in 2014 and 234.22 million baht in 2015 respectively.
In year 2015, the company earned 234.22 million baht which was decreased 29.43 million baht (11.16%) from previous year by provision of service to 38 consecutive projects (earned 161.87 million baht) from previous year and 40 new projects commenced in year (earned 59.74 million baht). Revenue from new business were comprised of two concert events earned 12.10 million baht and digital media business earned 0.51 million baht.
The reasons for the revenue decline were from the “price war” situation and discontinuity of revenue from time gap between projects. The company’s situation has been recovered since late of last year from the commencing of very large project won although the project was in early stage and still not fully generate revenue. Income from project design work is under difficult situation due to severe price competition in Thailand market. Therefore the company has strategically expand into AEC and East Africa market which are light competition market although being lower volume of work compared to Thailand market. Income from event organizing business was under company’s expectation as seeking of sponsor was difficult during economic slowdown period. The company’s new business in digital media for year 2015 was not being good response from the market resulting to be underperformed of revenue proportion.
The revenue of company and the subsidiaries can be categorized into revenue from consecutive projects and new projects in each fiscal year, and the number of projects that were serviced and realized for each fiscal year during 2013-2015 as below
|Year 2013||Year 2014||Year 2015|
|million Baht||%||million Baht||%||million Baht||%|
|1. Revenue from consecutive projects||186.20||46||223.46||51||161.87||38|
|2. Revenue from new projects||104.06||43||40.09||31||59.74||40|
|3. Revenue from event organizer and media||0.00||0.00||12.61|
|Total revenue from service||290.26||89||263.65||82||234.22||78|
Other sources of revenue from the company and the subsidiaries were interest received, profit from selling of financial investment and other revenue. During fiscal year 2013-2015 the company and the subsidiaries have earned 2.69 million baht, 3.16 million baht and 4.71 million baht respectively as other revenue. Other revenue in year 2015 was mainly earned from 1.08 million baht of interest received, 2.04 million baht of profit from financial investment and 1.01 million baht of dividend received from investment unit fund.
Cost of services of the Company and the subsidiaries are comprised of major items such as salary, benefits, personnel expense for directors, project managers, engineers, technical specialists, and project secretaries. The company recorded the cost according to the actual number of staffs in each project in accordance with the consultancy contract. Other service costs are comprised of project management expense and traveling expense for example. Additional consultancy cost are applicable for some projects which the company has to employed external specialists.
For the fiscal year of 2013-2015, the company and the subsidiaries’ cost of services was 197.55 million baht, 178.20 million baht and 178.20 million baht or 67.86 % , 67.59 % and 73.64 % of the revenue from service respectively. The increased cost of services in year 2015whilst decreasing in revenue was mainly caused by loss from event organizer business. However two concert events organized by the company’s subsidiary are reference portfolio. Furthermore cost of retaining to key competent staff who will be main resource of revenue generating and ability to bid for the projects in future was reasonably allocated.
For the fiscal year of 2013-2015, the company and the subsidiaries have a gross profit margin at 92.98 million baht, 85.46 million baht and 61.74 million baht or 31.94 %, 32.41 % and 26.36 % of the total revenue from selling and service respectively.
The company and the subsidiaries have a marginal decrease in gross profit margin from the year earlier as mainly resulted of loss from event organizer business caused by lack o f event sponsor.
Administrative expense of the company and the subsidiaries were primarily consisted of office personnel, including management, and other management expense such as vehicle and transportation expenses of management and employees, and financial, tax, and legal consultancy fee for example. The company and the subsidiaries’ administrative expense during fiscal year 2013-2014 were at 68.64 million baht and 65.06 million baht respectively.
For 2015, the administrative expense of the company and the subsidiaries was at 62.19 million baht, decreased of 2.87 million baht or 4.41 % resulting from effective expenses management prepared for decrease of revenue as earlier forecasted.
For the fiscal year of 2014, the company and the subsidiaries have other expenses of provision to doubtful debt for 1.14 million baht (0.43% of revenue). Provision and record of doubtful debt to 3 customers is conformed to the Company’s policy. However in early of year 2015, the Company and the subsidiaries have been partial paid on debts from all of 3 debtors under practically legal performed to protect the Company’s benefits. Such expenses of doubtful debts will be reverted after received payments from debtors.
|Net profit ratio||6.62%||6.64%||1.42%|
|Average shareholder’s equity||174.45||178.85||176.34|
|Return on equity||11.08%||9.91%||1.92%|
|Dividend payout ratio||88.02%||71.77%||554.72%|
For the fiscal year of 2013-2014, the company and the subsidiaries have a net profit margin (parent company part only) of 19.33 million baht and 17.72 million baht respectively or 6.58 % and 6.64 % of the revenue from service respectively.
For the fiscal year of 2015, the company and the subsidiaries have a net profit margin (parent company part only) of 3.39 million baht or 1.42 % of the revenue from service. The decrease of net profit from previous year was caused by operating results of new business which the company’s subsidiary is a new entrant of the market to collect portfolio for future opportunities
The company and the subsidiaries’ return on equity were 11.08 % and 9.91 % during the fiscal year of 2013- 2014. The average return on equity (only for the parent company) was 174.45 million baht and 178.85 million baht respectively.
The company and the subsidiaries’ return on equity was 1.92 % during the fiscal year of 2015, a decrease of 7.99 %. The shareholder’s equity (only for the parent company) was 173.74 million baht. The decrement of the shareholder’s equity in comparison to 2014 was a decrement of 14.33 million baht in the average shareholder’s equity, decrease of 80.87 %.
The net assets of the company and the subsidiaries were valued at 222.44 million baht, 233.68 million baht and 217.93 million baht on 31 December 2013, 31 December 2014, and 31 December 2015 respectively. Total assets in 2015 were decreased by 15.75 million baht or 6.74 % from the previous year. The examples of assets were 20.21 million baht in cash and cash equivalent and 4.62 million baht in account receivables.
On 31 December 2013, 31 December 2014 and 31 December 2015, the company and the subsidiaries possessed 29.31 million baht, 36.04 million baht and 15.83 million baht of cash and cash equivalent respectively mainly be cash advance and petty cash for project sites (5,000 baht to 25,000 baht per project). Remaining parts is bank deposit as saving accounts, current accounts and fixed d eposit accounts.
As of 31 December 2015, the company and the subsidiaries possessed 15.83 million baht of cash and cash equivalent, a decrement of 20.21 million baht or 56.08 % from previous year resulting from effective account receivables collection, on due account payable while revenue was decreased and the company’s debts were decreased from previous year.
|Maturity||31 December 2013||31 December 2014||31 December 2015|
|Not yet due||23.04||25.20||25.99|
|During 1-90 days||30.40||13.86||7.75|
|During 91-180 days||1.41||0.62||1.24|
|During 181-365 days||0.65||0.00||0.00|
|Over 365 days||1.10||2.17||1.10|
|Less allowance for doubtful debt||(1.18)||(2.32)||(1.18)|
|Net account receivables||55.42||39.53||34.90|
The Company’s account receivables were coming from the 30-day credit term offered to the customers after the invoice date, however, the company has a collection process from project owners which has a specific monthly schedule such as invoice date and cheque collection date for example, in order to collect the receivables in the scheduled time period.
As of 31 December 2013 and 31 December 2014, the company and the subsidiaries were having 55.42 million baht and 39.53 million in net account receivables and other receivables, respectively. As of 31 December 2015, the company has 34.90 million baht in account receivables and other receivables, a decrease of 4.63 million baht by shorter average collection time and successfully full collection of doubtful debt provision in year 2014 from all of three debtors. While account receivables amount were decreased from previous reflecting from decreasing of revenue.
As of 31 December 2015 the company and the subsidiaries have a decrement in net account receivables and other receivables with more than 365 days of 1.14 million baht from successfully full collection of account receivables to doubtful debt from three debtors which had been recorded as doubtful debts in year 2014.
As of 31 December 2013 and 31 December 2014, the company and the subsidiaries have a retention valued at 14.42 million baht and 15.30 million baht respectively; this is to comply with the project management contract that requires the retention. The owner of large-scale projects or high-value or government-owned projects would deduct the retention from the invoiced amount for approximately 5-10 percent of the project value. The average warranty period is 1 year from the delivery date.
As of 31 December 2015, the company and the subsidiaries have a retention valued at 18.36 million baht, increased from the year earlier, as the company has earned more revenue from customers who required retention.
As of 31 December 2013 and 31 December 2014, the company and the subsidiaries possessed 9.92 million baht and 9.29 million baht worth of net land, building and equipment, respectively. This comprised of the land and building of the head office, the decoration, facilities, office furniture, durable foods, and vehicles, etc.
As of 31 December 2015, the company and the subsidiaries possessed 9.87 million baht worth of net property and equipment. During the year 2015, the company has expand the office for expansion of new business, investment in office furniture and equipments, depreciation according to normal accounting practices resulting to slightly increase of net property and equipment.
As of 31 December 2013 and 31 December 2014, the company and the subsidiaries were having 12.60 million baht and 12.76 million baht in fixed deposits with pledged guarantee respectively, a slight increase from return on investment in banking.
As of 31 December 2015, the company and the subsidiaries were having 12.89 million baht in fixed deposits with pledged guarantee, a slight increase from return on investment in banking.
As of 31 December 2013, 31 December 2014, and 31 December 2015, the company and the subsidiaries were having 44.37 million baht, 54.04 million baht and 44.88 million baht for total liabilities respectively. The decrease of total liabilities in year 2015 were from decrease of account payables and liabilities from provision of employee’s benefits. The company and subsidiaries have no outstanding loan or debts to any banks or financial institutions. Description of major items in the liabilities is listed below
As of 31 December 2013 and 31 December 2014, the company and the subsidiaries were having 21.46 million baht and 29.75 million baht in account payables, respectively. The company was having account payables because some project owners would like to hire the overall project management and the company does not have a specialist according to the requirement from project owners, so the company has hired external specialists. Other payables are inclusive of unpaid expenses and unearned revenue for example.
As of 31 December 2015, the company and the subsidiaries were having 21.54 million baht in account payables and other payables. Account payables amount was 2.21 million baht and other payable amount was 19.33 million baht, which was comprised of 4.86 million baht unpaid expenses, 10.71 million baht advance payment received, and 3.73 million baht of other payables for example.
As of 31 December 2013, 31 December 2014 and 31 December 2015, the company and the subsidiaries were having 22.26 million baht, 24.11 million baht and 23.28 million baht in employee benefits respectively, a net decrease of 0.82 million baht or 3.40 %. The slightly decrease was resulted to 2.34 million baht in decrease of previously over-estimated employee’s benefits bur increase of 3.19 million baht provision.
As of 31 December 2013, 31 December 2014 and 31 December 2015, the company was having 178.04 million baht, 179.73 million baht and 173.74 million baht in shareholder’s equity, respectively. The shareholder’s equity in 2015 was decreased from previous year as a result of net ope rating profit in 2015.
The company and the subsidiaries have the debt to equity ratio (D/E ratio) of 0.25 times, 0.30 times and 0.26 times at the end of 2013, 2014, and 2015 respectively (calculated from total liabilities divided by the parent’s company equity on the same year-end date). The debt to equity ratio in 2013 and 2014 were increased as the increasing of the company and the subsidiaries’ debts especially account payables, other payables, accrued expenses and the employee benefits.
The major causes of debt to equity ratio decrease in year 2015 were decreased of liabilities, especially account payables, other payables, accrued expenses and the employee benefits
|Cash and cash equivalent||million Baht||29.31||36.04||15.83|
|Current assets||million Baht||158.35||165.67||144.02|
|Current liabilities||million Baht||21.93||29.87||21.60|
(Current assets/Current liabilities)
|Cash flow from operation||million Baht||23.48||37.57||(9.93)|
Current ratio at the end of 2015 was 6.67 times, increased from the year 2014 as decrease of current liabilities were less than decrease of current assets. The company still had high liquidity with decreased of current assets for 21.65 million baht (13.07 %) whilst decreased of cur rent liabilities for 8.27 million baht (27.69 %).
The company and the subsidiaries’ cash flow from operation was negative of 9.93 million baht in 2015, this reflects decreasing of revenue, an efficient collection of account receivables and on due of account payables.
The company and the subsidiaries have no significant investment expense in 2015. The investment expense was only buying office stationary and minor office building decoration.