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MD&A

Operating results and Financial position

In 2014, the construction industry did not expand further as compared with 2013. (as indicated by the Office of National Economic and Social Development Board). However, the national peace helped us deliver more works than in 2013. As a result, our profit from operation increased by 210 million Baht which is 48% as compared with that of the year 2013. The jobs accepted in 2014 included the elevated train, green line and blue line, so the performance was better than that of 2013.

In 2015, the construction industry has slowed down because the private sector was not confident in the economic conditions while the real estate industry has slowed down as well (particularly oversupply of high vertical residential buildings), including the construction projects in the public sector has postponed the bidding process. Thus the corporate group has lower operating profit of 151.89 million baht in 2015, a decline of 28 percent from that of 2014.

In 2016, the construction industry has a tendency to grow due to the expedition in investment in the infrastructure projects of the government while the real estate business has started improving to some extent and the construction work in Myanmar in 2016 was not that good because of a change in the government. Therefore, the construction work in Myanmar has declined so the operating profit of the company has increased 1.97% from that of 2015. The net profit in 2016 registered at 155.18 million baht.

Market Share

Market share information gathered from Ministry of Commerce information during the past five years is as following

Market share 2013 2014 2015
Market value from research (million baht) 5,426 6,669 5,567
Share of the Company (percent) 32 26 31

Note : The data from the Ministry of Commerce has the year 2015.

There may be discrepancies in our basic incomes because sometimes we get paid lower for labor and machinery or higher for labor, machinery and main materials. From 2014 to 2016, we got paid for only labor at the rate of 44, 29 and 35 percent respectively; got paid for labor and main materials at the rate of 49, 65 and 64 percent respectively. In the year that we got paid for a lot of labor and main materials, our incomes would be higher. The values given here are only for a rough guideline.

Analysis of the operating results

(A) Incomes from the contracted work

Revenues of the Company Group consist of the taking of employments from the work of Bored piling, diaphragm wall, civil work constructions, foundations, soil quality improvements, piling test services, other services and other revenues acquired apart from the operational works: such as, sales of various materials, profits derived from sales of the assets, interest receivable, profits derived from currency exchange rates.

In 2014 the corporate group has main incomes from the services for 1,887 million baht consisting of incomes from piling work and diaphragm wall (only labor income) for 44 percent, incomes from piling work and diaphragm wall (job contracted with raw material incomes) for 49 percent, incomes from structure and civil work for 2 percent and oversea incomes for 5 percent.

In 2015 the corporate group has main incomes from the services for 1,856 million baht consisting of incomes from piling work and diaphragm wall (only labor income) for 29 percent, incomes from piling work and diaphragm wall (job contracted with raw material incomes) for 65 percent and oversea incomes for 6 percent.

In 2016 the corporate group has main incomes from the services for 1,863 million baht consisting of incomes from piling work and diaphragm wall (only labor income) for 35 percent, incomes from piling work and diaphragm wall (job contracted with raw material incomes) for 64 percent and oversea incomes for 1 percent.

Incomes in 2016, compared with that of 2015, registered an increase in main income for 7 million baht or 0.38% so the operating profit has increased from 2015 for 1.97% due to the work accepted only the labor cost because its profit margin is higher than that of the work including the material cost. The work accepted only the material cost has the profit margin of 35% of the main incomes in 2016, compared with 29% of the main incomes in 2015.

Revenue from source revenue 2014 2015 2016
From government sector (percent) 36 21 17
From private sector (percent) 64 79 83

It is evident that jobs in the public sector have continued to decline due to delays in the projects of the public sector; however, it is anticipated that the construction in the public sector will be undertaken in 2017.

(B) Cost of contract work and Administrative Expense

Cost of contractual work

Cost of contractual work includes. The materials used in the construction, wages, fuel cost depreciation and other production costs.

The cost of contractual work was 1,498.12 million Baht in the year 2014 which increased by 1,057.95 million Baht or 41.61% as compared with the year 2013. This increase is due to payment of labor and main materials increased by 52% of total income in 2014 as compared with 30% of total income in 2013. Payment for labor and main materials is higher than payment for labor only.

The cost of the contracted work in 2015 was 1,546.91 million baht, compared with 1,498.12 million baht in 2014, an increase of 3.25 percent, because the jobs accepted with labor cost and major raw materials included have increased to 65 percent of the major service incomes in 2015 while the jobs accepted with labor cost and major raw materials included were only 49 percent in 2014.

The cost of the contracted work in 2016 was 1,537.98 million baht, compared with 1,546.91 million baht in 2015, an decrease of 0.58 percent, because the jobs accepted with labor cost and major raw materials included have increased to 65 percent of the major service incomes in 2016 while the jobs accepted with labor cost and major raw materials included were only 35 percent in 2015.

Sale and Administrative Expenses

In 2014, the sale and administrative expenses of 121.68 million Baht which increased by 45.30% as compared with 83.74 million Baht in 2013. This increase is due to the payment for staff and expenses of administration in Myanmar.

Selling and administrative expenses in 2015 were 126.18 million baht, compared with 121.68 million baht in 2014, an increase on 3.69 percent due to higher expenses related to the employees of the company.

Selling and administrative expenses in 2016 were 137.04 million baht, compared with 126.18 million baht in 2015, an increase on 3.69 percent due to the employee expenses of the company, the prosecution expenses and loss on currency exchange.

Bad Debt

In 2014, we allocated 2.8 million Baht for bad debts because payments were 12 months overdue. However, we received 3.89 million Baht as payment for allocated bad debts.

In 2015, the Company did not set allowance for doubtful accounts but received 8.67 million baht recoverable amount.

No allowance for doubtful accounts was made in 2016. Besides, the company received the payment from the doubtful receivable for 200,000 baht.

Gross and Net Profit

In 2014, the gross profit of the company was 389 million bath, compared with 249 million Baht in 2013; it was an increase of 56%; this increase is due to faster work delivery during the time of national peace as compared with 2014.

In 2015, the gross profit of the company was 309 million baht, compared with 389 million baht in 2014, a decline of 20.56% due to the type of the jobs accepted. In 2014 the jobs were the elevated trains (green line and blue line) while the jobs accepted in 2015 were the high-rise buildings of the private sector.

The gross profit of the company in 2016 was 325 million baht compared with 309 million baht in 2015, an increase of 5.18% due to the type of work accepted. In 2015 the work accepted from the private sector was high rising buildings but the work accepted in 2016 from the private sector was the high rising buildings and infrastructure work.

The profit (loss) attributable to owners of the company was 210 million baht in 2014 compared with 142 million baht in 2013, an increase 0f 48%, this increase is due to faster work delivery during the time of national peace as compared with 2013. and income from overseas

profit (loss) attributable to owners of the company was 153.24 million baht in 2015 compared with 210 million baht in 2014, an decrease 0f 27.02%, due to the decrease in the gross profit and increase administration expense

The profit (loss) attributable to owners of the company was 156.07 million baht in 2016 compared with 153.24 million baht in 2015, an increase 0f 1.85%, due to the increase in the gross profit.

Investment in machinery

We invested 97.85 million Baht in the purchase of new cranes. We sent old cranes to work in Myanmar. The new cranes will replace the old ones.

The investment of 164 million baht in 2015 was made to purchase crane vehicle and piling machine to replace the old ones which would be sent to undertake the work overseas, which is Myanmar.

The capital investment was made for 197.04 million baht in 2016 to purchase crane vehicles and drilling machines to replace the old ones and to facilitate the expansion and the investment promotion policy of the government agencies.

Shareholders' Returns

Our shareholders’ returns were 18% in 2013 and 17% in 2012; it was an increase of 5.89%; this increase is due to higher net profit. Our shareholders’ returns were 22% in 2014 and 18% in 2013; it was an increase of 22%; this increase is due to higher net profit.

In 2015 the return to shareholders was 15%, a decline of 31.81 percent because the operating results have decreased so the total profit is lower.

The return on stockholders in 2016 was 15% due to an increase in the operating results so the net profit has increased.

Analysis of Financial Status

Total Assets and Liabilities

Asset

Total assets in 2014, 2015 and 2016 were equal to 1,725 million baht, 1,807 million baht and 1,884 million baht.

In 2015 there was an increase of 82 million baht from that of 2014. The current assets have declined 44.78 million baht, mainly the accounts receivable not due for payment. The non-current assets increased by 127.58 million baht due to the increase in fixed assets in 2015, purchase of additional machines to replace the old machines, some of which would be sent to Myanmar.

Assets in 2016 have increased 77 million baht from that of 2015 while the current assets have declined 95 million baht due to the decrease in temporary investments. The non-current assets have increased 172 million baht due to the investment in fixed assets as additional machines have been acquired to replace the old ones, to facilitate the expansion and the investment promotion policy of the government agencies.

Liquidity

The total liabilities in 2014, 2015 and 2016 were 808 million baht, 814 million baht and 816 million baht respectively. The increase and decrease mostly incurred in the accounts payable and other payables. Increase or decrease in accounts payable is due to the portion of the work accepted. If the portion of the work in any year including the labor cost and supply cost has gone up, the accounts payable will increase as well but if the portion of the work in any year including only the labor cost has gone up, the accounts payable will decrease.

In 2015 the bonds of 150 million baht were issued and due within three years to finance the machinery purchase.

Long-Term Liabilities

Long term loan was 23.50 million Baht, 10.91 million Baht and 62.15 million Baht in 2014, 2015 and 2016 respectively. We bought machinery for replacement of machinery in bad conditions and those sent to do work in Myanmar. We take out long term loans from financial institutions.

In 2015 the borrowing has declined because the leases have been paid in accordance with the repayment schedule and the bonds were issued instead of leasing.

The bank loans in 2016 were replaced with the long-term borrowing instead of leasing.

Shareholders' Equity

Shareholders’ equity was 917 million Baht, 993 million Baht and 1,068 million Baht in 2014, 2015 and 2016 respectively. It increases every year due to continuous profit from work performance.

Liquidity

The debt-to-equity ratio (D/E ratio) in 2016 was 0.76 time compared with 0.82 time in 2015 and 0.88 time in 2014. The company has made an agreement with a financial institute requiring the company to maintain its liquidity ratio not over 1.5 times. The net gearing ratio in 2016 was 0.24 time compared with 0.20 time and 0.23 time in 2015 and 2014 respectively. As a result, the corporate group has a better liquidity.

Source of Capital

In 2014 we had total liabilities of 808.08 million Baht: current liabilities of 723.29 million Baht and long-term loans of 84.79 million Baht; the figures increased as compared with previous year. In 2013, we had total liabilities of 710.27 million Baht: current liabilities of 625.96 million Baht and long-term loans of 84.31 million Baht.

In 2015, the total liabilities of the corporate group was at 814.26 million baht, consisting of current liabilities of 582.19 million baht and long-term liabilities of 232.07 million baht, compared with the total liabilities of 808.08 million baht in 2014, consisting of current liabilities of 723.29 million baht and long-term liabilities of 84.79 million baht, an increase in the long-term liabilities to enhance the liquidity to the working capital of the company.

The total liabilities of the corporate group accounted at 815.95 million baht consisting of current liabilities of 545.12 million baht and long-term liabilities of 270.82 million baht, compared with 814.26 million baht in 2015 consisting of current liabilities of 582.19 million baht and long-term liabilities of 232,07 million baht. The long-term liabilities have increased to enhance the liquidity of the working capital of the company.

The source of the working capital is from a financial institute, accounts payable and issue of bonds.

Audit Fee (Remuneration for Audit and Review of Financial Statements)

As at December 31, 2015 and 2016. The company and its subsidiaries paid audit fee as follow:

Companies Audit's name Audit's Fee 2015 Audit's Fee 2016
Seafco Public Company Limited Mrs. Suvimol Krittayakiern 1,430,000 1,555,000
Seafco Construction Co., Ltd Mrs. Suvimol Krittayakiern 95,000 95,000
Seafco Intertrade Co.,Ltd. Mrs. Suvimol Krittayakiern 300,000 300,000
Seafco & Prayoonchai (1984)
Joint Venture
Mrs. Suvimol Krittayakiern 60,000 60,000
Srinakarin Joint Venture Mrs. Suvimol Krittayakiern 85,000 60,000
Total   1,970,000 2,070,000