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MD&A

Operating results and Financial position

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.

In 2017 the overall picture of the construction work has declined due to the delay in disbursement of the investment budget of the public sector and the sluggish condition of the real estate sector. However, the oversea work in Myanmar in 2017 has been better even though the overall construction work has declined so the operating results of the corporate group has increased 35.25% from that of 2016. The net profit in 2017 was 211.51 million Baht.

Market Share

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

Market share 2014 2015 2016
Market value from research (million baht) 6,669 5,567 5,890
Share of the Company (percent) 26 31 31

Note : The data from the Ministry of Commerce has the year 2016.

The data collection may be deviated with respect to the income base because some works undertaken received only the wages and machinery so the income would be lower. If the work undertaken includes wages, machinery and main raw materials, the value of the work will increase, so does the income. The proportion of the work undertaken by the company with only wage income between 2014 and 2016 was 29, 35 and 38 percent respectively. The work undertaken including wages and main raw materials was 65, 64 and 58 percent respectively. As a result, if any year the work undertaken including wages and main raw materials is high in proportion, the value of the work of the company will increase. Therefore the total market value collected is shown to provide the guideline for consideration only.

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 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.

The main income of the company in 2017 was from the services registered at 1,818 million baht consisting of incomes from bored pile work and diaphragm wall (only labor income) for 38%, bored pile work and diaphragm wall (including the material cost) for 58% and oversea work for 3%.

The total income in 2017 compared with that of 2016 has declined 45 million Baht or 2.41% as the work undertaken including wages and main raw materials in 2016 was at 64% of the main income while it was 58% of the main income in 2017.

Revenue from source revenue 2015 2016 2017
From government sector (percent) 21 17 36
From private sector (percent) 79 83 64

(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 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.

The cost of contracted work in 2017 was 1,481.12 million Baht compare with 1,537.98 million Baht in 2016, a decline of 3.69% as the work undertaken (including the material cost) was lower than that of 2016 or 10.73% of the main service income.

Sale and Administrative Expenses

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.

Selling and administrative expenses in 2017 was 148.50 million Baht compared with 137.04 million Baht in 2016, an increase 0f 8.36% due to the cost of sale of remaining supplies recognized to match the income classified in other income for 32.81 million Baht.

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.

In 2016, no allowance for doubtful accounts has been arranged while repayment from the debtors provided with the allowance for doubtful accounts has been received for 0.60 million Baht.

In 2017, no allowance for doubtful accounts has been arranged while repayment from the debtors provided with the allowance for doubtful accounts has been received for 7.38 million Baht.

Gross and Net Profit

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 gross margin of the company in 2017 was 337.12 million Baht compared with 325.32 million Baht in 2016, an increase of 11.80 million Baht or 3.62% because the delivery of the work is more rapid than that in 2016.

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.

In 2017 the profit of the parent company was 210.86 million Baht compared with 156.07 million Baht in 2016, an increase of 54.79 million Baht or 35.10% as there were incomes from sale of old machines and old supplies together with machines classified in other incomes of 2017.

Investment in machinery

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.

Investments in 2017 of 339.64 million Baht were acquisition of cranes, drilling machine and diaphragm wall machine builder to replace the old ones which were sold at cost of 305.14 million Baht to facilitate the additional works.

Shareholders' Returns

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.

Return on equity of the corporate group was 18% due to increase in profit so the comprehensive profit has increased.

Analysis of Financial Status

Total Assets and Liabilities

Asset

Total assets in 2015, 2016 and 2017 were equal to 1,807 million baht, 1,884 million baht and 2,466 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.

In 2017, the current assets increased 365 million Baht due to the increase in cash and cash equivalent of 222 million Baht and increase in temporary investments of 96 million Baht. Besides the non-current assets increased 216 million Baht due to the increase in land, buildings and equipment of 207 million Baht and other non-current assets of 19 million Baht paid as the deposit on machinery.

Liquidity

The total liabilities of the years 2015, 2016 and 2017 are equal to 814 million Baht, 816 million Baht and 1,270 million Baht. In the year 2015 and 2016 the liabilities were at trade payable and other creditors mostly. Trade payable will increase or decrease depending on ratio of receiving of work. If in any year, there is ratio of receiving work in type of total wage including main material is higher, the trade payable will increase. If in any year, there is ratio of receiving work for only labor which is higher, the trade payable will decrease.

The liabilities of the company increased 454 million Baht in 2017 compared with that of 2016, consisting of overdrafts and short-term loans from financial institutes of 65 million Baht, trust receipt on machinery imported at the end of December 2017, increase in accounts payable and other current liabilities of 138 million Baht and advance received from customers of 118 million Baht and portion of long-term liabilities due within one year for 192 million Baht as the bonds were due for retirement for 150 million Baht and installment payable for machinery of 42 million Baht.

In the year 2015, debenture is issued for 150 million Baht, due for payment within 3 years. In issuing of the debenture, to buy machine, due for payment in September 2018.

Long-Term Liabilities

Long term loan of the year 2014 to 2016, is equal to 23.50 million Baht, 10.91 million Baht and 62.15 million Baht; the company invested in buying machines to replace old and deteriorated machines and replacing the machines delivered for work in Myanmar, the company used the long-term loan source from financial institute.

In the year 2015, the loan reduced as the loan was leasing; debt was paid according to the installment payment period. In the year 2015 the method was changed to issue debenture, changing from leasing.

In the year 2016, it was increasing as it was loan from bank. The method was changed to issue long-term loan replacing leasing.

Long-term liabilities have declines in 2017 because the bonds due for retirement in September 2018 were classified as portion of long-term liabilities due within one year.

Shareholders' Equity

The shareholders' equity of the year 2015-2017 was equal to 993 million Baht, 1,068 million Baht and 1,196 million Baht. The shareholders' equity increased every year due to the fact that the operation result had continuous profit.

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.

The debt-to-equity ratio (D/E ratio) of the company was 1.06 times in 2017 and 0.76 times in 2016. The increase in 2017 was due to purchase of additional machines which has increased additional liabilities but it is within the conditions in the agreement made with the loan creditors to maintain the ratio not in excess of 1.5 times and net gearing ratio in 2017 was 0.19 times and 0.24 times in 2016. That has shown that the liquidity on loans from banks or financial institutes was better.

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

In 2017, the total liabilities of the corporate group were 1,270.28 million Baht consisting of current liabilities of 1,062.93 million Baht and long-term liabilities of 207.35 million Baht while the sources of working capital of the company are the financial institutes and accounts payable.

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

As at December 31, 2017 and 2016. The company and its subsidiaries paid audit fee as follow:

Companies Audit's name Audit's Fee 2016 Audit's Fee 2017
Seafco Public Company Limited Mrs. Suvimol Krittayakiern 1,555,000 1,585,000
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 60,000 85,000
Total   2,070,000 2,100,000