GLG CORP LTD — Annual Report 2016

Aug 29, 2016

GLG Corp Ltd

GLG Corp Ltd

ACN 116 632 958 PRELIMINARY FINAL REPORT

YEAR ENDED 30 JUNE 2016

1. Highlight of Results

2. Appendix 4E Financial Statements for the Year ended 30 June 2016

1

1. Results for announcement to market

Summary financial information for the consolidated entity for the 2015/16 financial year is set out below. Full financial details are attached to this announcement.

==> picture [415 x 263] intentionally omitted <==

----- Start of picture text -----

Consolidated
Summary Information 30 –JUN-16 30 –JUN-15 Inc/(Dec) Inc/(Dec)
USD$’000 USD$’000 USD$’000 %
Revenue from Ordinary
Activities
170,797 180,126 (9,329) (5.18)
Profit/(Loss) after Tax from
Ordinary Activities
2,920 3,148 (228) (7.24)
Net Profit/(Loss) after Tax
Attributable to Members
2,920 3,148 (228) (7.24)
Basic Earnings – US Cents Per
Share
3.94 4.25 (0.31) (7.29)
Dilute Earnings – US Cents Per
Share
3.94 4.25 (0.31) (7.29)
Net Tangible Assets – US Cents
Per Share
78.98 75.04 3.94 5.25
----- End of picture text -----

Dividends (Distributions)	As per security – US Cents	Franked amount per security-US cents
Dividends Paid during Year	Nil	Nil
Proposed Final Dividend	Nil	Nil
Proposed payment date for final dividend	N/A	N/A

2

GLG Corp Ltd

Summary commentary on results

Directors Comments:

GLG Corp Ltd (“GLG” or the “Company”) accounts are in the process of being audited by Deloitte Touche Tohmatsu, Chartered Accountants.

The Directors note that whilst they do not expect the final audited results to differ materially from those included in this Preliminary Financial Report, as at the date of this report, the audit process has not been finalised and further changes may be forthcoming.

The discussion that follows compares the Consolidated Statement of Profit or Loss and Comprehensive Income for the financial year ended 30 June 2016 with that of 30 June 2015.

GLG’s net profit decreased 7.24% to US$2,920 thousand, against a net profit of US$3,148 thousand in the previous year. The decrease in net profit was mainly due to provision of doubtful debts of US$300 thousand. GLG achieved a higher gross margin of 11.51% for year ended 30 June 2016 as compared to 10.42% in the previous year, due to changes in the product mix.

GLG’s sales decreased by US$9,329 thousand, or 5.18% to US$170,797 thousand compared to sales of US$180,126 thousand in the previous year. The decline in sales was mainly attributed to continued weakness observed from a major customer and GLG’s decision to decrease the orders with this particular customer which has continued to close a number of their stores in 2015/16 amid their own restructuring. The decline of orders from this customer accounted for a drop of US$18,703 thousand in sales. GLG managed to increase orders from other existing customers to make up some of the shortfall.

Selling and distribution costs increased by 114.16% to US$2,238 thousand compared to US$1,045 thousand in the previous year. The increase in the expenses was mainly due to the higher number of samples required for presentation to gain new orders for compensating the fall in decline in sales mentioned above and higher freight costs incurred in order to achieve timely delivery to customers.

Administration expenses decreased by 8.30% to US$10,242 thousand compared to US$11,169 thousand in the previous year. This reduction in expenses was achieved through a streamlining of processes and saving in net employee costs.

Finance costs increased by 94.13% to US$761 thousand compared to US$392 thousand in the previous year due to higher financing costs charged by one of the agents for a key customer.

Comparison of the Consolidated Statement of Financial Position as at 30 June 2016 with that of 30 June 2015 .

The Group’s financial position was stable as at 30 June 2016 as equity improved from US$55,607 thousand to US$58,527 thousand as at 30 June 2016, the net debt to equity ratio decreased from 55.83% to 45.29% as at 30 June 2016.

Trade and other receivables decreased by 21% to US$67,473 thousand as at 30 June 2016 compared to US$85,408 thousand as at 30 June 2015. The decrease was primarily due to the Goods-in-transit (Inventory) sold by GLIT to GLG which reduced the GLIT receivable. This is the reason for the increase in the Inventory balance during the period.

Non-current other assets increased to US$1,391 thousand as at 30 June 2016 because of the payment of infrastructure costs in Vietnam on an operating lease to an external party for the usage of land. The security deposit of US$5,000 thousand payable by GLG to GLIT for reserving the 100% production capacity of GLIT for GLG was reclassified from a current to a non-current asset, as at 30 June 2016.

3

Summary commentary on results (cont’d)

Property, plant and equipment increased to US$5,315 thousand as at 30 June 2016 due to the costs of constructionin-progress for the facility in Vietnam which commenced in November 2015.

Current borrowings decreased by 24.8%, to US$31,463 thousand as at 30 June 2016 compared to US$41,813 thousand as at 30 June 2015. The decrease was largely due to a decline in trust receipts attributable to lower sales for the year. However, the increases in Non-current borrowings to US$2,438 thousand consist of an external bank loan to finance the investment in Vietnam.

Comparison of the Consolidated Statement of Cash Flows for the financial year ended 30 June 2016 with that of 30 June 2016.

GLG’s cash from operating activities decreased to US$2,788 thousand as at 30 June 2016 compared to US$12,228 thousand as at 30 June 2016. The decrease was due to the decline in lower sales for the financial year.

We believe the cash flows from operations of GLG remains sufficient to meet our working capital requirements, capital expenditures, debt servicing and other funding requirements for the foreseeable future.

4

GLG Corp Ltd

Consolidated Statement of profit or loss and other comprehensive income for the financial year ended 30 June 2016

Revenue Cost of sales Gross profit Other revenue Other income Distribution expenses Administration expenses Finance costs Other expenses Profit before income tax expense Income tax expense Profit for the year Other comprehensive income Total comprehensive income for the year Earnings per share: Basic (cents per share) Diluted (cents per share)	Note 3 3 3 9 9	Consolidated	Consolidated
		2016 US$’000	2015 US$’000
		170,797	180,126 (161,358)
		(151,136)
		19,661	18,768 142 75 (1,045) (11,169) (392) (2,514)
		43 423
		(2,238)
		(10,242)
		(761)
		(3,243)
		3,643	3,865 (717)
		(723)
		2,920	3,148 - 3,148
		-
		2,920
			4.25 4.25
		3.94
		3.94

==> picture [50 x 242] intentionally omitted <==

Notes to the financial statements are included on pages 9 to 17

5

GLG Corp Ltd

Consolidated Statement of financial position as at 30 June 2016

Current assets Cash and cash equivalents Trade and other receivables Inventory Other assets Other financial assets Total current assets Non-current assets Other assets Other financial assets Investments accounted for using the equity method Property, plant and equipment Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Current tax liabilities Total current liabilities Non-current liabilities Borrowings Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Retained earnings Total equity	Note 4 5 5 12 6 7 7 8	Consolidated	Consolidated
		2016 US$’000	2015 US$’000
			10,831 85,408 114 180 344
		7,394
		67,388
		7,466
		327
		344
		82,919	96,877
			- 2,333 - 2,393
		1,391
		7,333
		-
		5,315
		14,039	4,726
		96,958	101,603
			2,913 41,813 949
		3,102
		31,463
		1,085
		35,650	45,675
			64 257
		2,438
		343
		2,781	321
		38,431	45,996
		58,527	55,607
			10,322 45,285
		10,322
		48,205
		58,527	55,607

==> picture [92 x 386] intentionally omitted <==

Notes to the financial statements are included on pages 9 to 17

6

GLG Corp Ltd

Consolidated Statement of changes in equity for the financial year ended 30 June 2016

Note Consolidated Balance at 1 July 2014 Profit for the year Other comprehensive income Total comprehensive income Balance at 30 June 2015 Balance at 1 July 2015 Profit for the year Other comprehensive income Total comprehensive income Balance at 30 June 2016	Issued Capital Retained Earnings US$’000 US$’000	Total US$’000
	10,322 42,137 - 3,148	52,459 3,148
	- -	-
	- 3,148	3,148
	10,322 45,285	55,607
	10,322 45,285 - 2,920	55,607 2,920
	- -	-
	- 2,920	2,920
	10,322 48,205	58,527

Notes to the financial statements are included on pages 9 to 17

7

GLG Corp Ltd

Consolidated Statement of cash flows for the financial year ended 30 June 2016

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest and other costs of finance paid Income tax paid Net cash provided by operating activities 13 Cash flows from investing activities Proceeds from sales of property, plant and equipment Grant received Payment for property, plant and equipment Net cash used in investing activities Cash flows from financing activities (Repayment of)/proceeds from borrowings Repayment from (amounts advanced) to related parties (Advances to)/ received from other parties Net cash used in financing activities Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year	Consolidated
	2016 US$’000 2015 US$’000
	176,843 188,515 (173,033) (175,419) (521) (206) (501) (662)
	2,788 12,228
	114 13 101 - (3,318) (144)
	(3,103) (131)
	(7,976) 5,470 30 169 4,824 (15,126)
	(3,122) (9,487)
	(3,437) 2,610 10,831 8,221
	7,394 10,831

==> picture [102 x 307] intentionally omitted <==

Notes to the financial statements are included on pages 9 to 17

8

GLG Corp Ltd
Notesto the Appendix 4E for the Year Ended 30 June 2016

Notes to the Appendix 4E

1. General information

GLG Corp Ltd (the Company) is a public company listed on the Australian Securities Exchange (ASX: ‘GLE’), incorporated in Australia and operating in Asia.

GLG Corp Ltd’s registered office and principal place of business are as follows:

Registered office Principal place of business Level 40 North Point 21 Jalan Mesin, 100 Miller St Singapore 368819 North Sydney NSW 2060 Australia

The entity’s principal activities are the global supply of knitwear/apparel and supply chain management operation.

2. Segment information

GLG Corp Ltd operates in the apparel industry and reports only one reportable segment under AASB8 “Operating Segments”.

3. Revenue

Revenue from the sale of goods Revenue from the rendering of services Other income Rental income Interest Income Grant Payable written back PIC cash payout Other Total other income	Consolidated
	2016 US$’000	2015 US$’000
	170,797	180,126
	43	142
	170,840	180,268
		9 12 - - 33 21
	9
	9
	47
	99
	180
	79
	423	75
	171,263	180,343

9

GLG Corp Limited
Notesto the Appendix 4E for the Year Ended 30 June 2016

4. Trade and other receivables

Trade receivables Third parties Other party- GLIT group Related Parties Other receivables Other receivables – GLIT group Provision for Doubtful Debts Less: Payable to Related Parties Payable to Other Parties – GLIT group Goods and services tax recoverable	Consolidated	Consolidated
	2016 US$’000	2015 US$’000
		20,707 53,267 8,096 984 5,000 (2,351)
	20,154 40,894 8,075 835
	-
	(2,610)
	67,348	85,703 - (328)
	-
	(6)
	67,342	85,375
	46	33
	67,388	85,408

==> picture [112 x 266] intentionally omitted <==

The average credit period on sales of goods and rendering of services is 60 days. No interest is charged on the trade receivables outstanding balance.

Before accepting any new customers, the Group uses an external scoring system to assess the potential customer’s credit quality and defines credit limits by customers. Limits and scoring attributed to customers are reviewed twice a year. 80% of the trade receivables that are neither past due nor impaired have the best credit scoring attributable under the external credit scoring system used by the Group. Of the trade receivables balance at the end of the year, US$4,405 thousand (2015: US$3,577 thousand) is due from the Group’s largest customer.

10

GLG Corp Limited
Notesto the Appendix 4E for the Year Ended 30 June 2016

4. Trade and other receivables(cont’d)

Included in the Group’s trade receivable balance are debtors with a carrying amount of US$435 thousand (2015: $327 thousand) which are past due at the reporting date. There has been no significant change in credit quality and all amounts are considered recoverable. The Group does not hold any collateral over these balances.

Ageing of Trade Receivables (excluding GLIT and Related Party amounts) past due but not impaired

due but not impaired
60 – 90 days 90 – 120 days More than 120 days Total Movement in the allowance for doubtful debts Balance at the beginning of the year Charge / (credit) to profit or loss Allowance written off during the year Balance at the end of the year*	Consolidated
	2016 US$’000	2015 US$’000
	78	327 - -
	45
	312
	435	327
		2,360 (9) -
	2,351
	300
	(41)
	2,610	2,351

==> picture [111 x 175] intentionally omitted <==

*Includes the provision for doubtful debts for Trade Receivables, both current and non-current. The Group has made a provision of US$300 thousand for one of the customer which filed for Chapter 11 bankruptcy in the United States.

In determining the recoverability of trade receivables, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Credit risk is concentrated with a few significant counterparties.

11

GLG Corp Ltd
Notesto the Appendix 4E for the Year Ended 30 June 2016

5. Other financial assets

Other financial assets
Current Trade receivables – Third parties (i) Provision for Bad Debts Total Current other financial assets Non-current Other receivables – GLIT group Loans and receivables – related parties (ii)(a)(b) Disclosed in the financial statements as : Total Non-current other financial assets	Consolidated
	2016 US$’000	2015 US$’000
		368 (24)
	368
	(24)
	344	344
		- 2,333
	5,000
	2,333
	7,333	2,333
		2,333
	7,333

==> picture [107 x 170] intentionally omitted <==

(i) The current trade receivable owed by third party has a provision for non-recovery in FY2016 of US$24 thousand (FY2015: US$24 thousand).

(ii) The loan owed by related parties consist of:

(a) US$1,871 thousand of rental deposit paid for the 10 years lease rental from Ghim Li Group Pte Ltd (2015: US$1,871 thousand).

(b) US$462 thousand of terms loan repayable over 10 years at fixed interest rate of 2% p.a. commencing January 2016 (2015: US$462 thousand).

6. Trade and other payables

Trade and other payables
Trade payables (i) Other payables Accruals	Consolidated
	2016 US$’000 2015 US$’000
	395 281 7 537 2,700 2,095
	3,102 2,913

==> picture [90 x 107] intentionally omitted <==

(i) The average credit period on purchases of certain goods is 4 months. No interest is charged on the outstanding balance of trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

12

GLG Corp Limited
Notesto the Appendix 4E for the Year Ended 30 June 2016

7. Borrowings

Secured– at amortised cost Current Trust receipts (i) (ii) (Gross) Bills payable (Gross) Finance lease liabilities Bank loan Total Non-current Finance lease liabilities Bank loan Disclosed in the financial statements as: Current borrowings Non-current borrowings	Consolidated
	2016 US$’000 2015 US$’000
	29,529 36,307 1,679 38 3,434 72 217 2,000
	31,463 41,813 20 64 2,418 -
	2,438 **64 **
	31,463 41,813 2,438 64
	33,901 41,877

Summary of borrowing arrangements:

(i) Secured by corporate guarantee from Ghim Li Group Pte Ltd and negative pledge over all assets of Ghim Li Global Pte Ltd.

• (ii) Banking relationship: the Group is dependent on bank facilities to support the working capital requirement of its operations. Presently, the bank facilities provided to the Group are uncommitted short term trade financing facilities which are renewable annually by the banks and long term financing facilities. At 30 June 2016 GLG Corp Ltd had short term financing facilities available of US$115,916 thousand and long term financing facilities available of US$11,736 thousand. (Short term: US$36,686 thousand was used and US$79,230 thousand was unused. Long term: US$2,635 thousand was used and US$9,101 thousand was unused). This is compared with US$119,432 thousand at 30 June 2015 (US$54,696 thousand was used and US$64,736 thousand was unused). GLG believe it continues to have the strong support from main bankers for its working capital and capital expenditure requirements.

The weighted average effective interest rates for bank overdrafts, bills payable and trust receipts at the balance sheet date were as follows:

	2016	2015
Bank overdrafts	10.95%	10.95%
Bank loans	3.52%p.a.	2.05%p.a.
Trust receipts / Bill payable	1.72%-1.96%	1.50%-1.89%
Finance lease liabilities	3.72%p.a.	3.87%p.a.

13

GLG Corp Ltd

Notesto the Appendix 4E for the Year Ended 30 June 2016

8. Issued capital

74,100,000 (2011: 74,100,000) fully paid ordinary shares

Consolidated	Consolidated
2016	2015
US$’000	US$’000
10,322	10,322

==> picture [95 x 81] intentionally omitted <==

Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.

Fully paid ordinary shares Balance at beginning of financial year Balance at end of financial year	Consolidated No. ’000 2016 US$’000 74,100 10,322 74,100 10,322	Consolidated
		No. ’000 2015 US$’000
		74,100 10,322
		74,100 10,322

9. Earnings per share

Earnings per share
Basic earnings per share: Total basic earnings per share Diluted earnings per share: Total diluted earnings per share	Consolidated
	2016 Cents per share 2015 Cents per share
	3.94 4.25
	3.94 4.25

Basic earnings per share

The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as follows:

Net profit Earnings used in the calculation of basic EPS Weighted average number of ordinary shares for the purposes of basic earnings per share	2016 US$’000 2015 US$’000
	2,920 3,148
	2,920 3,148
	2016 No.’000 2015 No.’000
	74,100 74,100

14

GLG Corp Limited

Notesto the Appendix 4E for the Year Ended 30 June 2016

9. Earnings per share (con’t)

Diluted earnings per share

The earnings used in the calculation of diluted earnings per share is as follows:

Net profit Earnings used in the calculation of diluted EPS Weighted average number of ordinary shares used in the calculation of basic EPS Weighted average number of ordinary shares used in the calculation of diluted EPS Contingent liabilities Consolidated 2016 US$’000 2015 US$’000 Contingent liabilities Guarantees arising from Letters of credit in force (i) 7,156 13,713 Total 7,156 13,713	Consolidated
	2016 US$’000 2015 US$’000
	2,920 3,148
	2,920 3,148
	Consolidated
	2016 No.’000 2015 No.’000
	74,100 74,100
	74,100 74,100

10. Contingent liabilities

(i) A number of contingent liabilities have arisen as a result of the Group’s letter of credit issued by banks for purchase of goods.

15

GLG Corp Ltd
Notesto the Appendix 4E for the Year Ended 30 June 2016

11. Subsidiaries

Name of subsidiary Country of incorporation	Ownership interest
	2016 % 2015 %
Ghim Li Global Pte Ltd Singapore	100 100
Ghim Li Global International Ltd Hong Kong	100 100
Escala Fashion Pte. Ltd. Singapore	100 100
Ghim Li International (S) Pte Ltd Singapore	100 100
Escala (USA) Inc (i) USA	- 100
Ghim Li Global International (GuangZhou) Ltd China	100 100
G&G Fashion (Vietnam) Co., Ltd. Vietnam	100 -

i) The company liquidated on 21 January 2016

12. Investments accounted for using the equity method

Name of entity Country of incorporation Principal activity	Ownership interest
	2016 % 2015 %
Jointly controlled entities JES Apparel LLC USA Importer of knitwear products	51 51

Summarised financial information in respect of the Group’s jointly controlled entity is set out below:

Financial position: Current assets Current liabilities Net assets Group’s share of jointly controlled entity’s net assets Financial performance: Income Expenses Total loss for investment in joint venture Group’s share of jointly controlled entity’s losses	Consolidated
	2016 US$’000 2015 US$’000
	393 393 (1,879) (1,879) (1,486) (1,486) (757) (757) - - - - - - - -

The entity ceased business in 2012 and the consolidated entity’s share of losses for 2016 and 2015 was nil. The entity’s cumulative unrecognised share of retained losses is US$757 thousand (2015: US$757 thousand).

16

GLG Corp Limited
Notesto the Appendix 4E for the Year Ended 30 June 2016

13. Notes to the cash flow statement

Reconciliation of profit for the year to net cash flows from operating activities

Profit for the year Gain/(Loss) on sale or disposal of non-current assets Depreciation and amortisation of non-current assets Bad and doubtful debts Interest Income Increase in income tax Changes in net assets and liabilities, net of effects from acquisition and disposal of businesses: (Increase)/decrease in assets: Inventories Trade and other receivables Other assets Increase/(decrease) in liabilities: Trade and other payables Net cash provided by/(used in) operating activities	Consolidated
	2016 US$’000 2015 US$’000
	2,920 3,148 (51) 20 232 263 2,533 - (9) (12) 222 55 (7,352) 146 5,642 8,183 (1,538) (10) 189 434
	2,788 12,228

14. Economic dependency

The consolidated entity is sourcing its apparel manufacturing requirements significantly from the GLIT entities. In return, the consolidated entity has an obligation to fulfill a minimum of 80% of the production capacity of GLIT entities. The agreement was entered into in June 2012 and will expire on 31 December 2017 with an automatic renewal for further successive period of 1 year unless this agreement is terminated pursuant to giving 3 months’ prior advance written notice by the manufacturer.

15. Subsequent event

The Company has entered a share purchase agreement with Ghim Li Group Pte Ltd to acquire a fabric and yarn mill in Malaysia. Due to changing market conditions, the Company needs to provide additional services beyond its existing business by acquiring Maxim Textile Technology, a company incorporated in Malaysia which owns the fabric and yarn mill. In addition, the company will acquire Maxim Textile Technology Pte Ltd, a company incorporated in Singapore with the intention to serve as a procurement and sourcing centre for fabric and other direct materials used in the manufacturing process of finished garments.

By executing this acquisition strategy, the Company will have a vertically-integrated textile manufacturing and supply chain business, offering the flexibility to plan for shorter production lead times resulting in speed-tomarket advantage to its customers by controlling each step in the value chain.

The completion of this acquisition is conditional on shareholders’ approval, obtaining necessary regulatory and statutory approvals, including Australian Securities Exchange and other related authorities. The company anticipates that the requisite approvals will be obtained to facilitate completion of the acquisition and do not expect any changes to the board or senior management of the Company as part of this acquisition.

17