MD & A
1. Explanation and Analysis of Financial status and Operating Results

In 2015, the world’s economic situation was still problematic and broadly expanded to various countries. Some country was still facing political problems. The economic and political problems were severely effecting across the world. However, for Thailand, many development projects were gradually announced but yet slower than the Government had planned. As for the laboring problem, numerous of foreign labors were constantly brought in due to the laboring shortage.

In 2016, the economic and political problems of many countries were still unsolvable. Notwithstanding, the announced economic and political policies by the new President of the United States of America caused an unpredictable direction for the global economy. Moreover, the United Kingdom’s prospective withdrawal from the European Union following its referendum risks causing severe global economic effect. For Thailand, development projects have been on the bidding process in accordance with the Government’s plan which shows a good start to encourage the growth of domestic economy to achieve the Government’s target.

2. Explanation on Financial Status and Operating Performance

Summary of the Company’s Financial Status based on Financial Statements as of December 31, 2016

As at December 31, 2016, the total assets of the Group were equal to 12,576.77 Million Baht increasing from December 31, 2015 by 1,141.93 Million Baht.

Major changes in Assets included

  1. Temporary Investment aas at December 31, 2016 equal to 455.02 Million Baht decreasing from December 31, 2015 by 157.04 Million Baht, as the Company had sold an investment in fund in order to make a payment for an investment in its subsidiaries and to use as a working capital for its own construction projects.

  2. Accounts Receivable and other receivablesas at December 31, 2016 before deducting the allowance for doubtful accounts equal to 2,612.07 Million Baht, decreasing from the amount as at December 31, 2015 by 204.71 Million Baht. In case payments are not made by the clients as it is specifically due, interest charges will be applied to those late payments. Interest charges will be conditionally calculated based on the due date and this standard will be practically applied to all receivables, including related companies’ receivables. However, due to the current economic circumstances, the Company has conceded the interest charges to those receivables with trivial late payment, except those receivables which have been under litigation process for debt repayment.

    The Company recorded an allowance for doubtful accounts for all those receivables with over-12-month overdue payment according to the Company’s rules and policies.

    Accounts receivable as compared between those as at December 31, 2015 and December 31, 2016 are as follows:

    unit : million baht

    Description Doubtful Debt Total debt Within due Within-12-month past due Over-12-month past due
    Account receivables
    (As at December 31, 2015)
    1,264.01 2,794.93 853.03 662.06 1,279.84
    Account receivables
    As at December 31, 2016
    1,257.68 2,586.21 535.99 711.35 1,338.87
    Increased (Decreased) (6.33) (208.72) (317.04) 49.29 59.03
  3. The Earned Revenues not yet billed as at December 31, 2016 equal to 2,309.07 Million Baht increasing from December 31, 2015 by 434.77 Million Baht. Since the Company had entered into construction agreements for many project, therefore, number of works were awaiting for handover. Moreover, some of the projects specified a condition that the whole project needed to be complete before the contractor could handover the work to the employer.

  4. Cost of real estate development project as at December 31, 2016 equal to 1,736.38 Million Baht, increasing from the amount as at December 31, 2015 by 326.06 Million Baht. This increase resulted from real estate development projects of Mana Patanakarn Co., Ltd., which is the Company’s subsidiary, with the shareholding proportion of 100 percent.

  5. Land, Buildings and Equipment as at December 31, 2016 before accumulated depreciation and allowance for devaluation equal to 5,912.99 Million Baht, increasing from as at December 31, 2015 by 816.20 Million Baht. The Company has acquired considerable machinery as a replacement for the old and depreciable ones, and has also acquired new machinery with new technology to order to increase the efficiency of work. However, the Company has also disposed old machineries in order to mitigate maintenance costs and storage costs for those deteriorated machineries.

Major Changes in Liabilities included

  1. Bank overdrafts and short-term loans from financial institutions as at December 31, 2016 was equal to 138.25 Million Baht, decreasing from as at December 31, 2015 by 247.19 Million Baht, since the Company has substantially repaid the short-term loans.

  2. Accounts payable and other creditors as at December 31, 2016 was equal to 1,700.43 Million Baht, increasing from as at December 31, 2015 by 297.09 Million Baht, due to the second half of year 2016; the Company has entered into construction agreements for many projects thus number of purchase orders and hiring of subcontractors were also increased. The terms and conditions of the payment were depended on what has been agreed by each supplier.

    Normally, suppliers offer a payment term of 30-60 days but some of them, such as steel supplier, offered a special discount for any payment made in cash. In case the Company has adequately cash in hands, it seems to be more advantages to the Company to pay in cash at the same time reducing the construction costs, thus the Company will agree to make a payment in cash. This complies with the policy that some key materials should be adequately purchased for the whole project in order to mitigate the price risk. Which special discount will be offered by suppliers in case of a payment made in cash.

    Detailed accounts payable and other creditors are as follows

    unit : million baht

    Description As of 31 Dec’16 As of 31 Dec’15
    (new adjustment)
    Increase
    (Decrease)
    Accounts payable – related and unrelated parties 1507.22 1,213.50 293.72
    Advance from related and unrelated parties 34.50 33.09 1.41
    Other creditors – related and unrelated parties 58.83 61.05 (2.22)
    Accrued expenses – related and unrelated parties 99.88 95.70 4.18
    Total account payables and other creditors 1,700.43 1,403.34 297.09
  3. Construction revenues receiving in advance as at December 31, 2016 equal to 1,898.82 Million Baht, increasing from as at December 31, 2015 by 491.04 Million Baht. This is an advance received from employers for construction in the second half of year 2016, which will be periodically deducted from periodic deliverables. The conditions applied as stated in each construction contract.

  1. Operating performance as comparison analysis between those in the year 2016 and 2015 in consolidated financial statement

  2. Increase (Decrease)

    Description 2016 2015 Amount Percentage
    1.1 Revenues from construction services 7,919.19 million baht 7,202.19 million baht 717.00 million baht 9.96
    1.2 Cost of construction services compared with revenues from construction services 92.07 % 94.44 % - (2.51)
    1.3 Revenues from sales and services 392.62 million baht 384.20 million baht 8.42 million baht 2.19
    1.4 Cost of sales and services compared with revenues from sales and services 93.26 % 95.11 % - (1.95)
    1.5 Administrative expenses 462.89 million baht 377.72 million baht 85.17 million baht 22.55
    1.6 Financial expenses 196.43 million baht 164.79 million baht 31.64 million baht 19.20
  3. Operating Performance for the year ended December 31
  4. Description 2016 2015
    Profit (Loss) for the year attributable to shareholders of the Company in the consolidated financial statement 52.02 million baht (173.84) million baht
    Profit (Loss) for the year in the separate financial statement 118.00 million baht (119.66) million baht
  5. Analysis and Explanation of Management

    For the operating results for the year 2016 ended 31 December 2016, the Company and its subsidiaries gained the total revenues of 8,360.94 Million Baht, divided into revenues from construction services in the amount of 7,919.19 Million Baht, revenues from sales and services in the amount of 392.62 Million Baht and other revenues 49.13 Million Baht. Compared to the year 2015, the Company and its subsidiaries incurred the increase revenue in the total of 8.97%, resulting from the construction services in the amount of 717.00 Million Baht representing 9.96% and from the sales and services in the amount of 8.42 Million Baht or 2.19%. For the year 2016, the Company earned the net profit of 52.02 Million Baht attributable to shareholders of the Company. Meanwhile, in the year 2015, the Company incurred the net loss of 173.84 Million Baht attributable to shareholders of the Company.

    The Company recognized the profit sharing from investments in associated companies and joint ventures in 2016 in the amount of 23.34 Million Baht, decreasing from the year 2015 equal to 61.62 Million Baht which the Company recognized the profit sharing in the amount of 84.96 Million Baht. Details are as follows:

      Year 2016 Year 2015
    VSPN Property Company Limited Recognized loss 0.72 Million Baht Recognized profit 0.18 Million Baht
    C.I.N. Estate Company Limited Recognized profit 27.09 Million Baht Recognized profit 47.92 Million Baht
    NWR - SBCC Joint venture Recognized loss 3.03 Million Baht Recognized profit 36.86 Million Baht

    The Company, its executives, and its employees are strives to run its business to achieve its vision, i.e.“To be one of Thailand’s top five largest general construction contractors with international standard, stability, sustainability together with responsibility to society and environment”. However, there are still barriers in business operation, such as internal and global economic situations, internal political issues which have been gradually improving now. The bidding sessions have been arranged for the Government sector’s construction for country development based on Thailand’s Government budgets. Although there are competitions among construction contracting companies, the Company’s executives and employees still persist to perform their duties at full capacity and at their best in order to achieve the Company’s aforementioned vision.

  1. Operating Performance for the year 2016 Construction business
    1. Revenues from construction services increased in 2016 compared to 2015 equal to 717.00 Million Baht or 9.96%, resulting from the increasing construction works. The top 3 projects contributing to the Company’s increasing revenues for the year 2016 included
      • a. The Project of Mae Moh Power Plant Units 4-7 Replacement Project of the Electricity Generating Authority of Thailand, of which the Company was the subcontractor of Marubeni Corporation, revenues in 2016 amounting to 1,567.58 Million Baht.
      • b. The Civil Works Project for the 2 Units of 110 MW Gas-fired Cogeneration Power Plant of the Banpong Utilities Company Limited, of which the Company was the subcontractor of Mitsubishi Corporation, revenues in 2016 amounting to 855.84 Million Baht.
      • c. The Construction Project of Drainage Tunnel under Bangsue Canal, from Ladprao Canal to the Chao Phraya River, owned by BMA, revenues in 2016 amounting to 784.68 Million Baht
    2. Construction cost - The Company had cost of construction services compared with revenues from construction services between 2016 and 2015, the Company thrived to maintain a close ratio of construction cost and the revenues of the construction services of year 2016 equal to 92.07% while in the year 2015 was 94.44%.
    3. Due to the shortage of Thai labors, the Company was required to hire foreign workers of which the costs are higher than Thai workers. However, the Company was required to do so in order to have a sufficient workforce to support current operation in terms of timely delivery and reducing risk of incurring liquidate damages for late delivery. Moreover, the Company prepared the workforce for the upcoming projects to be announced for bidding in accordance with the Government’s development plan.
    4. In order to control cost of construction within the budget, the Company bought in some main material supply in advance with the quantity that will be sufficient for using in the whole projects so as to reduce risk of uprising price. This policy will efficiently mitigate the impact of material price upon the cost of construction.
    5. Administrative expenses for the year 2016 increased when comparing to 2015 equal to 85.17 Million Baht or 22.55%, resulting from 2 main reasons as follows:
      • a. The new subsidiary companies, i.e. Mana Patanakarn Company Limited and Advance Prefab Company Limited, have started their operation. The combined administrative expenses of these two companies in 2016 were equal to 116.65 Million Baht, whilst 56.48 Million Baht in 2015.

        unit : million baht

        Administrative Expenses Year 2016 Year 2015
        Mana Patanakarn Company Limited 85.48 44.04
        Advance Prefab Company Limited 31.17 12.44
      • b. In 2016, the Company incurred a legal advisory cost and other advisory services which higher than in year 2015 in the amount of 27.22 Million Baht.
    6. The Company recorded allowance recovered bad debt in 2016 of 15.14 Million Baht and recorded doubtful account in the amount of 210.22 Million Baht in 2015.
    Concrete business

    Revenues from sales and services in 2016 increased from 2015 by 8.42 Million Baht or 2.19%; i.e. from 384.20 Million Baht in 2015 to 392.62 Million Baht in 2016. This resulted from the fact that the Company has manufactured more concrete for selling to external customers. However, when comparing 2016 to 2015, the cost of sales and services decreased as opposed to the revenues from sales and services; i.e. decreasing from 95.11% in 2015 to 93.26% in 2016 in spite of the Company improvement of cost control, price of the certain supply material were decreased, but due to an increase in overall wages including extra payment for hiring of foreign workers of which the average costs are higher than Thai workers to accelerate the construction work, this resulted in a slightly increasing in gross profits from sales and services from year 2016 equal to 26.45 Million Baht or 6.74% of revenues from sales and services while in year 2015 equal to 18.77 Million Baht or only 4.89%.

  2. The issuance and offering of 3,000 Million Baht Debenture

    On 21 August 2015, the Company issued and offered 1,500,000 units of 3 years debenture No.1/2015, with a par value of 1,000 Baht each, totaling 1,500 Million Baht. The maturity date of full redemption is 21 August 2018. The debenture bears interest at a rate of 4.50 percent per annum. The purposes of this debenture issuance are for investments, debt repayment, and working-capital increase. The debenture’s interest payable in 2016 was equal to 67.68 Million Baht.

    On 21 August 2015, the Company issued and offered 1,500,000 units of 3 years debenture No.1/2015, with a par value of 1,000 Baht each, totaling 1,500 Million Baht. The maturity date of full redemption is 21 August 2018. The debenture bears interest at a rate of 4.50 percent per annum. The purposes of this debenture issuance are for investments, debt repayment, and working-capital increase. The debenture’s interest payable in 2016 was equal to 67.68 Million Baht.