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Financials

Third Quarter Financial Statement And Dividend Announcement for the Financial Period Ended 30 September 2016

Financials Archive

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Profit & Loss

Profit & Loss 3Q2016

Profit & Loss 3Q2016

NM: Not meaningful

Balance Sheet

Balance Sheet 3Q2016

Review of Performance

Financial Performance

The Group’s revenue for the quarter ended 30 September 2016 (“3Q-2016”) decreased by 60% compared to the corresponding period last year. This is due to lower order book carried forward, deferral of projects and lower new order intake. The Group's business continues to be affected by the downturn in the oil and gas industry and the continued difficult market condition remains challenging for the Group. Since the second quarter of 2016, the Group ceased the recognition of revenue for its second land rig pending negotiation with the charterer. The Group started to recognise revenue from the chartering of a chemical tanker in 3Q-2016.

The Group’s gross profit decreased in tandem with the lower revenue recognised.

Other income for 3Q-2016 is lower than that in the previous year due to a lower foreign exchange gain during the period.

Total expenses for current period decreased compared to prior year due to the lower business activities and cost management efforts. Lower marketing and distribution expenses in 3Q-2016 is in line with the lower sales order intake during the period and the delay in existing projects. Administrative expenses decreased largely due to the rightsizing of manpower and curtailed spending in response to the activity level of the Group amidst the challenging market condition. Other operating expenses increased largely due to the depreciation of the new building which started from fourth quarter of 2015. Finance cost in 3Q- 2016 has increased as a result of higher loans and borrowings to support the asset chartering business compared to the corresponding period last year.

Financial Position

The Net Assets for the Group stood at S$82.8 million as at 30 September 2016. This is lower compared to that as at 31 December 2015 and attributable to the loss incurred for the period.

Trade receivables from the offshore and marine business segment reduced due to collection from customers and lesser new billings to the customers. Trade receivables from the asset chartering business segment increased in spite of a partial lump sum repayment in 3Q-2016. To date, the charterer is still behind in schedule of payment and a repayment schedule has been agreed with the charterer to bring its account current by year end. The amount due from contract customers decreased due to the eventual billing upon meeting milestones and lower level of project activities. Other receivables and deposits increased as the Group recognised an upfront payment for the chartering of a chemical tanker.

The higher term loan balance as at 30 September 2016 compared to that as at 31 December 2015 was due to loan draw down to finance the operations of the Group. The change in the redeemable exchangeable bonds balance is due to the accrual of interest during the period. Trade and other payables decreased due to payment made to suppliers for goods received or service rendered, coupled with lesser purchases from lower business volume.

Cash Flow

The net cash flow generated from operations was mainly due to the billing of amount due from contract customers after meeting the project milestones and subsequent collection from receivables. This is partially offset by the inventory purchases for new projects and upfront payment for the charter of a chemical tanker.

Less capital expenditures were made during the period as the construction of the new building was completed in the prior year, thereby resulting in lower cash flows used in investing activities.

Commentary

The offshore and marine industry and oil and gas sector is showing little signs of recovery and is expected to remain challenging with the continued oil price volatility and uncertain climate. This prolonged industry downturn impacted the Group business activity with delays to existing projects, a trend which is expected to continue. Sales order intake during the period was also much weaker compared to the prior year due to limited new projects in the market.

Against this backdrop, the Group will continue to exercise prudence when evaluating potential project and will place greater emphasis on operational cost discipline in project execution. To sustain its business volumes during this downturn, the Group will continue to diversify its customer base towards non-oil and gas and onshore requirements. These initiatives will take time to develop and are not likely to fully cover shortfall in our traditional business segments.

The collection of charter income for the land rigs was affected during this downturn. A repayment schedule to pare down the outstanding receivables has been agreed with the charterer to repay the overdue amount. During the period, the Group has received a partial payment from the charterer. The Group continues to negotiate the terms of charter with the charterer for the second land rig.

In respect of the redeemable exchangeable bonds maturing in the fourth quarter, the Group will redeem the first tranche in full and the second tranche partially with the remaining to be extended for another 12 to 24 months. This has been agreed in principle with the bondholder pending completion of documentation. The Group will make the necessary announcement at the appropriate time.

The Group will continue to aggressively pursue cost management and resource optimisation to extract efficiency and savings. While cost saving measures have been put in place, further cost cutting actions will be required given the continued challenging outlook. The Group will rightsize its resources and operating infrastructure in order to cope with the lower business volumes and margin pressure from competitors vying for the limited opportunities. The Group will assess any potential impairment of intangible assets at year end.