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Unaudited Financial Statement And Dividend Announcement For The Full Year Ended 31 December 2016

Financials Archive

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Consolidated Statement Of Comprehensive Income

Profit & Loss

Balance Sheet

Balance Sheet

Review of Performance
REVIEW OF INCOME STATEMENT OF THE GROUP
FY2016 vs FY2015

Revenue

Review of Performance

Notes:

  1. Offshore & Engineering includes offshore structures, engineering, manufacturing, inspection and maintenance. This also includes rope access services.
  2. Marine includes stearngear manufacturing and refurbishment works, ship inspection, repair & maintenance services and engineering & fabrication works. This also includes diving services.
  3. Energy Services includes oil sludge and slop reclamation, hydro cleaning oil and gas tanks, encapsulation of wastes before landfill disposal and design and launch carbon footprint management initiatives and green initiatives.

The Group experienced a 34% decline in revenue bringing its total revenue to $60.1 million in FY2016. The decline concludes a challenging twelve months brought by the lower oil price environment.

Offshore & Engineering segment

FY2016 and FY2015 showed a two dismal years in the oil and gas industry. In FY2016, Offshore and Engineering segment experienced a further decrease in revenue from $40.1 million in FY2015 to only $21.2 million in FY2016 or a 47% cut in the revenue stream.

Amongst our three business segments, the Offshore & Engineering segment experienced the worse impact of the downturn in Oil & Gas.

This also explains the decrease in revenue in 4Q2016 as compared to 4Q2015.

Marine segment

The two years slump in oil prices dragged the year on year revenue from Marine segment from $37.3 million in FY2015 to $23.9 million in FY2016.

This also explains the decrease in revenue in 4Q2016 as compared to 4Q2015.

Energy Services segment

Revenue from Energy Services grew by 14% or $1.9 million from $15.0 million mainly due to overseas project and continuous support from the major Oil & Gas players.

These also explain the increase in revenue from Energy Services segment in 4Q2016 vs 4Q2015.

Cost of sales, gross profit and gross profit margin

Gross profit decreased by $11.8 million or 62% from $18. 9 million in FY2015 due to lower revenue in Offshore & Engineering and Marine segments as explained above.

Gross profit margin dropped from 21% in FY2015 to 12% in FY2016 due to lower revenue from Offshore & Engineering segment to cover its running fixed cost such as depreciation, rental and property taxes.

These also explain the fluctuations in cost of sales, gross profit and gross profit margin in 4Q2016 as compared to 4Q2015.

Other income

FY2016 vs FY2015

Other income decreased by $17.9 million or 231% from $7.7 million gain mainly due to:
- Write-down of fair values of asset-held-for-sale of $936,000 in FY2016;
- Impairment of property, plant and equipment for $11.5 million mainly due from certain vessels of the Group;
- Impairment loss on Joint Venture in Sultanate of Oman which remains dormant;
- Impairment loss on goodwill arising on consolidation of $380,000;
- $4.2 million gain on disposal of 6 Tech Park property during 3rd quarter of FY2015;
- Lower government grant received in FY2016 as compared to FY2015;
- higher foreign currency exchange loss recorded in FY2016; and partially offset
- net gain on bargain purchase of $1.0 million in relation to acquisition of business and certain assets of Stone Marine Singapore Private Limited during FY2016;

These also explain the decrease in other income in 4Q2016 as compared to 4Q2015.

Administrative expenses

FY2016 vs FY2015

The Group's administrative expenses marginally decreased by 2% or $434,000 as a result of management's strategy to increase efficiency and eliminate redundancy across the Group. This lowered our costs for wages, welfare and medical insurance by approximately $2.6 million to $6.6 million in FY2016.

The decrease was offset by:

- one-off transaction in 4Q2016 due to write-off of trade receivables for $1.4 million;
- allowance for impairment of trade receivables of approximately $1.5 million (FY2015: $712,000) from customers which suffered significant losses in its operation;
- catch up on depreciation on two properties previously classified under disposal group

These also explain the increase in administrative expenses in 4Q2016 as compared to 4Q2015.

Finance expenses

The Group's finance expenses decreased by 10% or $545,000 mainly attributable to reduction in short term loans together with lower utilisation of trade financing as a result of lower business demand.

These also explain the fluctuations in finance expense in 4Q2016 as compared to 4Q2015.

Income tax

The Group has a minimal income tax charge due to utilisation of Group relief.

Net loss

The Group incurred a net loss in FY2016 and 4Q2016 due to gloomy global energy industry leading to lower demand, impairment of certain non-current assets and writedown of assets of disposal group classified as held-for-sale. These also resulted in a net loss attributable to Equity holders of the Company.

REVIEW OF FINANCIAL POSITION

Current assets

Current assets (excluding disposal group) declined by $18.5 million or 23% to $62.6 million as at 31 December 2016 mainly due to decrease of $12.4 million in net trade receivables as a result of intensive collection effort and rigid measures on those critical backlogs in billings, collection and receivables.

Non-current assets

The total non-current assets showed a 7% increase of $17.8 million from $254.0 million as at 31 December 2015 and is attributable to:

- reclassification of assets classified as held-for-sale of approximately $14.2 million (net of depreciation) for the two properties previously under disposal group as the sale of such properties is no longer highly probable given the low prices offered by potential buyers;
- progressive payment for construction of property at 42A Penjuru Road of approximately $16.0 million;
- increase in deposit for the purchase of machineries $910,000 for Energy segment; partially offset by
- Impairment loss on Joint Venture in Sultanate of Oman which remains dormant;
- Impairment loss on goodwill arising on consolidation of $380,000;
- Impairment of property, plant and equipment of $11.5 million;and
- depreciation during the year and disposal of some unutilised assets.

Current liabilities

Current liabilities displayed a substantial decline of 52% from $131.2 million as at 31 December 2015 to $63.1 million as at 31 December 2016 mainly due to:

- successful completion of bank debt refinancing of $50.0 million Medium Term Note in August 2016;
- payments of trade payables and bank borrowings and;
- decreased in liabilities directly associated with disposal group of approximately $8.2 million as a result of reclassification of loans related to 2 properties previously under disposal group as mentioned above.

Non-current liabilities

Non-current liabilities increased from $90.6 million as at 31 December 2015 to $155.6 million as at 31 December 2016 as a result of:

- bank debt refinancing of $50.0 million as stated above;
- restructuring of certain loan facilities;
- drawdown of construction loan pertaining to the construction of property at 42A Penjuru Road and;
- reclassification to non-current borrowings the term loans related to 2 properties previously under disposal group as mentioned above.

Disposal Group classified as held-for-sale

The Group reclassified certain assets and liabilities under disposal group as held-for-sale as part of the key initiatives of management to dispose some under utilised assets for cost savings and improve the cash flow position.

As at 31 December 2016, the remaining asset held-for-sale is the building on leasehold land for approximately $6.3 million.

REVIEW OF CASHFLOW STATEMENT

The Group has a net cash inflow from operating activities of $5.2 million mainly as a result of intensive collection of trade and other receivables of $$15.1 million and cash generated from operations of $3.1 million reduced by payments of trade and other payables of $12.3 million.

The Group has a net cash outflow from investing activities of $8.4 million due mainly to:
- purchases of property, plant and equipment of $7.6 million;
- payment for acquisition of business in current period of $1.5 million;
- payments of deferred consideration relating to prior financial year's acquisitions of $700,000 offset by;and
- proceeds from disposal of property, plant and equipment.

The Group's cash outflow from financing activities of $1.6 million relates repayment of borrowings less net proceeds from private placement.

Commentary

Notwithstanding the downturn in the Oil & Gas sector, the Group continues to generate positive cash flows from operations in the last two years.

The business conditions in the marine and offshore industry remain challenging. To augment our revenue stream, we are actively looking at engineering works in the construction industry. The Group had clinched contracts worth $5.5 million in FY2016.

Our Energy Services segment has been performing well and, barring unforeseen circumstances, is expected to continue to perform.

Group's order book as at 31 December 2016 stands at $12.1 million (as at 31 December 2015: $12.1 million).