Unaudited Financial Statement And Dividend Announcement For The First Financial Quarter 31 March 2019
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Consolidated Statement Of Comprehensive Income
Review of Performance
REVIEW OF INCOME STATEMENT OF THE GROUP
1Q2019 vs 1Q2018
- Offshore & Engineering includes offshore structures, engineering, manufacturing, inspection and maintenance. This also includes rope access services.
- Marine includes stearngear manufacturing and refurbishment works, ship inspection, repair & maintenance services and engineering & fabrication works. This also includes diving services and dredging and reclamation works.
- Energy Services include oil sludge and slop reclamation, hydro cleaning oil and gas tanks, encapsulation of wastes prior to landfill disposal and design and launch carbon footprint management initiatives and green initiatives.
Overall, Group’s revenue in 1Q2019 rose by 42% or $6.3 million, from $15.0 million in 1Q2018 to $21.3 million in 1Q2019. The increase in revenue was mainly attributable to Marine segment and Energy Services registering an increase in revenue of $6.5 million and $0.9 million respectively, offset by reduction in revenue of $1.1 million from the Offshore & Engineering segment.
Offshore & Engineering segment
Revenue from the Offshore & Engineering segment for 1Q2019 declined by $1.1 million or 32%, from $3.5 million in 1Q2018 to $2.4 million in 1Q2019. The decrease in revenue was mainly due to lower work orders in the Offshore structure and fabrication business of $0.9 million and from precision engineering business of $0.4 million.
Revenue for the Marine segment increased by $6.5 million or 88% to $13.9 million in 1Q2019 which was attributable to:
- The new dredging and reclamation business of 51%-owned Mencast-KSE Pte Ltd contributed a revenue of $6.3 million;
- The segment’s MRO (maintenance, repairs and overhaul) services recorded a 19% growth in revenue, from $3.1 million in 1Q2018 to $3.7 million revenue in 1Q2019;
- Offset by a lower volume activity of $0.4 million in diving services.
Energy Services segment
Revenue from Energy Services segment increased by 23% growth from $4.1 million in 1Q2018 to $5.0 million in 1Q2019, due mainly to increase in revenue contributions of $0.9 million from the Group’s waste treatment plant.
Cost of sales, gross profit and gross profit margin
Cost of sales increased by 49% or $6.6 million from $13.5 million in 1Q2018 to $20.1 million in 1Q2019, in line with the increase in Group’s revenue.
Gross profit in 1Q2019 declined by $0.4 million when compared to 1Q2018, a result of lower revenue contributions from the Offshore & Engineering segment and diving services which were not sufficient to cover its fixed running costs.
The Group’s administrative expenses decreased by approximately $0.6 million from 1Q2018 of $3.8 million to $3.2 million in 1Q2019 mainly due to the following:
- reduction in depreciation of $110,000 related to a property disposed in 4Q2018;
- reduction in depreciation of $60,000 related to assets classified to disposal group in 4Q2018;
- reduction in employee compensations and welfare of $285,000 in Energy Services segment in relation to salaries and bonuses of certain key executives resigned in FY2018; and
- effects of adoption of SFRS(I) 16 on the rental expense of leasehold land, offset with additional depreciation expenses and amortisation of finance expense.
Finance expenses increased by $0.6 million or 42% from $1.4 million in 1Q2018 to $2.0 million in 1Q2019 due to additional finance cost for the amortisation of lease liability of $90,000 and increase from bank borrowings.
Income tax expense of the Group in 1Q2019 arose from the current provision for income tax on the profitable Energy services segment. During 1Q2018 the Group recognised an underprovision of income tax expense from Marine and Offshore & Engineering segments of $74,000.
Loss before income tax
Consequent to the above, the Group recorded a loss before income tax of $3.0 million as compared to $2.4 million in 1Q2018. Excluding the non-recurring gain on sale of property, plant and equipment of $530,000 in 1Q2018, 1Q2019 loss before income tax of $2,978,000 is similar to 1Q2018 loss of $2,967,000.
REVIEW OF FINANCIAL POSITION
The Group’s current assets as at 31 March 2019 amounted to $135.6 million, increased by 6% or $8.2 million as compared to $127.3 million as at 31 December 2018. The increase was mainly attributable to the following:
- increase in asset of disposal group classified as held-for-sale of $9.8 million for initial recognition of right-of-use assets on leasehold land for certain properties to be disposed of; partially offset by
- decrease in cash and cash equivalents of $1.7 million;
- increase in trade and other receivables and contract assets of $2.7 million which were in line with the revenue growth from the Marine and Energy Services segments but was offset by reduction in inventories of $2.6 million owing to a lower revenue and work orders from customers in the Offshore & Engineering segment.
Non-current assets as at 31 March 2019 increased by $16.8 million as compared to $129.8 million as at 31 December 2018 mainly due from the following:
- effects of adoption of SFRS(I) 16 Leases on right-of-use assets on leasehold land of $18.0 million as at 31 March 2019;
- additions in property, plant and equipment of $1.8 million mainly from the dredging and reclamation business; offset by
- depreciation expense on property,plant and equipment.
As at 31 March 2019, current liabilities increased by $12.0 million or 6% to $229.9 million, as compared to $217.9 million as at 31 December 2018, mainly due to:
- effects of adoption of SFRS(I) 16 Leases on lease liabilities under disposal group of approximately $9.7 million and $1.1 million respectively; and
- increase in trade and other payables and contract liabilities by $1.9 million mainly due to works done in the dredging and reclamation business.
Non-current liabilities increased by $16.0 million from $6.3 million as at 31 December 2018 to $22.3 million as at 31 March 2019 mainly from the increase in lease liabilities.
REVIEW OF STATEMENT OF CASH FLOWS
The Group’s cash and cash equivalents as at 31 March 2019 were approximately $13.9 million as compared to $7.9 million as at 31 December 2018. The Group reported a net cash inflow from operating activities of $4.2 million in 1Q2019 due mainly to its operating income before changes in working capital of $4.2 million.
Net cash used in investing activities was $1.6 million for 1Q2019 due to purchases of property, plant and equipment mainly from dredging and reclamation business of approximately $1.3 million and $0.2 million from the Energy Services segment.
Net cash used in financing activities of $4.0 million during 1Q2019 was mainly a result of repayments of term loans, lease liabilities and payment of interests of approximately $5.8 million, offset by proceeds from bank borrowings of $1.8 million.
The Group reported increases in revenue as compared to previous year same quarter. There has been encouraging increases in customer’s enquiries.
Notwithstanding the improved conditions, the Group expects market conditions to be competitive and pressure on margins will persist. As such, the Group is cautious on its industry outlook.
The Group has outstanding orders amounting to approximately $39.5 million as at 31 March 2019.