Unaudited Financial Statements And Dividend Announcement For The Full Year Ended 31 December 2017
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Consolidated Statement Of Comprehensive Income
Review of Performance
REVIEW OF INCOME STATEMENT OF THE GROUP
4Q2017 vs 4Q2016 and FY2017 vs FY2016
- 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.
- Energy Services includes oil sludge and slop reclamation, hydro cleaning oil and gas tanks, encapsulation of wastes prior for landfill disposal and design and launch carbon footprint management initiatives and green initiatives.
Overall, revenue in FY2017 decreased by 14% or $8.4 million to $51.7 million as compared to $60.1 million in FY2016 mainly due to weaker revenue in the Offshore & Engineering segment and Marine segment whereas the Energy segment remains comparable year-on-year.
The Group registered a 58% increase in revenue to $11.4 million in 4Q2017. The increase in revenue came from three (3) business segments particularly from Offshore & Engineering segment as explained below.
Offshore & Engineering segment
Revenue from the Offshore & Engineering segment in FY2017 was $14.1 million, decrease by $7.2 million when compared to $21.2 million in FY2016. The order book at the start of FY2017 was lower than the start of FY2016 as the oil and gas industry remains muted during the current reporting period due to subdued oil prices that brought about a general decline in demands from major customers.
4Q2017 revenue from this segment increased by $2.2 million as compared to 4Q2016 mainly due to substantial completion of certain projects in 4Q2017.
Revenue from the Marine segment for FY2017 of $22.3 million declined by 7% when compared to $23.9 million revenue registered in FY2016 mainly due to lower demand from customers and lower project activity from diving services and repairs and maintenance services.
In 4Q2017, the Marine segment recorded a 25% increase in its revenue when compared to $3.6 million revenue in 4Q2016 mainly due from its diving services which registered $838,000 higher revenue in 4Q2017 as compared to 4Q2016.
Energy Services segment
Revenue from Energy Services for FY2017 was $15.4 million, a marginal increase by 2% as compared to FY2016 of $15.0 million.
In 4Q2017, revenue was 30% higher when compared to 4Q2016 revenue of $3.4 million, mainly due to continuous support of major oil & gas players in Singapore.
Cost of sales, gross profit and gross profit margin ("GP%")
The Group reported a gross loss of $4.2 million for the year ended 31 December 2017 as compared to a gross profit of $7.2 million in previous year. Overall, the decline in gross profit in FY2017 was mainly attributable to:
- Significant decline in revenue from Offshore & Engineering segment which saw a $7.2 million or 34% revenue reduction, reflecting its inability to cover the existing fixed running costs. This explains the disproportionate reduction in cost of sales when compared to the revenue reduction;
- Negatively impacted by net increase in depreciation and upkeep and maintenance of vessels of $1.7 million and $0.7 million respectively on FY2017, as compared to $0.4 million and $0.2 million respectively in FY2016; and
- Margin compressions arising from increased competition in both the Offshore & Engineering and Marine segments.
These also explain the fluctuations in gross loss and gross loss margin in 4Q2017 as compared to 4Q2016.
Other losses - net
The Group recorded an increase in other losses- net by $41.2 million from $13.0 million in FY2016 to $54.2 million in FY2017.
The Group's administrative expenses for FY2017 marginally increased by 4% from $15.4 million in FY2016 to $16.0 million in FY2017.
The 13% decrease in administrative expenses in 4Q2017 of $4.4 million from $5.1 million in 4Q2016 is mainly due to:
- in 4Q2016 the Group catch up on depreciation on two properties for $1.3 million
previously classified under disposal group; partially offset with:
- higher property tax and land rental of $220,000 mainly due from the increase in annual value of 42A property effective on 1 January 2017 but the assessed value started from the date of TOP in August 2016; and
- increases in legal and professional fees of approximately $200,000 due to its ongoing corporate exercise and present legal cases.
Increase in finance expense of $0.7 million to $5.8 million in FY2017 was mainly due to:
- additional interests incurred on drawdown of new bank borrowings of $15 million; and
- additional borrowing costs of $0.6 million were accounted for in finance expense in FY2017 as opposed to $0.5 million being capitalised under property, plant and equipment instead of finance expense in FY2016.
These also explain the increase in finance expense in 4Q2017 as compared to 4Q2016.
Income tax expense in FY2017 was $475,000 as compared to $46,000 in FY2016. The increase was mainly due to under-provision of deferred income tax charged to profit or loss by a subsidiary in the Marine segment.
Consequent to the above, the Group incurred a net loss attributable to Equity holders of the Company of $82.0 million and $65.7 million in FY2017 and 4Q2017 respectively as compared to a net loss of $26.9 million and $24.4 million in FY2016 and 4Q2016 respectively.
The net profit attributable to non-controlling interests for FY2017 increased by $888,000 from $544,000 in FY2016 to $1.3 million in FY2017. 4Q2017 net income attributable to non-controlling interests of $127,000 was higher by $888,000 or 117% when compared to 4Q2016 net loss of $761,000.
Excluding the impairment charges, the net loss for 4Q2017 and FY2017 will be $9.9 million and $25.0 million as tabulated below:
REVIEW OF FINANCIAL POSITION
Current assets of the Group decreased by 37% from $70.6 million as at 31 December 2016 to $44.1 million as at 31 December 2017. The decrease was mainly due to:
- disposal of 11 Tuas Basin Close property which was presented in FY2016 under disposal group classified as held-for-sale for $6.4 million;
- decrease in due from construction contract as a result of recognition of loss from cancellation of customer's contract of $5.4 million;
- total net impairment of trade receivables of approximately $3.9 million;
- decrease in trade receivables arising from intensive collection effort as highlighted in operating cash inflow;
- decrease in inventories of $1.4 million due to write-downs from the Offshore & Engineering segment.
Non-current assets decreased by $56.3 million or 21% from $271.8 million as at 31 December 2016 to $215.5 million as at 31 December 2017 mainly due:
- impairment of goodwill of approximately $35.1 million;
- impairment of under- utilised machinery and vessels of $6.0 million and $3.5 million respectively registered under Offshore & Engineering segment as well as Marine segment; and
- depreciation expense of $15.5 million recognised in FY2017.
Current liabilities of the Group as at 31 December 2017 marginally increased by 1% or $798,000 from $64.8 million as at 31 December 2016.
Non-current liabilities marginally declined by 1% from $155.6 million as at 31 December 2016 to $153.9 million as at 31 December 2017.
Net current liabilities position
Consequent to the reduction in current assets (as explained above), the current liabilities of the Group exceed the current assets by $21.4 million.
Disposal Group classified as held-for-sale
On 4 December 2017, the Group completed the disposal of leasehold industrial property located at 11 Tuas Basin Close, Singapore 638806 at a loss of $310,000.
REVIEW OF STATEMENT OF CASH FLOWS
The Group's cash and cash equivalents increased by $7.3 million from $7.4 million as at 31 December 2016 to $14.7 million as at 31 December 2017.
In tandem with the Group's continuous effort in monitoring its working capital requirements, it registered a net cash inflow from operating activities of $28.9 million as at 31 December 2017 arising from intensive collection efforts in trade and other receivables of $20.7 million and increases in trade and other payables of $15.5 million.
The Group had minimised its capital expenditure in response to weak demands in the oil and gas industry and hence, recorded minimal investing activities of $3.0 million for FY2017. The marginal capital expenditure mainly relates to the Energy segment for its expansion of services to customers.
Net cash used in financing activities for FY2017 amounted to $22.9 million, mainly due to repayment of bank borrowings, finance lease liabilities and interest payments totalling to $38.3 million, offset by proceeds from new bank borrowings of $15.9 million and dividends paid to non-controlling interests of $600,000.
The continued weakness in the outlook and business condition for the O&G industry has created a challenging business environment for the Group whose products and services demands are generally driven by the overall performance of the industry.
The Group had breached various financial covenants of the banks. The Company is in discussions with the banks to arrive at an overall re-financing solution. In this regard, the Group continues to use the going concern basis in preparing the financial statements.
As announced on 28 September 2017 and 11 November 2017, the Company is in continuous discussions with various parties in relation to transactions which may involve the divestment of assets or other form of corporate exercises.
The Company will make appropriate announcements as and when there is any material development.
Group's order book as at 31 December 2017 stands at $15.5 million (as at 31 December 2016: $12.1 million).