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Unaudited Financial Statements And Dividend Announcement For The Full Year Ended 31 December 2018
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Consolidated Statement Of Comprehensive Income
Review of Performance
REVIEW OF INCOME STATEMENT OF THE GROUP
4Q2018 vs 4Q2017 and FY2018 vs FY2017
- 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.
All three business segments generated healthy revenue growth in both reporting periods ended 4Q2018 and FY2018 as compared to corresponding periods.
Overall, Group's revenue for FY2018 increased by 46% or $23.8 million to $75.5 million as compared to $51.7 million in FY2017.
Likewise for 4Q2018 Group's revenue also increased by $14.7 million or 129% when compared to 4Q2017. The increase in revenue for current reporting periods was mainly driven by a stronger revenue contribution from the Marine segment.
Offshore & Engineering segment
Revenue from the Offshore & Engineering segment for the year ended FY2018 remained relatively stable as compared to previous year, increased marginally by 3.8% to $14.6 million.
For 4Q2018, this segment recorded an increase in revenue of $1.1 million or 44% mainly due to higher recognition on works done from existing projects.
Revenue for the Marine segment jumped by 95% or $21.1 million to $43.4 million in FY2018which was attributable to:
- The segment's MRO (maintenance, repairs and overhaul) services recorded a 28% growth in revenue, from $12.5 million in FY2017 to $16.0 million revenue in FY2018 due mainly to an uptick in business activities that led to higher demand for the Group's MRO services;
- The growth was further driven by a robust volume growth for new built propellers which posted an increase in revenue of 120% or $5.9 million, from $4.9 million in FY2017 to $10.8 million in FY2018;
- The new dredging and reclamation business of 51%-owned Mencast-KSE Pte Ltd contributed a maiden revenue of $12.2 million;
- Diving activities, however, showed a lower volume activity resulting to a $0.5 million decline in revenue.
These also explained the fluctuation in revenue in 4Q2018 as compared to 4Q2017.
Energy Services segment
Revenue from Energy Services segment was up by 14%, from $15.4 million in FY2017 to $17.5 million in FY2018, due mainly to increased work orders of $0.7 million from an existing customer and revenue contributions of $1.4 million from the Group's waste treatment plant.
These also explained the fluctuation in revenue in 4Q2018 as compared to 4Q2017.
Cost of sales, gross profit and gross profit margin
Cost of sales increased by 19% or $10.4 million to $66.3 million in FY2018, in line with the increase in revenue.
Driven primarily by a stronger revenue and lower depreciation charges in FY2018 (a result of impairments undertaken in FY2017), the Group registered a gross profit margin over revenue of 12% or a gross profit of $9.2 million in FY2018, as compared to a gross loss margin of 8.0% or gross loss of $4.2 million in FY2017.
This also explained the fluctuations in cost of sales and gross profit in 4Q2018 as compared to 4Q2017.
The Group's administrative expenses remained relatively similar for both reporting periods/financial years in 4Q2018/FY2018 and 4Q2017/FY2017.
Finance expenses remained relatively similar for reporting periods/financial years ended 4Q2018/FY2018 and 4Q2017/FY2017.
The Group tax charge of $0.4 million in FY2018 is due to current provision for income tax of $1.2million on its profitable Marine and Energy segments offset by overprovision of previous years and deferred income tax charge.
On the back of an improvement in revenue and the absence of impairment losses, net loss for the Group was signficantly reduced by 92%, from $80.7 million net loss in FY2017 to $6.6 million net loss in FY2018.
Net loss attributable to equity holders of the Company in FY2018 similarly dropped by 90% from $82.0 million in FY2017 to $8.2 million in FY2018.
These also explained the fluctuation in Group's net loss and net loss attributable to equity holders of the Company in 4Q2018 as compared to 4Q2017.
REVIEW OF FINANCIAL POSITION
As at 31 December 2018 the Group's current assets amounted to $127.4 million, increased by 189% or $83.2 million as compared to $44.1 million as at 31 December 2017. The increase was mainly attributable to the following:
- reclassification of $74.3 million non-current assets to assets of disposal group classified as held-for-sale as part of the on-going efforts of the Group to dispose certain properties to pare down its debt;
- Increase in trade and other receivables of $4.6 million in line with the revenue growth in FY2018;
- Increase in contract assets of $3.2 million due mainly to accrued revenue for works done.
Non-current assets decreased by $85.7 million, from $215.5 million as at 31 December 2017 to $129.8 million as at 31 December 2018, due to the movements in the property, plant and equipment:
- reclassification of leasehold land and building of approximately $74.3 million to current assets, as explained above;
- depreciation charges of $12.8 million in FY2018;
- As previously announced, the Company through S & W Pte Ltd, its wholly owned subsidiary, entered into a Sale & Purchase Agreement for the disposal of the entire stake in Changshu Honghua, which was mainly related to a leasehold land and building with net book value of $5.9 million; offset by
- purchase of a vessel of approximately $3.6 million for the new dredging and reclamation business; and
- costs capitalised during FY2018 from the rectification works done in 42A Penjuru Road property of $3.4 million.
Current liabilities increased by $5.5 million or 3% from $210.9 million as at 31 December 2017 to $216.4 million as at 31 December 2018, mainly due to:
- net increase in trade and other payables and contract liabilties of $6.2 million from $20.2 million as at 31 December 2017 to $26.4 million as at 31 December 2018 due mainly from the new dredging and reclamation business of approximately $4.8 million;
- increase in provision for current income tax by $875,000 mainly from marine segment; offset by
- decrease in current borrowings of $1.6 million, being the aggregate of current borrowings of $114.5 million and liabilities classified under disposal group of $74.3 million as at 31 December 2018, when compared to 31 December 2017 current borrowings of $190.4 million.
The non-current liabilities decreased by $0.8 million from $8.6 million as at 31 December 2017 to $7.7 million as at 31 December 2018 mainly from provision of deferred tax in both current year and prior years with net amount of $0.2 million and decrease in noncurrent borrowings due to repayment of certain term loans and finance lease during FY2018.
REVIEW OF STATEMENT OF CASH FLOWS
The Group's cash and cash equivalents as at 31 December 2018 were approximately $15.3 million as compared to $11.6 million as at 31 December 2017. The Group reported a net cash inflow from operating activities of $10.5 million in FY2018 due mainly to its operating income before changes in working capital of $10.9 million.
Net cash provided by investing activities was $5.5 million for FY2018 as a result of the release of a $2.1 million fixed deposits pledged, net proceeds from disposal of fixed assets of $1.7 million and $8.9 million proceeds from disposal group classified as held-for-sale. This was offset by purchases of property, plant and equipment of $7.3 million. The purchase of fixed assets during the current financial year was mainly related to:
- purchase of a vessel by the Group's new dredging and reclamation business of $3.6 million in 3Q2018;
- capital expenditures of $0.6 million from Energy segment as part of their operational requirements;
- Certain renovation works of $0.4 million undertaken by the Marine segment; and
- rectification works, amounting to $2.7 million, for the Group's 42A Penjuru property during FY2018.
Net cash used in financing activities of $12.2 million during FY2018 was mainly a result of repayments of term loans, finance lease liabilities and payment of interests of approximately $25.8 million, offset by proceeds from bank borrowings of $14.6 million.
The Group expects the operating environment to remain challenging despite improvement in activities in 2018. In 2019, the Group will continue to focus on strengthening its balance sheet, improving liquidity and continue to take measures to reduce labour intensive operations.
The Group has outstanding orders amounting to approximately $46.0 million as at 31 December 2018. Completion is expected to be over the next two years.