Unaudited Financial Statement And Dividend Announcement For The First Financial Quarter 31 March 2021
Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.
Consolidated Statement Of Comprehensive Income
"NM" denotes not meaningful.
Review of Performance
REVIEW OF INCOME STATEMENT OF THE GROUP – CONTINUING OPERATIONS
1Q2021 vs 1Q2020
- 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, maintenance, repair & overhaul (“MRO”) services and engineering & fabrication works. This also includes diving services.
- Energy Services comprise of waste treatment and recovery waste system. Capabilities of waste treatment plant include treatment of waste water, oily sludge, slope, mud oil, contaminated soil, solid wastes and filter cakes.
Overall, the Group revenue declined by 25% or $3.7 million from $14.9 million in 1Q2020 to $11.2 million in 1Q2021. This was mainly attributable to the Offshore & Engineering and Marine segments registering a reduction in revenue of $1.1 million and $2.8 million respectively.
Offshore & Engineering segment
The $1.1 million decline in revenue for Offshore & Engineering segment was mainly a result of scaling down the Group’s rope access business, registering a $0.7 million decline in revenue. Precision engineering business also recorded a lower revenue of $0.3 million to $1.2 million in 1Q2021 mainly due to lower volume of work done for a customer in 1Q2021 as compared to 1Q2020.
Revenue for the Marine segment declined by $2.8 million or 33%, from $8.5 million in 1Q2020 to $5.7 million in 1Q2021 which was attributable to:
- the absence in deliveries of high value new built propellers in excess of $1.0 million, revenue decreased by $2.1 million, from $4.3 million in 1Q2020 to $2.3 million in 1Q2021;
- decline in the segment’s MRO (maintenance, repairs and overhaul) services by $0.8 million, from $2.9 million in 1Q2020 to $2.1 million in 1Q2021 due to lower orders from customers; partially offset by
- increase in revenue from diving services of approximately $86,000 to $1.3 million in 1Q2021.
Energy Services segment
Revenue from the waste treatment business remained relatively the same for both reporting periods at slightly over $3.0 million.
Cost of sales, gross profit and gross profit margin
Cost of sales increased by 8% or $0.7 million, from $8.6 million in 1Q2020 to $9.3 million in 1Q2021, mainly arose from the Energy Services segment incurring higher running costs in the treatment of waste. The Group’s diving business also incurred equipment rental of approximately $125,000 for a one-off overseas project.
Gross profit of the Group decreased by $4.3 million to $2.0 million in 1Q2021, as compared to $6.3 million in 1Q2020. The decrease was mainly due to the absence in delivery of of high value new built propellers and weaker demand for precision engineering products and MRO services.
Consequently, the Group’s gross profit margin as a percentage over revenue was 17% in 1Q2021 as compared to 42% in 1Q2020.
Administrative expenses decreased by $0.3 million or 11% from $2.8 million in 1Q2020 to $2.5 million in 1Q2021 mainly due to the following:
- lower employees compensation and welfare by approximately $195,000 arising from natural attrition and a temporary pay-cut across the Group beginning June 2020;
- decrease in professional fees of $75,000; and
- cost savings from travelling and transportation expenses of approximately $54,000.
The finance expenses of the Group declined by 43% or $0.8 million from $1.8 million in 1Q2020 to $1.0 million in 1Q2021, mainly due to lower interest rates charged on certain borrowings, as well as a reduction in the Group’s borrowings, in line with settlement of bank borrowings arising from assets divestment.
Share of profit/(loss) of associated company
Better performance from the Group’s sole associated company in 1Q2021 has led to a recognition of the share of profit of $61,000 as compared to share of loss of $146,000 in 1Q2020.
There was no provision for income tax in 1Q2021 as the Group has unrecognised tax losses and capital allowance as at balance sheet date that can be carried forward and utilised to offset future taxable income subject to meeting certain statutory requirements.
Profit from continuing operations
Consequent to the above, the Group recorded a profit of $0.2 million in 1Q2021 as compared to $11.4 million in 1Q2020. Excluding the non-recurring gain of $8.6 million, profit from continuing operations in 1Q2020 would have been $2.8 million.
REVIEW OF FINANCIAL POSITION
Overall, the Group’s current assets remain stable at $113.0 million for the period/year ended 31 March 2021 and 31 December 2020.
- decrease in inventories of $0.5 million mainly due to recent deliveries of new built propellers;
- net decrease in trade and other receivables of $0.5 million mainly due to higher collections from customers;
- increase in contract assets of $91,000 mainly due to deferred cost in relation to chartering of a vessel in 2Q2021.
- increase in cash and cash equivalents of $0.3 million.
As at 31 March 2021, the Group’s non-current assets of $110.4 million were lowered by $1.1 million as compared to $111.5 million as at 31 December 2020. The decrease was mainly due to the following:
- depreciation expense on property, plant and equipment and ROU assets amounting to $2.5 million; offset by
- additions in property, plant and equipment of $1.3 million mainly arose from capital expenditures incurred by the Energy Services segment of approximately $1.1 million;
- increase in investment in an associated company by $61,000 being the recognition of the Group’s share of profit for 1Q2021.
The Group’s current liabilities increased by $1.2 million or 1% to $89.3 million, as compared to $88.1 million as at 31 December 2020, mainly due to:
- increase in current borrowings of $1.8 million, mainly due to reclassification of noncurrent to current borrowings, measured against the commencement of monthly principal repayment (effective in the month of March 2021) and reporting balance sheet dates. Accordingly, the current borrowings as at 31 December 2020 were computed on a 10-month basis starting from March to December 2021 whereas for the current borrowings as at 31 March 2021, it was computed on a 12-month basis from April 2021 to March 2022;
- increase in contract liabilities of $930,000 mainly from deposits and advances received from a customer of approximately $514,000 for chartering a vessel; offset with
- decrease in trade and other payables of $1.5 million mainly due to payment of external suppliers and release of rental relief payable to tenants upon receipt of cash grant from the government;
- decrease in liabilities directly associated with disposal group classified as held-for-sale of $121,000 for the payment of leasehold rental.
Non-current liabilities of the Group as at 31 March 2021 reduced by $3.0 million or 3% from $111.6 million as at 31 December 2020 to $108.6 million as at 31 March 2021 mainly due to reduction in non-current borrowings as explained in current borrowings.
REVIEW OF STATEMENT OF CASH FLOWS
Overall, the Group’s cash and cash equivalents in 1Q2021 increased by $302,000 from $15.6 million as at 31 December 2020 to $15.9 million as at 31 March 2021. The Group reported a net cash provided by operating activities of $3.8 million in 1Q2021 due mainly to its operating income before changes in working capital of $3.6 million and net increase on working capital of $0.2 million.
Net cash used in investing activities for 1Q2021 was $1.3 million mainly due to additions on property, plant and equipment as part of the capacity expansion in Energy Services segment.
Net cash used in financing activities of $2.2 million during 1Q2021 was a result of repayments of term loans, lease liabilities and payment of interests of approximately $2.3 million, offset by proceeds from bank borrowings of $0.1 million.
DISCONTINUED OPERATIONS AND DISPOSAL OF A SUBSIDIARY CLASSIFIED AS HELD-FOR-SALE
Disposal of 51% Equity Interest in MKSE
As announced on 2 October 2020, Mencast Investment Holdings Pte. Ltd., a wholly owned subsidiary of the Company, had entered into a Sale and Purchase agreement (“SPA”) for the disposal of 51% equity interest in MKSE, represented by 153,000 shares in MKSE.
Following the Group’s decision to sell MKSE and in compliance with SFRS(I) 5 Non-current Assets Held-for-Sale and Discontinued Operations, the assets and liabilities of MKSE were classified as Assets of disposal group classified as held-for-sale and Liabilities directly associated with disposal group classified as held-for-sale respectively on the consolidated balance sheet as at 30 September 2020. Its financial results have been reclassified to “Discontinued Operations” as of 30 September and its prior periods’ financial results have been restated to reflect this change in presentation in the Consolidated Statement of Comprehensive Income.
The completion of the proposed disposal of MKSE has taken place on 12 November 2020 and resulted to a gain on disposal of non-current assets held-for-sale of $1.73 million as disclosed in 4Q2020 Financial Results Announcement.
For comparative purpose, the results of the discontinued operations are as follows:
The Group expects the resurgence of COVID-19, continued border controls restriction, tightening of economic and social activities in Singapore and many countries around the world will continue to affect our customers who operate mainly in the marine, offshore, energy, oil and gas industries. The Group expects the effects of the COVID-19 pandemic to continue to evolve, and the overall business environment to remain challenging, particularly for the marine, offshore and engineering business segments.
The Group will strategically expand its presence and capacity of its waste treatment plant to serve existing customers, as well as to grow the customer base in the Energy segment. This enhancement is expected to diversify and stabilise our Group’s business.
While the Group is mindful of the challenges and the impact of a prolonged outbreak of the Covid-19, it will continue to seek new business, exercise prudence and place greater emphasis on operational costs containment and savings.