Condensed Interim Financial Statements For The Second Quarter And Six Months Ended 30 June 2021
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Condensed Interim Statement Of Comprehensive Income
Condensed Interim Balance Sheets
Review of Performance
Review of Statement of Comprehensive Income
Overall, the Group revenue declined by 8% or $1.92 million from $24.22 million in HY2020 to $22.30 million in HY2021. This was mainly attributable to the Offshore & Engineering and Marine segments with a revenue decline of $1.80 million and $1.62 million respectively. The decline from these two segments were offset with an increase in Energy Services segment of $$1.50 million.
Offshore & Engineering segment
The $1.80 million decline in revenue for Offshore & Engineering segment was mainly due to:
- scaling down of the Group’s rope access business, recording a $0.98 million decline in revenue;
- Precision engineering business also recorded a lower revenue of $0.80 million to $2.62 million in HY2021 mainly due to lower volume of work done for a customer in HY2021 as compared to HY2020.
These also explained the fluctuation in Offshore & Engineering segment revenue in 2Q2021 as compared to 2Q2020.
Revenue for the Marine segment declined by $1.62 million or 13%, from $12.71 million in HY2020 to $11.09 million in HY2021 which was attributable to:
- reduction in the number of deliveries of high value new built propellers in excess of $0.5 million, hence revenue decreased by $2.58 million, from $6.12 million in HY2020 to $3.54 million in HY2021; offset with
- increase in revenue from diving services of approximately $0.68 million to $1.17 million in HY2021;
- increase in the segment’s MRO (maintenance, repairs and overhaul) services by $0.27 million, from $4.70 million in HY2020 to $4.97 million in HY2021, due to a slight improvement in orders from customers.
These also explained the fluctuation in Marine segment revenue in 2Q2021 as compared to 2Q2020.
Energy Services segment
Revenue from the waste treatment business increased by $1.51 million or 28% from $5.33 million in HY2020 to $6.83 million in HY2021 as a result of higher demands from recurring customers.
These also explained the fluctuation in Energy Services segment revenue in 2Q2021 as compared to 2Q2020.
Cost of sales, gross profit and gross profit margin
Cost of sales increased by 8% or $1.30 million to $17.83 million in HY2021, mainly arose from the Energy Services segment incurring higher running costs in the treatment of waste and a progressive increase in plant capacity. The Group’s diving business also incurred higher costs in line with the increase in revenue.
Gross profit of the Group decreased by $3.22 million from $7.69 million in HY2020 to $4.47 million in HY2021. The decrease was mainly due to the absence in delivery of high value new built propellers and weaker demand for precision engineering products.
Consequently, the Group’s gross profit margin, as a percentage over revenue, decreased from 32% in HY2020 to 20% in HY2021.
2Q2021 gross profit increased by $1.10 million or 78% to $2.52 million in 2Q2021, as compared to $1.42 million in 2Q2020. The increase was mainly attributable to Energy Services gross profit contribution of $1.46 million in 2Q2021 as compared to $$0.44 million in 2Q2020, in line with the increase in revenue.
The Marine segment also registered an increase in gross profit contribution of approximately $0.74 million in 2Q2021 as compared to 2Q2020 mainly from MRO services and diving services.
Administrative expenses remained relatively the same for both reporting periods HY2021/HY2020 at $5.5 million.
2Q2021 administrative expenses of $3.05 million increased by $410,000 or 16% from $2.64 million in 2Q2020 mainly due to the issuance of share awards to key management personnel of $240,000 under the PSAS 2021 scheme.
The finance expenses of the Group of $2.04 million in HY2021 decreased by 40% or $1.38 million from $3.42 million in HY2020 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.
These also explained the fluctuation in finance expenses in 2Q2021 as compared to 2Q2020.
Share of profit/(loss) of associated company
Better performance from the Group’s sole associated company in HY2021 resulted to its share of profit of $285,000 as compared to share of loss of $76,000 in HY2020.
These also explained the fluctuation in share of profit/(loss) of associated company in 2Q2021 as compared to 2Q2020.
Profit from continuing operations
Consequent to the above, the Group recorded a profit of $0.25 million in HY2021 as compared to $11.45 million in HY2020. The reduction in profits was mainly a result of lower gross profit contributions (as explained above), lower receipts from government grants and the absence of a non-recurring gain (net) of $8.63 million in HY2021.
REVIEW OF BALANCE SHEET
Overall, the Group’s current assets remain stable at $113.0 million for the period/year ended 30 June 2021 and 31 December 2020.
- decrease in cash and cash equivalents of $0.94 million (please refer to Part D. Condensed Interim Consolidated Statement of Cash Flows);
- decrease in contract assets of $0.37 million was a result of higher billings to customers where the right to payment became unconditional. These billings were mainly related to the Group’s diving business; offset with
- net increase in trade and other receivables of $1.02 million mainly due to dividend receivables from associated company of $0.5 million and increase in advances to suppliers of $0.41 million.
The Group’s non-current assets of $108.10 million as at 30 June 2021 was down by 3% or $3.39 million, from $111.49 million as at 31 December 2020. The decrease was mainly due to:
- decrease in property, plant and equipment amounting to $3.18 million;
- decrease in investment in an associated company of $0.22 million.
The Group’s current liabilities increased by $2.85 million or 3% to $90.98 million as at 30 June 2021, as compared to $88.13 million as at 31 December 2020, mainly due to:
- increase in current borrowings of $2.38 million, mainly due to reclassification of non-current 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 30 June 2021, it was computed on a 12-month basis from July 2021 to June 2022;
- increase in contract liabilities of $1.28 million mainly from deposits and advances received from customers of approximately $0.34 million and $0.69 million respectively, in connection to the chartering of a vessel and for new built propellers; offset with
- decrease in trade and other payables of $0.56 million mainly due to the release of approximately $0.37 million rental relief payable to tenants upon receipt of cash grant from the government and the reversal of warranty claim of $100,000;
- decrease in liabilities directly associated with disposal group classified as held-for-sale of $142,000 for the payment of leasehold rental.
Non-current liabilities of the Group as at 30 June 2021 reduced by $7.04 million or 7%, from $111.62 million as at 31 December 2020 to $104.58 million as at 30 June 2021. This was mainly due to reduction in non-current borrowings as explained in current borrowings above.
Review of Condensed Interim Statement of Cash Flows
Overall, the Group’s cash and cash equivalents in HY2021 declined by $0.93 million, from $15.60 million as at 31 December 2020 to $14.67 million as at 30 June 2021. The Group reported a net cash provided by operating activities of $7.89 million in HY2021 due mainly to its operating income before changes in working capital of $7.17 million and net increase on working capital of $0.72 million.
Net cash used in investing activities for HY2021 was $1.83 million mainly due to additions on property, plant and equipment as part of the capacity expansion in Energy Services segment.
The Group continues to deal with the ongoing challenges that were brought on by the COVID-19 pandemic in the current reporting period. Demands from customers who are in the marine, offshore, oil and gas industry remain cautious though there are some signs of recovery. The resurgence of COVID-19 and with the spread of new variants, various forms of pandemic-related movement controls, tightening of economic and social activities in Singapore and many countries will continue to affect our customers in these industries. The Group expects the business environment under its Offshore & Engineering and Marine segments to remain challenging amidst margin compression, rising material and operating costs.
As mentioned in our past results announcements, the Group’s Energy segment has plans to expand its presence and capacity of its waste treatment plant. While improvements and upgrading works are being reviewed, it is also working on commissioning new equipment in respect of meeting higher health, safety, environmental and regulatory requirements. Barring unforeseen circumstances, the segment expects the capacity expansion plans and enhancement works to be ready in 4Q2021. The segment will also strategically seek to expand its customer base.
The Group will continue to seek new business opportunities and developments but will remain prudent and focus on operational cost containment to ensure resiliency in its businesses.