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Financials

Condensed Interim Financial Statements For The Six Months Ended 30 June 2024

Financials Archive

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CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED INTERIM BALANCE SHEETS

Review of Performance
Review of Statement of Comprehensive Income

Revenue

Overall, the Group's revenue for 1HY2024 rose by 7% or $1.76 million from $23.70 million in 1HY2023 to $25.46 million in 1HY2024. The increase in revenue was mainly due to the following segments:

• Marine segment – up by $1.47 million;
• Offshore & Engineering segment – higher by $0.24 million; and
• Energy services segment – marginally increased by $51,000.

Offshore & Engineering segment

The increase in revenue in the Offshore & Engineering segment of $0.24 million was primarily due to higher revenue contribution from an Indonesia subsidiary of the Group in the offshore structure and steel fabrication business of $155,000 in 1HY2024.

Marine segment

Marine segment revenue increased by $1.47 million from $10.34 million in 1HY2023 to $11.81 million in 1HY2024 mainly due to:

• increase in revenue for new build propeller of $0.96 million, from $4.84 million in 1HY2023 to $5.80 million in 1HY2024; and
• increase in Marine's MRO (maintenance, repairs and overhaul) service revenue by $0.51 million, from $5.50 million in 1HY2023 to $6.01 million in 1HY2024. Propulsion system MRO service revenue contributed to an increase of $0.61 million offset with the decline in ship repair works by $0.10 million.

Energy Services segment

Revenue from the Energy services segment remained relatively the same for both reporting periods 1HY2024 and 1HY2023 at $11.1 million.

Cost of sales, gross profit ("GP") and gross profit margin

In 1HY2024, cost of sales increased by 20% or $3.28 million to $19.35 million compared to $16.07 million in 1HY2023. The Energy services segment included a $4.13 million revenue for a fast-track contract, but with a single-digit gross margin, which resulted in increased cost of sales and lower overall gross profit. The Group's gross profit decreased by 20% or $1.52 million, from $7.63 million in 1HY2023 to $6.11 million in 1HY2024. The following factors contributed to the decline in gross profit:

• GP from Energy services segment declined by $4.60 million due to:
  • a reduction in the volume of work orders from the waste treatment; offset with
  • the marginal contribution to the gross profit from a fast-track contract of $0.33 million;

offset with

• an increase in the GP of approximately $1.68 million from MRO services and new built propellers from the Marine segment; and
• a drop in gross losses of approximately $1.28 million from the Offshore & Engineering segment's offshore structure & steel fabrication and precision engineering due to costs saving as a result of assets divestment in prior year. Menji Shanghai also contributed to the gross profit contribution of $0.12 million.

Consequently, the Group's gross profit margin (as a percentage over revenue) was down by 8 percentage point, from 32% in 1HY2023 to 24% in 1HY2024.

Administrative expenses

Administrative expenses remained relatively the same for both reporting periods 1HY2024/1HY2023 at $5.0 million.

Finance expenses

The Group's finance expenses of $3.36 million for 1HY2024 decreased by 14% or approximately $0.52 million from $3.88 million in 1HY2023 mainly due to the reduction in the Group's borrowings, in line with settlement of bank borrowings in prior year arising from assets divestment.

Share of loss of associated companies

The Group recorded a share of loss of $37,000 from its remaining associated company in 1HY2023 compared to $Nil in 1HY2024. The Group and the Company's share of losses in its associated company has already exceeded its interest as at FY2023, hence the Group and the Company have not recognised further losses in 1HY2024.

Net (loss)/profit

Consequent to the above, the Group recorded a net loss before tax of $0.36 million in 1HY2024 as compared to a net profit before tax of $3.29 million in 1HY2023.

Review of Balance Sheet

Current assets

Overall, the Group's current assets remained stable at $99.24 million and $99.38 million for the period/year ended 30 June 2024 and 31 December 2023 respectively, details are explained below:

• inventories increased by $1.35 million from $4.08 million in FY2023, mainly due to higher volume of secured and on-going orders for new build propellers in the Marine segment; offset with
• net decrease in trade and other receivables of $0.97 million mainly due to the $1.03 million receipt of the third and final payment tranche in relation to the disposal of Vac-Tech; and
• net decreases in cash and cash equivalents by $0.46 million as explained in the Review of Condensed Interim Consolidated Statement of Cash Flows section below.

Non-current assets

The Group's non-current assets of $79.05 million as at 30 June 2024 decreased by 3% or $2.56 million from $81.61 million as at 31 December 2023, as a result of the following:

• a net decrease in property, plant, and equipment ("PPE") of $2.58 million; offset with
• a fair value gain of $22,000 from financial assets, at FVOCI.

Current liabilities

The Group's current liabilities increased by $0.80 million or 1% from $86.82 million as at 31 December 2023, to $87.62 million as at 30 June 2024, because of the following:

• increase in contract liabilities of $2.59 million due mainly to advances received from customers of approximately $2.43 million for new build propellers; offset with
• decrease in trade and other payables of $0.93 million, mainly due to payment of accruals and payables to suppliers;
• net decrease in current borrowings of $0.42 million mainly due to repayment of borrowings;
• decrease in current income tax liabilities of $0.19 million; and
• decrease in liabilities under disposal group of approximately $0.24 million mainly due to monthly repayment of borrowings.

Non-current liabilities

The Group recorded a 5% decline or $3.23 million on its non-current liabilities from $61.81 million as at 31 December 2023 to $58.58 million as at 30 June 2024 attributable to:

• repayment of bank loans and lease liabilities; offset with
• under-provision of deferred income tax liabilities in prior years.

Review of Condensed Interim Statement of Cash Flows

The Group reported a net cash inflow from operating activities of $6.84 million due to higher operating income before changes in working capital of $7.17 million (net of interest received), offset with net decrease in working capital of $0.33 million.

Net cash provided by investing activities of $0.52 million was mainly due to the following:

• proceeds in relation to third and final tranche payment for the disposal of Vac-Tech of $1.03 million;
• additional cash receipt of $0.19 million as a result of business combination of Menji Shanghai; and
• proceeds from the disposal of PPE of $30,000; offset with
• cash outlay of $0.73 million for the purchase of PPE, mainly for the operational needs in the Marine segment.

Cash outflow from financing activities amounted to approximately $7.82 million, due mainly to repayment of bank borrowings, lease liabilities, and interest expenses; offset with the increase in trade financing for 1HY2024.

Commentary

The current elevated interest costs and inflationary pressures are likely to persist throughout 2024. Together with the prevailing economic volatility, the Group anticipates a challenging business environment within its three operating segments (Offshore & Engineering, Marine, and Energy Services).

The Group is committed to mitigating these challenges through the streamlining of major expenditures, prudent liquidity management, increased marketing endeavour aimed at driving sales performance, and proactive measures to realign current processes to achieve greater efficiencies.

In light of the foregoing, the Group will exercise prudence in its quest for organic growth and focus on pursuing new revenue streams. Additionally, the Group is diligently seeking opportunities to broaden its customer base by engaging with new clientele and/or markets to strengthen the resilience of its core business segments.