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Financial Statements For The Second Half Year And Full Year Ended 31 December 2021
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
"NM" denotes not meaningful.
Review of Performance
Review of Statement of Comprehensive Income
The Group's revenue of $51.28 million for FY2021, was $4.41 million or 9% higher than the previous year revenue of $46.87 million, on the back of higher contributions from Marine segment, up by 24% from $21.96 million in FY2020 to $27.32 million in FY2021. This increase, was however, offset by the decline in revenue from Offshore & Engineering and Energy services segments of $0.58 million and $0.37 million respectively.
Offshore & Engineering segment
Revenue from Offshore & Engineering segment of $9.76 million in FY2021 decreased by $0.58 million or 6% was mainly due to:
- scaling down of the Group's rope access business which resulted in a $1.26 million decline in revenue;
- decrease in heat exchange business by $0.57 million due to lower works order from customer; and
- precision engineering business also recorded a lower revenue of $0.33 million to $5.04 million in FY2021 mainly due to lower volume of work done for a customer in FY2021 as compared to FY2020; offset with
- increase in offshore structure and steel fabrication business by $1.58 million or 51% from $3.08 million to $4.66 million mainly due to higher demands from 3 major customers.
Revenue from Offshore & Engineering segment for 2HY2021 of $5.37 million is higher than 2HY2020 of $4.15 million by $1.22 million mainly due to $1.28 million increase in works order completed in 2HY2021 from offshore & engineering fabrication business.
Revenue from Marine segment rose by $5.36 million or 24% to $27.32 million in FY2021 as compared to $21.96 million in FY2020, which was attributable to:
- increase in the number of on schedule deliveries of high value new built propellers in 4Q2021 resulting in an increased revenue contribution of $2.36 million, from $9.65 million in FY2020 to $12.01 million in FY2021;
- increase in revenue from diving services of approximately $1.70 million from $3.64 million in FY2020;
- increase in the segment's MRO (maintenance, repairs and overhaul) services by $1.29 million to $9.96 million in FY2021, in line with higher demands from recurring customers.
These also explained the fluctuation in Marine segment revenue in 2HY2021 as compared to 2HY2020.
Energy Services segment
Revenue from the waste treatment business decreased marginally by $0.37 million or 3% from $14.58 million in FY2020 to $14.21 million in FY2021 because of lower work orders from a major customer.
These also explained the fluctuation in Energy Services segment revenue in 2HY2021 as compared to 2HY2020.
Cost of sales, gross profit and gross profit margin
Cost of sales increased by $3.44 million or 10%, mainly attributable to higher running costs in Marine segment of approximately $2.74 million which was in line with the increase in revenue.
Gross profit of the Group was up by $0.97 million or 8%, from $12.62 million in FY2020 to $13.59 million in FY2021. The increase was mainly due to the delivery of high value new built propellers in the last quarter of 2021. Higher demands for the Group's MRO business also contributed to improved gross profit. This increase was, however affected by a slight decrease in gross profit from Energy services segment due to its higher running costs.
Consequently, the Group's gross profit margin remains relatively the same at 27% for both financial years ended FY2021 and FY2020.
Gross profit for 2HY2021 increased by $4.19 million or 85%, from $4.93 million in 2HY2020 to $9.11 million in FY2021. The significant jump was mainly attributable to Marine and Offshore and Engineering segment which contributed higher gross profit of $5.58 million and $1.35 million respectively. The increase was, however offset with a decrease in Energy services segment's gross profitability of $2.75 million due to lower volume of work orders from an Oil Supermajor customer in 2HY2021 as compared to 2HY2020.
Administrative expenses in FY2021 were $10.87 million, decreased by approximately $0.56 million or 5% mainly due to lower legal and professional fees in FY2021 as compared to FY2020.
This also explained the decrease in administrative expenses in 2HY2021 as compared to 2HY2020.
The finance expenses of the Group of $3.89 million in FY2021 declined by 32% or $1.81 million from $5.70 million in FY2020, 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 and the commencement of monthly repayment of loans in the first quarter of FY2021.
These also explained the fluctuation in finance expenses in 2HY2021 as compared to 2HY2020.
Share of profit of associated companies
The Group recorded a higher share of profit from its associated companies in FY2021, up by $272,000 or 106%, from $257,000 in FY2020 to $529,000 in FY2021 mainly due to a better performance.
These also explained the fluctuation in share of profit of associated companies in 2HY2021 as compared to 2HY2020.
Profit from continuing operations
Consequent to the above, the Group recorded a profit of $6.63 million in FY2021 as compared to $5.88 million in FY2020.
Review of Balance Sheet
As at 31 December 2021, the Group's current assets decreased by $0.65 million from $113.12 million as at 31 December 2020 attributable to:
- decrease in cash and cash equivalents of $1.30 million;
- decrease in inventories by $170,000 due to write down of inventories of $109,000; offset with
- net increase in trade and other receivables of $0.50 million mainly due to dividend receivables from associated company of $0.3 million; and
- increase in contract assets of $0.27 million was a result of higher accrued revenue mainly related to the Group's diving business.
Non-current assets decreased by $6.38 million from $111.49 million as at 31 December 2020 to $105.12 million as at 31 December 2021 mainly due to:
- net decrease in property, plant and equipment and deposits for purchase of PPE amounting to $6.35 million; and
- decrease in investment in an associated company of $0.26 million.
Current liabilities as at 31 December 2021 increased by $2.17 million or 2% from $88.13 million as at 31 December 2020, mainly due to:
- increase in current borrowings of $1.78 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 31 December 2021, it was computed on a 12-month basis from January 2022 to December 2022;
- increase in trade payables due mainly from Marine and Offshore & Engineering segments of approximately $1.00 million; offset with
- decrease in contract liabilities of $0.20 million mainly from advances received from customers of approximately $0.12 million related to new built propellers; and
- decrease in liabilities directly associated with disposal group classified as held-for-sale of $0.44 million for the payment of leasehold rental.
Non-current liabilities of the Group as at 31 December 2021 declined by $15.86 million or 14%, from $111.62 million as at 31 December 2020 to $95.76 million as at 31 December 2021. The decrease in non-current liabilities was due to:
- reduction in non-current borrowings as explained in current borrowings above; and
- decrease in deferred income tax liabilities due to discharged of deferred income tax.
Review of Full Year Consolidated Statement of Cash Flows
The cash and cash equivalents of the Group as at 31 December 2021 were approximately $14.31 million. Overall, the cash and cash equivalents decreased by $1.27 million as shown in Part D Consolidated Statement of Cash Flows. The Group reported a net cash inflow from operating activities $18.82 million in FY2021 due mainly to its operating cash flow before working capital changes of $18.26 million and net increase on working capital of $0.53 million.
Net cash used in investing activities for FY2021 was $3.33 million mainly due to:
- additions on property, plant and equipment of $3.87 million mainly for capacity expansion in Energy Services segment; offset with
- dividends received from an associated company of $0.5 million
Net cash used in financing activities of $16.76 million during FY2021 was a result of repayments of term loans, lease liabilities and payment of interests of approximately $16.89 million, offset with proceeds from bank borrowings of $0.13 million.
The Group continues to deal with the ongoing challenges brought by the COVID -19 pandemic in the current reporting period. It remains positive over the demands from its customers in the marine, offshore, oil and gas industry, which has shown signs of recovery. Persistent and rising crude oil prices had also injected some market optimism in these sectors. It will continue to stay focused on capturing opportunities that complement or expand its engineering, fabrication & manufacturing businesses, and MRO services.
The Group continues to make good progress in executing its expansion plan in enhancing the waste treatment plant capacity under the Energy segment. It is currently working with various government agencies in respect of meeting their health, safety, environmental and regulatory requirements. This segment will intensify its efforts to grow its customer base with new customers, as well as meeting higher demands from recurring customers.
Management remains watchful for potential headwinds. With interest rates set to rise, finance charges are poised to increase. Higher operating costs from labor and systematic inflation are likely to be a defining characteristic going forward. Other issues such as geopolitical tensions, supply chain disruptions and rising electricity prices in Singapore are amongst the factors that have also been taken into consideration.
The Group remains committed to execute its turnaround strategies, to remain prudent and focus on operational cost containment to ensure resiliency across its business segments as well as to continue to drive growth by exploring viable opportunities both in Singapore and overseas, and to seek out strategic partners and potential investments.