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Financials

Financial Statements For The Second Half Year And Full Year Ended 31 December 2022

Financials Archive

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

BALANCE SHEETS

Review of Performance
Review of Statement of Comprehensive Income

Revenue

Overall, the Group recorded a revenue of $42.34 million in FY2022, lowered by 8% or $3.57 million from $45.91 million in FY2021. The lower revenue was mainly attributable to the Offshore & Engineering and Energy Services segment.

Offshore & Engineering segment

Revenue for Offshore & Engineering segment decreased by $2.59 million, from $9.75 million in FY2021 to $7.16 million in FY2022. The decline was mainly attributable to:

1. lower revenue contribution from precision engineering business of $1.92 million, from $5.04 million in FY2021 to $3.12 million in FY2022, mainly due to lower volume of work done of approximately $1.60 million for a customer in FY2022 as compared to FY2021; and
2. lower revenue contribution in the offshore structure and steel fabrication business of approximately $0.67 million, from $4.66 million in FY2021 to $3.99 million in FY2022. This was mainly due to a higher competitive operating environment leading to fewer repairs and other marine related services undertaken by the Group in FY2022.

These also explained the fluctuation in Offshore & Engineering segment revenue in 2HY2022 as compared to 2HY2021.

Marine segment

Revenue for the Marine segment remained relatively constant at approximately $21.93 million and $21.95 million for FY2022 and FY2021 respectively due to:

1. an increase in revenue for the MRO (maintenance, repairs and overhaul) services segment by $0.51 million, from $7.41 million in FY2021 to $7.92 million in FY2022, mainly due to higher demands and/or volume of work done for recurring customers; and
2. increased demands for new build propellers leading to a higher revenue contribution of $2.00 million, from $12.01 million in FY2021 to $14.01 million in FY2022; offset by
3. the absence of retainer fee and a short-term chartering income of $2.53 million in FY2022.

These also explained the fluctuation in Marine segment revenue in 2HY2022 as compared to 2HY2021.

Energy Services segment

Revenue from the waste treatment business decreased by 7% or approximately $0.96 million from $14.21 million in FY2021 to $13.25 million in FY2022 affected by a reduction in work orders from a major customer.

This also explained the fluctuation in Energy Services segment revenue in 2HY2022 as compared to 2HY2021.

Cost of sales, gross profit and gross profit margin

Despite the decline in Group’s revenue for FY2022, the cost of sales remained relatively the same for both periods FY2022/FY2021 at $32.45 million/$32.43 million, due to inflationary pressure on direct cost of production.

Overall, the gross profit of the Group decreased by $3.60 million from $13.49 million in FY2021 to $9.89 million in FY2022 due mainly from the Energy Services and Marine segment incurring higher energy, materials and running costs in FY2022.

Consequently, the Group’s gross profit margin, as a percentage over revenue, decreased from 29% in FY2021 to 23% in FY2022.

These also explained the decrease in gross profit and gross profit margin for 2HY2022 as compared to 2HY2021.

Administrative expenses

Administrative expenses in FY2021 of $10.31 million decreased by $0.81 million or 8% to $9.50 million in FY2022 mainly due to lower:

• depreciation charges of approximately $0.40 million;
• professional fee expenses of $0.24 million; and
• bank charges of $0.25 million.

These also explained the decrease in administrative expenses in 2HY2022 as compared to 2HY2021.

Finance expenses

The interest expenses of the Group increased by 38% or $1.47 million from $3.88 million in FY2021 to $5.35 million in FY2022 mainly due to higher effective interest rates on bank borrowings.

This also explained the fluctuation in finance expenses in 2HY2022 as compared to 2HY2021.

Share of profit of associated companies

The Group recorded a lower share of profit of $75,000 from two of its associated companies in FY2022, as compared to a share of net profit of $529,000 in FY2021 mainly due to decline in profit from operations of Vac-Tech during FY2022.

This also explained the fluctuation in share of profit of associated companies in 2HY2022 as compared to 2HY2021.

(Loss)/profit from continuing operations

Consequent to the above, the Group recorded a loss of $234,000 in FY2022 as compared to a profit of $6.89 million in FY2021.

Review of Balance Sheet

Current assets

Current assets were down by 2% or $2.70 million, from $112.47 million as at 31 December 2021 to $109.77 million as at 31 December 2022. The decrease was attributable to:

1. a decrease in cash and cash equivalents by $5.28 million as explained (please refer to Part D. Consolidated Statement of Cash Flows);
2. net decrease in trade and other receivables of $0.71 million in line with the reduction in Group’s revenue;
3. decrease in contract assets registered of $0.86 million, mainly related to disposal of Subsea group in 1HY2022; offset with
4. a marginal increase in inventories of $0.14 million, mainly due to higher volume of on-going projects expected to be delivered in financial period ended 30 June 2023 (“1HY2023”), offset with lower finished goods inventory due to high delivery of new propellers during 4Q2022; and
5. an increase in assets of disposal group by $4.02 million due to a reclassification of investment in associated company to disposal group of $4.07 million. This reclassification is directly related to the disposal of Vac-Tech.

Non-current assets

As at 31 December 2022, the Group’s non-current assets decreased by 13% or $13.83 million, from $105.12 million as at 31 December 2021 to $91.29 million as at 31 December 2022. The decrease was mainly due to:

1. decline in property, plant and equipment of $9.47 million; and
2. reclassification of investment in associated companies of $4.07 million from non-current assets to current assets under the “Assets of disposal group classified as held for sale”.

Current liabilities

As at 31 December 2022, the Group’s non-current liabilities reduced by $14.39 million, from $95.76 million as at 31 December 2021 to $81.37 million as at 31 December 2022. This decrease was mainly in relation to repayment of banks loans and lease liabilities, as well as early settlement of loans outstanding arising from the termination of 107 Gul Circle lease and the disposal of Subsea Group.

1. a decrease in trade and other payables of $2.17 million, mainly due to suppliers’ payment and offsetting of trade payables, accruals and GST payables;
2. a decrease in liabilities under disposal group of $0.78 million, due to repayment of bank borrowings and lease liabilities; offset with
3. an increase in contract liabilities of $0.82 million, mainly from advances received from customers for new build propellers; and
4. an increase in current borrowings of $0.71 million, mainly due to higher utilization of trade financing facilities.

Non-current liabilities

As at 31 December 2022, the Group’s non-current liabilities reduced by $14.39 million, from $95.76 million as at 31 December 2021 to $81.37 million as at 31 December 2022. This decrease was mainly in relation to repayment of banks loans and lease liabilities, as well as early settlement of loans outstanding arising from the termination of 107 Gul Circle lease and the disposal of Subsea Group.

Review of Full Year Consolidated Statement of Cash Flows

Overall, the Group’s cash and cash equivalents in FY2022 of $9.03 million, were reduced by $5.28 million from $14.31 million as at 31 December 2021.

The Group reported a net cash provided by operating activities of $13.81 million as a result of its operating income before changes in working capital of $14.50 million and net decrease in working capital of $0.31 million.

Net cash used in investing activities of $0.24 million was mainly due to the following:

1. payment for the purchase of PPE of $2.42 million of which $1.50 million was related to capacity expansion on Energy Services segment; offset with
2. proceeds from disposal of subsidiary corporations of $1.95 million; and
3. dividend income received from an associated company for $200,000.

Net cash used in financing activities of $18.58 million was mainly due to the following:

1. repayment of bank borrowings of $13.81 million;
2. repayment of lease liabilities of $1.60 million; and
3. interest payments of $4.88 million; offset with
4. net utilisation of trade financing of $1.71 million.

Commentary

The Group expects macro headwinds such as elevated interest & inflation rates, higher raw material, commodities, and energy costs to continue into 2023. Based on the current volatile economic environment, the Group’s business costs across its three operating segments (Offshore & Engineering, Marine and Energy Service segments) will be challenging.

The Group will continue to focus on rationalizing major expenses, liquidity management and restructure under-performing assets and businesses.

Against this backdrop, the Group will exercise caution in its pursuit of organic growth as well as to strive for new operational / manufacturing developments to generate new revenue stream and work on opportunities to grow its customer base with new customers and/or markets to ensure resiliency in its business segments.