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Unaudited Financial Statements For the Second Quarter and Half Year Ended 30 September 2018

Financials Archive

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Income Statement

Balance Sheet

Review of Group Performance

Consolidated Statement of Profit or Loss and Other Comprehensive Income

(a) Revenue, costs of sales and gross profit

The Group recorded revenue of approximately US$45.36 million for the three months ended 30 September 2018 ("2QFY2019"), up 10.0% from US$41.23 million in the previous corresponding period ("2QFY2018"). This was driven by higher revenue from the Group’s core chartering and brokerage business.

Revenue from the Group’s core chartering and brokerage business increased to US$41.40 million in 2QFY2019, from US$37.20 million in 2QFY2018 and US$38.97 million in 1QFY2019. This increase was attributed mainly to commencement of new vessel charter contracts with the Group’s key customer in the Middle East.

Chartering and brokerage services accounted for approximately 91% of Group revenue in 2QFY2019, compared to 90% in 2QFY2018. The remaining 9% of Group revenue was derived from the provision of vessel management services.

For the six months ended 30 September 2018 ("1HFY2019"), Group revenue gained 6.6% to US$87.86 million from US$82.45 million in 1HFY2018, lifted mainly by higher revenue from the chartering and brokerage business.

(b) Gross profit

Gross profit in 2QFY2019 decreased 18.8% to US$8.24 million from US$10.15 million in 2QFY2018. Gross profit margin softened to 18.2% in 2QFY2019 from 24.6% previously. This was attributed to a shift in revenue mix, lower utilization, lower charter rates for the contracts that were extended with a key customer during 1QFY2019, as well as leasing expenses for a specialized vessel which was transferred to the Group’s 50%-owned joint venture company Rawabi Vallianz International Company Limited ("RVIC") during 3QFY2018. The Group also experienced higher personnel costs which rose in tandem with the growth of the Group’s vessel operations in the Middle East.

(c) Other income

The Group recorded other income of US$0.84 million in 2QFY2019 compared to US$1.77 million in 2QFY2018. This was due mainly to the absence of a foreign exchange gain and gain on disposal of plant, property and equipment.

(d) Administrative expenses

Administrative expenses, which comprise largely personnel and travel related expenses, decreased 8.8% to US$2.88 million in 2QFY2019 compared to US$3.16 million in 1QFY2018. The decline was attributed mainly to reduced staff costs and the on-going cost control measures implemented by the Group.

(e) Other operating expenses

Other operating expenses in 2QFY2019 amounted to US$0.83 million due mainly to a foreign exchange loss as well as asset and bad debts written off.

(f) Finance costs

Finance costs in 2QFY2019 were relatively stable at US$3.58 million compared to US$3.61 million in 2QFY2018.

(g) Share of results of associate and joint ventures

The Group recorded a profit of US$0.03 million from its share of results of associate and joint ventures in 2QFY2019 which was attributed to RVIC.

(h) Net profit attributable to owners of the Company

Net profit attributable to owners of the Company declined 44.3% to US$2.93 million in 2QFY2019 from US$5.26 million in 2QFY2018, attributed mainly to lower gross profit and other income as well as higher other operating expenses. For 1HFY2019, the Group recorded net profit attributable to owners of the Company of US$7.15 million, down 24.9% from US$9.52 million in 1HFY2018. Based on the weighted average number of shares, the Group recorded basic earnings per share of 0.04 US cents for 1HFY2019.

Statements of Financial Position

(i) Trade and other receivables

Trade receivables increased to US$43.33 million as at 30 September 2018 from US$34.0 million as at 31 March 2018, in line with higher revenue. Other receivables also increased to US$207.17 million from US$174.86 million as at 31 March 2018 due mainly to an increase in amount due from joint venture.

(j) Property, plant and equipment

Property, plant and equipment increased slightly to US$275.09 million as at 30 September 2018 from US$272.2 million as at 31 March 2018, due to the vessel drydocking cost, which was offset partially by depreciation expenses.

(k) Joint ventures

Investment in joint ventures increased slightly to US$65.35 million as at 30 September 2018 from US$65.33 million as at 31 March 2018. This was due mainly to the share of results from RVIC.

(l) Total current and non-current borrowings

Total current and non-current borrowings for the Group include term loans, working lines and finance lease.

Total current and non-current term borrowings, which comprised largely of bank borrowings for vessels, increased to US$280.03 million as at 30 September 2018 from US$246.21 million as at 31 March 2018. This was due mainly to drawdown of a term loan facility, offset partially by repayment of revolving facilities.

(m) Trade and other payables

The Group’s trade payables increased to US$37.92 million as at 30 September 2018 from US$33.04 million as at 31 March 2018, attributed mainly to higher trade accruals in relation to the Group’s business activities. Other payables decreased slightly to US$64.50 million as at 30 September 2018 from US$65.16 million as at 31 March 2018.

Consolidated Statement of Cash Flows

Cash and cash equivalents decreased by US$0.87 million to US$6.70 million as at 30 September 2018 from US$7.57 million as at 31 March 2018.

The Group used net cash of US$4.90 million in operating activities during 1HFY2019. Net cash used in investing activities of US$8.76 million for 1HFY2019 was attributed mainly to increase in construction in progress and vessel drydocking costs. Net cash generated from financing activities in 1HFY2019 amounted to US$12.80 million. This was attributed mainly to proceeds from the drawdown of term loan facility and advance from shareholder, offset partially by repayment of revolving facilities, an advance to joint venture and payment of interest.

Commentary

With the increase in crude oil prices since the start of 2018, there are indications that sentiment in the oil and gas (O&G) industry is starting to turn positive. If oil prices continue to be stable, the O&G industry could see a potential rise in rig deployment, an increase in capital expenditures, higher activities in the exploration sector and development of new oil and gas fields in the coming years. However, escalating trade tensions may continue to stoke fears over the outlook for demand of oil and exert pressure on the oil markets, which may in turn affect the recovery of the O&G industry.

For the offshore support vessel ("OSV") segment in which the Group operates, the business environment remains challenging due to intense competition. The oversupply of OSVs amid soft demand conditions continues to exert downward pressure on vessel utilisation rates and charter rates. Despite the harsh market conditions, the Group has continued reporting operating profits since the O&G industry downturn, reflecting the resilience of its business model which is built primarily on long term charter contracts.

As one of the largest OSV providers in Middle East, the Group intends to leverage its premier market position to capitalise on the opportunities in the Middle East region which is among the world’s largest oil and gas producers. The Group’s core vessel chartering business is driven mainly by long term charter contracts secured with a key National Oil Company ("NOC") customer in the Middle East which is a major player in the region’s offshore oil and gas production.

The Group aims to enhance its standing with the NOC customer by strengthening and differentiating its capabilities, as well as broadening its service offering beyond traditional OSV business to address other aspects of the customer’s offshore support requirements. With the support of its largest shareholder Rawabi Holding Company Limited, coupled with its commitment towards the NOC customer’s In-Kingdom Total Value Add program requirements, the Group believes it is placed in good stead to seize future business opportunities. The Group is actively participating in recent significant tenders for projects of the NOC customer.

To broaden its revenue base, the Group is pursuing opportunities to widen the scope of its operations in the Middle East region to new target markets in Egypt, Abu Dhabi, UAE and Kuwait. As part of its ongoing strategies, the Group is working continuously to strengthen its operational capabilities and service quality, improve cost and operational efficiencies, and expand and differentiate its fleet to meet customers’ requirements.

As at 30 September 2018, the Group’s chartering services order book had total value of approximately US$650 million. This comprises mainly long term charter contracts that stretch up to 2025 inclusive of extension options of up to 2 years.