Unaudited Financial Statements For the Financial Year Ended 31 March 2018
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Review of Group Performance
Consolidated Statement of Profit or Loss and Other Comprehensive Income
(a) Revenue, costs of sales and gross profit
The Group registered revenue of approximately US$184.34 million for the financial year ended 31 March 2018 ("12MFY2018") which represents a decline of 25.6% or approximately US$63.49 million from US$247.83 million for the 15 months ended 31 March 2017 ("15MFY2017"). The decline was attributed mainly to a regular 12 months financial year in 12MFY2018 compared to 15 months in 15MFY2017 and lower utilization for certain vessels. This was partially offset by the commencement of new charter contracts during 12MFY2018.
For 12MFY2018, the Group's core chartering and brokerage services accounted for 83% of revenue, similar to the revenue contribution of 84% in 15MFY2017. Chartering and brokerage revenue for 12MFY2018 softened to US$152.62 million from US$207.45 million in 15MFY2017. The decrease was attributed mainly to a regular 12 months financial year in 12MFY2018 compared to 15 months in 15MFY2017 as well as lower utilisation for certain vessels in Asia. This was however mitigated by the Group's ongoing long-term charters in the Middle East as well as the commencement of new contracts with a key customer in the Middle East during 12MFY2018.
Gross profit in 12MFY2018 decreased 29.0% to US$44.32 million from US$62.46 million in 15MFY2017 in line with lower revenue. Gross profit margin eased slightly to 24.0% in FY2018 from 25.2% previously due to the difference in revenue composition of the chartering and brokerage business, and one-off mobilisation cost to deliver new vessels for the chartering contracts in Middle East.
(b) Other operating income
The Group recorded other operating income of US$7.87 million in 12MFY2018 compared to US$7.50 million in 15MFY2017. Other operating income in 12MFY2018 consisted mainly of gain on disposal of plant property and equipment of US$5.77 million, insurance claim of approximately US$0.78 million and foreign exchange gain of US$0.68 million.
(c) Administrative expenses
Administrative expenses, which comprise largely personnel and travel related expenses, decreased 26.5% or US$5.10 million to US$14.13 million in 12MFY2018 when compared to 15MFY2017. The reduction was attributed mainly to a regular 12 months financial year in 12MFY2018 compared to 15 months in 15MFY2017, lower professional fees and the on-going measures implemented by the Group to optimise its cost structure.
(d) Other operating expenses
Other operating expenses in 12MFY2018 decreased by 51.7% to US$2.19 million from US$4.53 million in 15MFY2017. The other operating expenses in 12MFY2018 were attributed mainly to allowance for doubtful receivables of US$0.98 million and provision or impairment on property, plant and equipment of US$1.2 million.
(e) Finance costs
Finance costs decreased 39.5% or US$9.12 million to US$13.97 million in 12MFY2018 from US$23.09 million in 15MFY2017. The decline in finance costs was due mainly to the full redemption of Notes Payables on 22 November 2016 and a regular 12 months financial year in 12MFY2018 compared to 15 months in 15MFY2017. This was partially offset by higher cost of borrowing in tandem with the rise in LIBOR rate.
(f) Share of results of associate and joint venture
The Group registered a loss of US$1.24 million from its share of results of associate and joint ventures in 12MFY2018. This arose mainly from a recognition of deferred tax expense by Rawabi Vallianz International Company Limited, the Group's 50%-owned joint venture company in the Middle East. In 15MFY2017, the Group recorded a share of loss of associate and joint ventures of US$3.39 million which was attributed mainly to its 49%-owned associate company in Indonesia, PT Vallianz Offshore Maritime.
(g) Operating profit from ordinary activities before exceptional items
The Group recorded an increase of 4.8% in operating profit from ordinary activities before exceptional items to US$20.66 million in 12MFY2018 from US$19.71 million in 15MFY2017 despite a regular 12 months financial year in 12MFY2018 compared to 15 months in 15MFY2017. The improvement was attributed mainly to the absence of a share of loss of associate, reduced finance costs and lower operating expenses as a result of the Group's continuing efforts to streamline its operations and optimise its cost structure.
(h) Exceptional Items
The Group recorded an exceptional expense of US$5.93 million in 12MFY2018, due to a bad debt written-off under its 49%-owned subsidiary in Mexico, Vallianz Marine Mexico S.A De C.V for receivables that was long overdue. The exceptional items of US$214.55 million recorded in 15MFY2017 was related to various impairments as a result of the slowdown in the offshore and marine market and rightsizing initiatives undertaken by the Group. The impairments in 15MFY2017 are set out in the table below:
(i) Net profit
As a result of the above, the Group registered a net profit of US$11.54 million for 12MFY2018, reversing a net loss of US$192.53 million in 15MFY2017.
Excluding the exceptional items, the Group's net profit for 12MFY2018 decreased by 20.6% to US$17.48 million from US$22.02 million in 15MFY2017. The decrease of approximately US$4.54 million was attributed mainly to the income tax expense of US$3.18 million in 12MFY2018 versus an income tax credit of US$2.31 million which led to a negative swing of US$5.49 million. This was partially mitigated by the increase in operating profit before exceptional items of US$0.95 million for 12MFY2018 when compared to 15MFY2017.
Profit attributable to owners of the Company in 12MFY2018 swung to US$16.7 million from a loss of US$158.2 million in 15MFY2017.
Based on the weighted average number of shares, the Group recorded basic earnings per share of 0.23 US cents for 12MFY2018.
Statements of Financial Position
(j) Trade receivables
Trade receivables decreased to US$34.0 million as at 31 March 2018 from US$91.9 million as at 31 March 2017. The decrease was attributable mainly to a decrease in the balance with Swiber Group Limited ("SHL") ("SHL group balance") following the set-off and settlement agreement with SHL ("SHL SOSA").
(k) Other receivables
Other receivables increased to US$174.9 million as at 31 March 2018 from US$124.9 million as at 31 March 2017. The increase was attributable to the increase of amount due from associate, partially offset by a decrease in SHL group balance as a result of the SHL SOSA.
(l) Available-for-sale investments
As at 31 March 2018, there has been no redemption by the issuer of the unquoted preference shares. Accordingly, the balance remained the same when compared to 31 March 2017.
(m) Property, plant and equipment
Property, plant and equipment decreased to US$272.2 million as at 31 March 2018 from US$372.2 million as at 31 March 2017. The decrease was due primarily to the disposal of 3 vessels and the transfer of a specialised vessel to Rawabi Vallianz International Company Limited ("RVIC"), which is the Group's 50%-owned joint-venture company in the Middle East, during 12MFY2018.
(n) Joint ventures
Investment in joint ventures increased to US$65.33 million as at 31 March 2018 from US$54.03 million as at 31 March 2017. The increase was the result of quasi-equity contribution of approximately US$12.54 million from the Group to RVIC during 12MFY2018 offset with the share of results from this joint venture.
(o) 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, reduced to US$246.21 million as at 31 March 2018 from US$340.82 million as at 31 March 2017. This is due mainly to repayments of loan principal for the vessels that were disposed and transferred during 12MFY2018.
(p) Trade payables
The Group's trade payables decreased to US$33.04 million as at 31 March 2018 from US$62.5 million as at 31 March 2017. This was attributed mainly to settlement of trade payables and a decrease in SHL group balance as a result of the SHL SOSA.
(a) Other payables
The Group's other payables decreased to US$65.2 million as at 31 March 2018 from US$136.9 million as at 31 March 2017. The decrease was attributable mainly to lower trade accruals and a reduction in SHL group balance as a result of the SHL SOSA.
Consolidated Statement of Cash Flows
Cash and cash equivalents decreased by US$38.00 million to US$7.57 million as at 31 March 2018 from US$45.57 million as at 31 March 2017.
(q) Cash flow from operating activities
The Group used net cash of US$0.98 million for operating activities in 12MFY2018.
(r) Cash flow used in investing activities
Net cash generated from investing activities of US$69.26 million for 12MFY2018 was contributed mainly by proceeds from disposal of four vessels.
(s) Cash flow from financing activities
Net cash used in financing activities in 12MFY2018 amounted to US$106.29 million. The significant cash outflow in 12MFY2018 was attributed to the repayment of loan principal and interest of approximately US$122.43 million, offset partially by proceeds from the issuance of new shares in connection with the Company's Rights cum Warrants issue.
Crude oil prices have staged a steady recovery since the beginning of 2018 due to tighter demand-supply market dynamics as a result of the strategies taken by the major oil producing countries to curb crude oil production. This is generally leading to a more optimistic view of the global oil and gas industry prospects. While the operating environment for the offshore support vessel ("OSV") sector remains challenging due to intense competition and soft demand conditions, there are early signs that vessel owners are beginning to scrap older OSVs. This is expected to gradually bring the OSV market into better balance and relieve downward pressure on vessel utilisation rates and charter rates.
The Group's core vessel chartering business is driven mainly by the long-term charter contracts secured with a key National Oil Company in the Middle East which is a major player in the region's offshore oil and gas production. This resilient business model has enabled the Group to continue delivering operating profits despite the harsh market conditions in the OSV sector over the last few years.
In 12MFY2018, the Group's operating profit before exceptional items increased 5% to US$20.7 million compared to the 15MFY2017. The Group's continued operation profitability amid a tough business climate can be attributed to its ongoing longterm vessel charters and commencement of new vessel charter contracts in the Middle East, as well its successful initiatives to optimise its expense structure.
As one of the largest OSV players in the Middle East, the Group works closely with its National Oil Company customer to develop innovative solutions for its offshore support requirements. Having also secured new vessel charter contracts in Egypt and Turkmenistan during 2017, the Group will continue to pursue opportunities in new target markets.
As at 31 March 2018, the Group maintained a robust chartering services order book with total value of approximately US$850 million, comprising mainly long term charter contracts that stretch up to 2025 inclusive of 2-year extension options.
The Group is also working continuously to strengthen its operating capabilities and service quality, improve cost and operational efficiencies, and expand and differentiate its fleet to meet customers' requirements.
With the strong support and strategic partnership of Rawabi Holding, which is its largest shareholder with a stake of 57.67%, the Group will be seeking opportunities to further expand its business by leveraging its superior market position in the Middle East.