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Financial Statements And Related Announcement - First Quarter Results

Financials Archive

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Profit and Loss Statement

Financials

Statement of Comprehensive Income

Financials

Review of Group Performance

Consolidated Income Statement and Statement of Comprehensive Income

(a) Revenue

Group's revenue increased by US$26.4 million or 16.0%, from US$164.9 million in first quarter ended 31 March 2015 ("1Q2015") to US$191.3 million in 1Q2016. The increase was due mainly to revenue recognized from ongoing projects in South Asia.

Revenue contributed by geographical area

(b) Cost of sales and gross profit

In consistent with higher revenue, cost of sales increased by US$16.3 million or 11.2% from US$145.5 million in 1Q2015 to US$161.8 million in 1Q2016.

Gross profit margin improved from 11.8% in 1Q2015 to 15.5% in 1Q2016. This was due to stringent control on operating costs and also reduction in procurement and subcontract costs.

(c) Other operating income

Other operating income decreased by US$1.5 million or 52.7% from US$2.9 million in 1Q2015 to US$1.4 million in 1Q2016. The decrease was due mainly to absence of fair value gain on financial derivative of a bank borrowings of US$0.7 million and gain on disposal of property, plant and equipment of US$0.5 million in 3M2016.

(d) Administrative expenses

Administrative expenses decreased by US$1.0 million or 12.4% from US$8.1 million in 1Q2015 to US$7.1 million in 1Q2016. The decrease was the result of the Group's cost optimization program.

(e) Other operating expense

Other operating expense increased by US$1.4 million or 46.7% from US$2.9 million in 1Q2015 to US$4.3 million in 1Q2016. The increase was due mainly to increase net foreign exchange loss of US$2.8 million.

(f) Finance costs

Finance costs maintained at US$13.9 million. Finance costs include interest on bank borrowings and finance charges/ debt issuance cost on debt securities.

Total borrowings as at 31 March 2016 were US$1,020.3 million as compared to 31 March 2015 of US$1,092.0 million.

(g) Share of profit from associates and joint ventures

Share of profit of associates and joint ventures decreased by US$2.0 million or 41.5%, from US$4.8 million in 1Q2015 to US$2.8 million in 1Q2016. The decrease was due mainly lower contribution from certain joint ventures and associates.

Statements of Financial Position

(h) Trade receivables and construction work in progress ("CWIP")

The Group's trade receivables and CWIP increased by US$90.5 million from US$611.6 million as at 31 December 2015 to US$702.1 million as at 31 March 2016. The increase were due to

  1. Higher revenue contribution; and
  2. Timing difference between achievement of milestone and revenue recognized for projects in progress.

(i) Other receivables (current and non-current)

Other receivables increased by US$15.1 million from US$278.8 million as at 31 December 2015 to US$293.9 million as at 31 March 2016. The increase was due mainly to increase in capitalized vessel cost and down payment of purchases.

(j) Inventories

Inventories decreased by US$19.2 million, from US$39.9 million as at 31 December 2015 to US$20.7 million as at 31 March 2016. These are materials and consumables purchased for ongoing projects.

(k) Investment in associates

Investment in associates decreased by US$17.5 million, from US$158.5 million as at 31 December 2015 to US$ 141.0 million as at 31 March 2016. The decrease was due mainly to repayment of shareholder advances.

(l) Investment in joint ventures

Investment in joint ventures increased marginally by US$0.7 million, from US$27.8 million as at 31 December 2015 to US$28.5 million as at 31 March 2016.

(m) Property, plant and equipment

Property, plant and equipment decreased by US$109.5 million from US$787.2 million as at 31 December 2015 to US$677.7 million as at 31 March 2016. The decrease was due mainly to transfer of vessel equipment to an associate.

Depreciation increased marginally by US$0.1 million, from US$11.0 million in 1Q2015 to US$11.1 million in 1Q2016.

Assets under construction are not depreciated.

(n) Total current and non-current borrowings

Total current and non-current borrowings include bank loans, notes payables and finance leases.

Total current and non-current borrowings increased by US$3.5 million from US$1,016.8 million as at 31 December 2015 to US$1,020.3 million as at 31 March 2016. The increase was due to appreciation of USD against SGD currency notes payables. The increase was partially offset by repayment of borrowings during the period.

Net debt-to-equity ratio is as follows:

As at 31 March 2016, the Group has the following outstanding notes payables:

Notes Payable

Cross currency interest rate swap contracts relating to the above-mentioned issued notes have been established and creating an effective cash flow hedge against the foreign currency and interest rate movement.

Consolidated Statement of Cash Flows

(o) Cash flow generated from operating activities

In 1Q2016, the Group's net cash generated from operating activities amounted to US$57.0 million, this comprised operating cash flow before working capital changes of US$32.5 million, and adjusted for net working capital inflows of US$35.2 million and income tax and interest payment of US$10.7 million. The net working capital inflows were mainly the result of the followings:

  1. decrease in inventories of US$19.2 million; and
  2. decrease in other receivables of US$60.7 million;

which were partially offset by:

  1. increase in trade receivables and CWIP of US$36.3 million; and
  2. decrease in trade and other payables of US$8.4 million.

(p) Cash flow used in investing activities

In 1Q2016, the Group's net cash used in investing activities amounting to US$0.5 million, which due mainly to proceed from purchases of property, plant and equipment of US$1.6 million, partially offset against dividend received from an associate of US$0.9 million.

(q) Cash flow used in financing activities

In 1Q2016, the Group recorded net cash outflow from financing activities of US$26.9 million, which was due mainly to repayment of bank borrowings amounting to US$146.0 million, partially offset against new bank borrowings amounted to total US$128.3 million.

Commentary

Since the end of FY2015, business sentiment in the oil and gas industry remain volatile. In response to the weaker oil price environment, major oil companies continue to reduce their planned expenditure or delaying some of their projects. This situation is inevitably leading to price pressures within the oilfield services supply chain. However, the Group believes that the impact on shallow water field development and production activities would be lower.

The Group is an established provider of EPIC services for shallow water oil and gas field developments. The Group's EPIC activities focus on the field development stage (post exploration and appraisal stages, and after the customer's decision to commence development activity) and do not heavily involve work for the exploration stage of the oil and gas value chain. In addition, shallow water projects have lower break-even costs. In view of these factors, the Group believes its business would be less affected by the industry's expenditure cuts and that it is in a better position to capitalise on future bidding opportunities. Nonetheless, the Group expects to continue making headway in its turnabout effort, by strengthening its capabilities in higher-value EPIC services and improving its operational performance while maximizing cost efficiencies. In addition, The Group has also instituted a more stringent control on costs to mitigate the current global environment.

The Group order book was US$1.2 billion as at 13 May 2016. The Group continues to see opportunities in its field of expertise and is working actively on new project tenders in its target markets in South Asia, Southeast Asia, West Africa and Latin America. Nonetheless, the Group will continue to adopt a prudent and cautious approach due to the fluctuation of oil prices and take the necessary steps to mitigate such risks.

Balance Sheet

Financials