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Fourth Quarter Financial Statement And Dividend Announcement For The Year Ended 31 December 2017

Financials Archive

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Income statement

Profit and Loss

Statement of comprehensive income for three months ended 31 December 2017

comprehensive income

Statement of financial position

Balance Sheet

Review Of Performance

INCOME STATEMENT REVIEW

While the O&G sector is showing signs of recovery with oil price stabilised, the Group's performance in three months ended 31 December 2017 ("4Q17") and twelve months ended 31 December 2017 ("12M17") were weaker, compared with stronger performance in three months ended 31 December 2016 ("4Q16") and twelve months ended 31 December 2016 ("12M16"). The protracted refinancing exercise constrained working capital which, in turn, further affected the Group's business operations. The positive impact of the sectorial recovery would only be enjoyed in twelve months ended 31 December 2019 ("12M19").

Commentaries of the group's performance in 4Q17 compared to 4Q16 as well as 12M17 compared to 12M16 are listed below:-

4Q17 vs 4Q16

The Group's revenue for 4Q17 decreased by US$28.0 million (38.5%) to US$44.7 million as compared to 4Q16. The decrease in revenue was mainly due to:

  1. delays in re-deployment of the Group's liftboats due to working capital constraints as a result of disruption from the refinancing exercise;
  2. drop in utilisation rate of jack-up rigs and not recognising revenue from customers that will not be able to meet existing charter obligations as assessed by the Group;
  3. further drop in utilisation rates of the Group's Offshore Support Vessels; and
  4. overall reduction in charter rates across the Group's fleet of vessels.

The cost of sales and servicing for 4Q17 decreased by US$22.5 million (35.3%) to US$41.3 million as compared to 4Q16. The decrease was largely due to reduction of depreciation arising from impairment losses of vessels in 4Q16 and lower accrued costs in 12M17.

As a result of the above, the Group's gross profit for 4Q17 decreased by US$5.4 million (61.8%) to US$3.4 million as compared to 4Q16.

The decrease in other income in 4Q17 as compared to 4Q16 was mainly due to the foreign exchange gain recorded in 4Q16.

The increase in other operating expenses in 4Q17 as compared to 4Q16 was mainly due to impairment losses on plant and equipment as well as provision for receivables from charterers and joint ventures amounting to US$896.9 million. The Group carried out an impairment assessment of its entire fleet of vessels based on their intended use, taking into account the oversupply of offshore logistics vessels and jack-up rigs in the industry, lower charter rates and depressed market value of these assets.

The increase in finance costs in 4Q17 as compared to 4Q16 was mainly due to the additional interest expense arising from higher interest rates as compared to 4Q16.

Higher share of associates and jointly controlled entities' losses in 4Q17 as compared to 4Q16 was mainly due to higher impairment losses on plant and equipment and trade receivables by the Group's joint ventures and associates.

As a result, the Group incurred loss before income tax of US$969.0 million.

Charter income derived from Singapore flagged vessels are exempted from tax under Section 13A of the Income Tax Act of Singapore. Current period income tax expense of US$0.9 million relates to the corporate tax expense and withholding tax expense incurred by vessels operating in certain overseas waters.

12M2017 vs 12M2016

The Group's revenue for 12M17 decreased by US$125.1 million (39.3%) to US$193.1 million as compared to 12M16. The decrease in revenue was mainly due to:

  1. delays in re-deployment of the Group's liftboats due to working capital constraints as a result of disruption from the refinancing exercise;
  2. drop in utilisation rate of jack-up rigs and not recognising revenue from customers that will not be able to meet existing charter obligations as assessed by the Group;
  3. further drop in utilisation rates of the Group's Offshore Support Vessels; and
  4. overall reduction in charter rates across the Group's fleet of vessels.

The cost of sales and servicing for 12M17 decreased by US$65.7 million (25.6%) to US$191.3 million as compared to 12M16.

As a result of the above, the Group's gross profit for 12M17 decreased by US$59.4 million (97.1%) to US$1.8 million as compared to 12M16.

The decrease in other income in 12M17 as compared to 12M16 was mainly due to lower gain arising from the disposal of subsidiaries coupled with the unrealised foreign exchange gains recognised in 12M16.

The decrease in administrative expenses in 12M17 as compared to 12M16 was mainly due to further cost cutting measures undertaken by the Group.

The increase in other operating expenses in 12M17 as compared to 12M16 was mainly due to impairment losses on plant and equipment as well as provision for receivables from charterers and joint ventures amounting to US$896.9 million. The Group carried out an impairment assessment of its entire fleet of vessels based on their intended use, taking into account the oversupply of offshore logistics vessels and jack-up rigs in the industry, lower charter rates and depressed market value of these assets.

Higher share of Associates and Jointly controlled entities' losses in 12M17 as compared to 12M16 was mainly due to higher impairment losses on plant and equipment and trade receivables by the Group's joint ventures and associates.

As a result of the above, the Group's loss before income tax for 12M17 amounted to US$1.02 billion.

Charter income derived from Singapore-flagged vessels is exempted from tax under Section 13A of the Income Tax Act of Singapore. Current period income tax expense of US$2.9 million in 12M17 relates to the corporate tax expense and withholding tax expense incurred by vessels operating in certain overseas waters.

STATEMENT OF FINANCIAL POSITION REVIEW

Non-current Assets

The Group's Non-current Assets amounted to US$1,644.3 million as at 31 December 2017. The decrease in Non-current Assets was mainly due to impairment loss on Plant and Equipment during the period. The decrease in joint ventures was also due to the share of losses of the joint ventures.

Current Assets

The Group's Current Assets amounted to US$291.5 million as at 31 December 2017. The decrease in Current Assets was mainly due to impairment of trade receivables as well as utilisation of cash for repayment of loans, interest costs and deployment of funds towards maintenance of the Group's Service Rigs. The decrease was partially offset by increase in non-trade receivables from joint ventures.

Total Liabilities

The Group's Total Liabilities amounted to US$1,630.9 million as at 31 December 2017, which were marginally lower as compared to 31 December 2016. As at 31 December 2017, the Group was in a net current liabilities position of US$948,598,000 and this was mainly due to the classification of the Group's term loans of US$637,588,000 as current liabilities while the refinancing exercise was in progress. Upon completion of the refinancing exercise, substantial amount of the financial liabilities will be reclassified from current liabilities back to non-current liabilities, which will result in a net current assets position for the Group. In addition, barring unforeseen circumstances, based on internal budget and cash flow planning, the Group is confident that it would be able to meet its other short term obligations as and when they fall due.

Total Equity

The decrease in Total Equity was attributable mainly due to the losses incurred in the year.

STATEMENT OF CASH FLOWS REVIEW

Cash Flow from Operating Activities

The Group's net cash inflow from operating activities was US$64.2 million. This was mainly due to the net cash generated by the operations of the Group.

Cash Flow from Investing Activities

The Group's net cash used in investing activities was US$72.1 million. This was mainly due to the deployment of funds towards the Group's operating assets.

Cash Flow from Financing Activities

The Group's net cash used in financing activities was US$153.1 million. This was mainly due to repayment of bank borrowings and interest costs during the period.

Commentary

Following a review of the Group's operations, cash flows and business strategy in parallel with the Group's refinancing exercise, the strategic direction is to focus on its Liftboat business and pare down on assets which are facing low utilization in view of overcapacity in the market. Jack up rigs and offshore logistics vessels had been identified within the Group's assets to be disposed as the charter rates of these assets are very depressed despite high capital expenditure required to deploy them.

The Liftboat division of the Group has been receiving increasing number of enquiries in recent months in line with the stabilization of fossil fuel prices. With the completion of its refinancing exercise, the Group will have additional working capital which will be used to deploy more Liftboats. The Group expects its current fleet of 12 Liftboats to be fully deployed by end of 2018, as long as there is no major deterioration of the macro economic environment. Even though the utilization rate of Liftboats will improve and the Group does not expect charter rates to decline in view of the stabilisation of fossil fuel prices, the Group expects to enjoy material improvements in both topline and bottomline only in 12M19. This is because some of the charters are already contracted earlier at lower charter rates and not all the Liftboats will have full year contributions in 12M18.

With strengthened financial fundamentals upon the completion of re-financing, the Group will be able to focus and enhance its Liftboat capability and capacity. In addition, the Group plans to work with strategic investors and partners to grow market share in this attractive business segment in which the Group has strong competitive advantage.

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