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Operation Review

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Extracted from Annual Report 2017


Financial Highlights

The Group's revenue for FY2017 decreased by 39.3% to US$193.1 million. The decrease in revenue was mainly due to the reduction in charter rates and delays in re-deployment of the Group's liftboats due to working capital constraints as a result of disruption from the refinancing exercise.

The cost of sales and servicing for FY2017 decreased by 25.6% to US$191.3 million as compared to FY2016. The decrease was largely due to reduction of depreciation arising from impairment losses of vessels in FY2016 and lower operating costs in FY2017.

As a result of the above, the Group's gross profit for FY2017 decreased by US$59.4 million (or 97.1%) to US$1.8 million as compared to FY2016.

The decrease in other income in FY2017 as compared to FY2016 was mainly due to lower gain arising from the disposal of subsidiaries coupled with unrealised foreign exchange gain recognised in FY2016.

The other operating expenses in FY2017 includes write-off and impairment losses on plant and equipment, trade receivables and other receivables amounting to approximately US$896.9 million. Impairment losses for FY2017 were made after taking into account the oversupply of offshore support logistics services vessels and jack-up rigs in the industry, lower charter rates and depressed market value of these assets.

The decrease in finance income in FY2017 as compared to FY2016 was mainly due to lower interest income from fixed deposits with financial institutions.

The increase in finance costs in FY2017 as compared to FY2016 was due mainly to additional interest expense arising from higher interest rates as compared to FY2016.

Higher share of associates and jointly controlled entities' losses in FY2017 as compared to FY2016 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 loss before income tax for FY2017 amounted to US$1.01 billion.

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$2.9 million relates to the corporate tax expense and withholding tax expense incurred by vessels operating in certain overseas waters.

Business Segments

Revenue according to business segments for FY2017 consist of revenue from liftboats, jack-up rigs and offshore support logistics services vessels which amounted to approximately US$96.0 million or 49.7%, US$76.2 million or 39.5% and US$20.4 million or 10.5% respectively. The decrease in revenue from jack-up rigs for FY2017 as compared to FY2016 amounted to US$81.2 million or 51.6%. As a result, the revenue mix for liftboats, jack-up rigs and offshore support logistics services vessels for FY2017 was 49.7%, 39.5% and 10.5% (FY2016: 39.9%, 49.5% and 10.5%) respectively.

Geographical Segments

Our revenue contributions based on geographical segments for FY2017 were adequately diversified, reducing geographical market risk. In FY2017, revenue contributed by Singapore, Middle East, India, rest of Asia and Europe amounted to approximately US$11.5 million or 5.9%, US$63.2 million or 32.8%, US$26.7 million or 13.8%, US$73.7 million or 38.2%, and US$13.7 or 7.1% respectively, of total revenue.

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