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Operation Review

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Extracted from Annual Report 2016


Financial Highlights

The Group's revenue for FY2016 decreased by 9.4% to US$318.2 million. The decrease in revenue was mainly due to the reduction in charter rates and delay in the completion of the modifications and upgrade of the Group's Service Rigs.

The cost of sales and servicing for FY2016 increased by 10.3% to US$257.0 million as compared to FY2015. The increase was due to the deployment of additional Service Rigs.

As a result of the above, the Group's gross profit for FY2016 decreased by US$56.8 million (or 48.1%) to US$61.2 million as compared to FY2015.

The increase in other income in FY2016 as compared to FY2015 was mainly due to gain arising from the completion of the sale of assets held for sale during the year and unrealised foreign exchange gains on the Group's Notes Payable.

The other operating expenses in FY2016 includes impairment losses on plant and equipment and provision for trade receivables amounting to approximately US$70.9 million, in addition to the impairment losses made in FY2015 of US$81.1 million bringing accumulated impairment losses for FY2016 and FY2015 to US$152.0 million. Impairment losses for FY2016 were made due to some of the projects that were committed at higher oil prices and the difficult and uncertain market conditions of the global oil and gas industry.

The increase in finance income in FY2016 as compared to FY2015 was mainly due to higher interest income from loans to Joint Ventures.

The increase in finance costs in FY2016 as compared to FY2015 was due mainly to additional interest expense for the financing of newly delivered Service Rigs.

The lower share of associates and jointly controlled entities' results in FY2016 as compared to FY2015 was mainly due to the impairment losses on plant and equipment and trade receivables recognised by the Group's Joint Ventures and Associates.

As a result of the above, the loss before income tax for FY2016 stands at US$30.9 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$2.7 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 FY2016 consist of revenue from production and maintenance support and revenue from exploration and development support which amounted to approximately US$276.2 million or 86.8% and US$41.5 million or 13.1% respectively. The decrease in revenue from production and maintenance support for FY2016 as compared to FY2015 amounted to US$36.3 million or 11.6%. As a result, the revenue mix for production and maintenance support segment and exploration and development support segment for FY2016 was 86.8% and 13.1% (FY2015: 89.0% and 11.0%) respectively.

Geographical Segments

Our revenue contributions based on geographical segments for FY2016 were adequately diversified, reducing geographical market risk. In FY2016, revenue contributed by Singapore, Middle East, India, rest of Asia and Europe amounted to approximately US$50.0 million or 15.7%, US$95.1 million or 29.9%, US$48.5 million or 15.2%, US$77.7 million or 24.4% and US$30.4 million or 9.6%, respectively, of total revenue.

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