Extracted from Annual Report 2012
Introduction
During the past twelve months, utilization for offshore support vessels improved. CH Offshore Group seized the opportunity and managed to deploy its fleet of vessels wherever there was demand for them. Our relentless efforts have been rewarded as we see yet another profitable financial year for the CH Offshore Group (the “Group”). As a result, for the financial year ended 30 June 2012, the Group achieved profit after tax of US$33.4 million.
On behalf of the Board, I am pleased to present the Annual Report and the Audited Financial Statements of the Group for the financial year ended 30 June 2012 (“FY12”).
Financial Review
REVENUE declined by 12% to US$51.5 million from US$58.6 million. During FY12, revenue was mainly affected by the reduced fleet size due to the sale of three vessels to its Indonesian associated company during FY11 and one vessel in the financial year just ended.
GROSS PROFIT AFTER DIRECT DEPRECIATION Due to the smaller fleet of wholly-owned vessels, operating costs decreased 7.6% to US$14.7 million from US$15.9 million for FY11 and direct depreciation declined 15.4% to US$7.8 million from US$9.3 million. However, these reductions were insufficient to offset the lower revenue generated during FY12. Hence, gross profit after direct depreciation decreased by 13.2% to US$29.0 million for FY12 as compared with US$33.4 million for FY11.
OTHER INCOME For the current financial year reported, the Group recorded other income of US$3.9 million which was mainly from the sale of a vessel to its associated company. For the previous financial year, the Group recorded other income of US$3.1 million, of which, US$2.6 million arose from the sale of three vessels to its associated company and US$0.5 million from foreign exchange gain.
SHARE OF RESULTS OF ASSOCIATED COMPANIES Share of results of associated companies increased 204.7% to US$4.3 million from US$1.4 million for FY11. These were derived from its three associated companies. The higher profit was primarily derived from its Indonesian associated company. The Indonesian fleet increased to four vessels from three due to the purchase of an additional vessel in March 2012.
PROFIT AFTER INCOME TAX. Despite revenue decreasing by 12% in the financial year just ended, profit after tax of US$33.4 million was only 0.5% lower than profit after tax of US$33.6 million for FY11. The Group was able to maintain this level of profit due to lower operating costs, lower depreciation expenses, absence of financial cost and a significant increase in the contributions from its associated companies.
FINANCIAL POSITION As at 30 June 2012, the Group reported profit after tax of US$33.4 million. This translated into higher net assets value (NAV) per share which rose to 36.29 US cents from 33.82 US cents as the Group's shareholders' funds rose 7.3% to US$255.9 million from US$238.5 million as at 30 June 2011. Due to the strong operating performance, the Group recorded cash surplus from operating activities of US$27.6 million for the financial year ended 30 June 2012.
Cash and cash equivalents increased 77.4% to US$76.8 million from US$43.3 million as at 30 June 2011. This was due to proceeds from the sale of a vessel. The sale of the vessel also resulted in a decrease of fixed assets to US$147.8 million as at 30 June 2012. As the vessel was sold to an associated company during FY12, the investment in associated companies rose 62.4% to US$22.5 million from US$13.8 million and related total deferred gains increased by 87.8% to US$7.5 million from US$4.0 million as at 30 June 2011.
Trade receivables increased 49.3% to US$30.0 million from US$20.1 million due to delay in payments from a major client. Other receivables and prepayments reduced 26% to US$1.1 million from US$1.5 million. This was primarily due to decrease in bunker purchased. Other payables consisted of a security deposit from a client.
There were no bank borrowings during FY12. Due to surplus cash position, all the bank loans were fully redeemed during FY11.
With prudent management, the Group was able to maintain a strong and healthy financial position as at 30 June 2012.
Fleet Activities
The Group currently manages a modern fleet of 15 (fifteen) AHTS vessels, 9 (nine) of which are wholly-owned with an average age of about 5 years old as of 30 June 2012. The fleet includes 7 (seven) 12,240 bhp AHTS vessels built in Japan. The rest are in the 5,000 bhp category.
During FY12, the Group had sold another vessel to its Indonesian associated company to maintain its chartering activities despite the Cabotage Rule in Indonesia. This brings the total of its Indonesian fleet to 4 (four) vessels as at 30 June 2012.
The Group provides marine support services to the oil and gas industry worldwide. We have clients in South East Asia, the Middle East, Americas, Africa and Russia. The Group will continue to remain strategically viable and will extend its geographical reach wherever opportunities beckon.
Dividend
Recent financial crisis and downgrading of major banks is likely to affect trade financing as banklending capacities are likely to decrease. With reduced lending capacities, banks will be more reluctant to lend. Hence, it is prudent for the Group to set aside surplus cash to internally fund its capital commitments for the new financial year FY13 as well as to cover corporate guarantees issued. These corporate guarantees were issued in prior years in proportion to its shareholdings to enable its associates to obtain loans from the banks to finance the purchase of vessels. The strong financial position had indeed placed the Group in good stead to seize opportunities to grow its business and also to reward its shareholders.
Due to the continuous good operating performance which generated surplus cash flow, the Group paid out an interim dividend of 0.75 SGD cents per ordinary share for the half year ended 31 December 2011. This amounted to approximately S$5.3 million which is equivalent to US$4.3 million.
For the financial year ended 30 June 2011, the Group paid out a total cash dividend of 2.75 SGD cents on the back of profit after tax of US$33.6 million. As the profit after tax for the current financial year ended 30 June 2012 of US$33.4 million was consistent with the previous FY11, the directors have, after taking into consideration the above factors, decided to recommend a final tax-exempt dividend of 2.00 SGD cents per ordinary share which will amount to approximately S$14.1 million (equivalent to US$11.3 million). On top of this, the directors are pleased to recommend an additional special tax-exempt dividend of 2.00 SGD cents per ordinary share due to the surplus cash position so as to reward the shareholders for their continued support. These, together with the interim dividend payout of 0.75 SGD cents, will amount to a total dividend payout of 4.75 SGD cents per ordinary share for the financial year ended 30 June 2012. Hence, the total dividend recommended for FY12 is higher than the previous financial year. On 21 August 2012, our share price was S$0.425 per ordinary share. At this share price, the dividend yield is approximately 11.2%.
Outlook and Prospects
We expect challenges ahead in FY13 as the OSV market remains competitive despite improving demand situation.
Given our strong financial position, the Group is in a good position to expand our fleet should the opportunities arise. To ensure our competitive edge is not compromised, we are always on the lookout for new acquisitions or newbuildings. Our maintenance team also ensures our young fleet is well maintained and upgraded as and when required. We are optimistic that with our experienced team and prudent management, we will be able to move forward towards greater horizons and continue to strengthen our global presence.
Acknowledgements
On behalf of the Board, I would like to extend a warm welcome to Mr Goh Boon Kiat who had joined us on 28 October 2011 as Director. Mr Goh brings with him a wealth of knowledge and experience.
I would also like to thank and congratulate our management and staff for another year of good results. It is through their perseverance and hard work that the Group has been able to maintain its profitability.
Last but not least, it remains for me to thank our valuable clients, business partners, shareholders for their continued support, and all our Board members for their invaluable counsel and contributions.
Tan Pong Tyea
Non-Executive Chairman21 August 2012