financials

Unaudited 1st Quarter Financial Statements And Dividend Announcement

Financials Archive

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Statement of profit or loss and other comprehensive income for the financial period ended 30 September 2018

Income Statement

Statements of financial position as at 30 September 2018

Income Statement

Review of Performance

The Group made a loss of US$1.38 million in the first quarter ended 30 September 2018 ("1Q1819") as compared to a loss after income tax of US$0.17 million in the quarter ended 30 September 2017 ("1Q1718"). The loss widened by US$0.94 million mainly driven by decline in revenue, US$0.54 million increase in cost of sales and US$0.24 million increase in administrative expenses.

Revenue

The Group's revenue decreased 25% from US$3.71 million in 1Q1718 to US$2.77 million in 1Q1819. The lower revenue was mainly driven by lower utilization rate of 60% in 1Q1819 as compared to 79% in 1Q1718. The charter rates was significantly reduced compared to corresponding quarter in previous year.

Cost of Sales and Depreciation

The operating expenses increased 47% from US$1.16 million in 1Q1718 to US$1.70 million in 1Q1819 largely due to higher bunker, port charges and repair costs incurred. Depreciation expenses decreased 13.6% as compared to 1Q1718 due to lower vessels' book value after the impairment charge taken over the past year.

Administrative Expenses

Administrative expenses increased 31% from US$0.76 million in 1Q1718 to US$1.00 million in 1Q1819 as there was a one-off reversal of business development expenses of US$0.20 million in 1Q1718. Excluding the one-off adjustment, administrative expenses in 1Q1718 would have been US$0.96 million, marginally lower than the US$1.00 million incurred in 1Q1819.

Share of Results of Associated Companies

The Group's share of associates results had improved from a loss of US$79,000 to a profit of US$36,000. This improvement was mainly due to improved vessel utilization rate of our associates.

Loss after Income Tax

The Group's loss after tax increased from US$0.17 million loss in 1Q1718 of US$1.38 million in 1Q1819. Lower revenue contribution and higher operating cost were the main factors for the losses in 1Q1819.

A Review of the Financial Position

The Group net assets value was US$95.28 million and net asset value per share was 13.52 US cents per share as at 30 September 2018. Current ratio was 1.43 as at 30 September 18, an increase when compared to current ratio of 1.38 as at 30 June 18.

Cash and cash equivalents decreased by US$0.57 million or 13% to US$3.68 million as at 30 September 2018 compared to 30 June 2018. The increase was mainly due to cash used for operating activities of US$0.82 million in 1Q1819. The cash outflow from operations was mainly due to longer time taken to collect payments from clients and the increased payment to vendors due to the higher repair costs incurred. The cash out flow from operations was partially offset by partial repayment of shareholder's loan from an associated company.

Trade and other receivables increased by US$0.69 million or 7% to US$10.49 million as at 30 September 2018 compare to 30 June 2018 largely driven by delay in payments from a few customers.

Income Statement

FY1718 Annual report Clarification

In FY2018, as there was a change of holding company, the Board and Management considered it prudent that the Company make a provision for doubtful debts of US$8,657,000 of which, US$4,100,000 relates to loan due from Falcon Energy Group Ltd ("FEG").

The 4.3% interest charged on the non-trade loan of US$4,100,000 to FEG was determined based on the Company's borrowing costs at the point of granting the loan. The loans to FEG was granted in Oct 16 and Mar 17 when the Company's borrowing rate was 4.28% and 4.20% respectively. The loans were supposed to be short term in nature. The effective interest rate of 4.5% as shown in the annual report for period ended 30 Jun 17 was derived by taking the average of the loan interest from 1 Feb 16 to 28 Jul 16 of 4.73% and loan interest from 29 Jul 16 to 30 Jan 17 of 4.28%.

Discussion with FEG to reach a repayment plan is ongoing, against the background of FEG working out its restructuring plan with its bankers.

Commentary

The oil and gas sector are showing sign of improvement with tender activities picking up. If oil prices continue to improve through 2018 and 2019, infill well drilling should resume and new production should commence as exploration and production companies grow more confident of oil price strength. However, charter rates are not expected to improve due to the oversupply situation in the near term. Barring any unexpected geopolitical developments or a decline in oil prices that could derail the sector recovery, we are cautiously optimistic that the market will find its balance in the medium term.

The Group will continue to develop ways to increase operational efficiency, cut costs and preserve cash. Thisstrategy will allow us to ride out the rest of the downturn and be ready for the rebound in the industry.

Save as disclosed herein, there are no known factors or events which may affect the Group in the next reporting period and the next 12 months.