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The Group recorded a full year loss of US$40.080 million in FY1617, against a full year profit of US$5.626 million in FY1516. The Group's loss was mainly attributable to (1) lower vessel charter rates and utilisation, (2) one-time vessel impairment charge of US$36.259 million & (3) doubtful debt provision of US$2.383 million.
The Group's revenue decrease by US$8.32 million or 34% as compared to corresponding period for FY1516 due to lower vessel charter rates and utilisation. Average vessel utilisation rate was 73%, against an average vessel utilization rate of 79% in FY1516.
The Group responded to the harsh charter market environment by reining in on operating expenditure. Thorough review on our vessel operating costs had resulted in 18% reduction in operating expenditure from US$6.012 million in FY1516 to US$4.924 million in FY1617. However, the reduction in operating expenditure was not enough to offset the revenue reduction, resulting in gross profit margins before direct depreciation reduced from 76% in FY1516 to 70% in FY1617.
The Group recorded other income of US$0.344 million in FY1617, 96% lower than the other income recorded in FY1516. Other income in FY1516 comprised mainly of the reversal of prior years' foreign tax provision of US$5.209 million and the reversal of commission fee payable of US$3.737 million, which is related to the claim settlement in FY1415. FY1617 mainly comprised of interest income of US$0.136 million, foreign exchange gain of US$0.045 million and reversal of prior year over-provided expenses amounting US$0.163 million.
With the Group adopting a prudent approach in doubtful debt and vessel impairment assessment, a doubtful debt provision of US$2.383 million and vessel impairment charge of US$31.076 million charges were recorded in FY1617. This resulted in a net increase in other expense by US$30.869 million as compared to FY1516. Other expense in FY1516 comprised of an allowance for doubtful debts of US$1.269 million and a vessel impairment charge of US$1.001 million.
Administrative expenses decreased from US$5.225 million in FY1516 to US$4.530 million in FY1617. The reduction was mainly driven by the Group series of cost rationalisation and business streamlining initiatives.
The Group recorded a share of associated companies' losses of US$6.904 million in FY1617, against a share of loss of US$1.964 million in FY1516. The losses widened as compared to prior year due the recognition of impairment expenses on jointly owned vessels. The Group's share of impairment expenses amounted to US$5.183 million.
The deferred tax expense relates to its Singapore-owned, foreign flagged vessels.
The losses incurred by the Group during the financial year has resulted in the decrease of its net assets value from US$161.345 million as at 30 June 16 to US$120.219 million as at 30 June 17. The Group's net asset value per share decreased from 22.88 US cents as at 30 June 2016 to 17.20 US cents as at 30 June 2017. Despite the challenging environment, the Group's liquidity remained healthy with a current ratio of 2.3.
The Group's cash decreased from US$9.711 million to US$4.668 million largely due to loan granted to ultimate parent company, funding of related parties' and associates' companies expenditure and incurrence of dry docking expenditure amounting US$0.667 million for one of the vessel.
Trade and other receivables increased by US$8.817 million to US$18.040 million as compared to US$9.223 million as at 30 June 2016. The increase was largely due to US$4.3 million loan granted to ultimate parent company and increase in amount due from associates and related parties by US$1.9 million. The Group also faced increasing pressure from clients to grant longer credit term.
As at 30 June 2017, the Group's non-current assets which comprised of the Group's vessels and its investment in associates decreased US$45.192 million or 27% as compared to the end of last financial year. The decreased was mainly due to recognition of impairment charges of both the Group's owned and co-owned vessels after an in-depth evaluation of the carrying value of the vessels.
Provisions balance comprised of foreign withholding tax accrued.
The Group's total current and non-current loan and borrowings include term loan and credit line. Short-term loans and borrowing as at 30 June 2017 decreased US$1.964 million as compared to 30 June 2016 due to partial repayment of short-term credit line. The Group has during the year, took steps to increase its long-term borrowing by tapping on the Spring Singapore's Bridging Loan financial support scheme, which explained the increase in long-term loan by US$3.631 million.
Advance from client decreased US$1.581 million from US$3.098 million as at 30 June 2016 to US$1.517 million as at 30 June 2017 due to the recognition of revenue earned from advance payment made by a customer.
There was a reversal of deferred tax provision of US$756,000 in FY1617 due to impairment charge arising from its Singapore-owned, foreign-flagged vessels.
The oil and gas sector faces more uncertainty in the year ahead. As a result of the late 2016 agreement among the Organization of the Petroleum Exporting Countries ("OPEC") to cut oil production, crude oil prices increased during FY 2016 from the historical lows experienced in the last several years. However, the increase in the production of oil from shale deposits on land in the United States together with weaker than expected demand for oil is creating an uncertain horizon for the continued strength or increase in oil prices. The ease with which shale oil well can be revived for production when prices rise add to the clouded outlook for oil prices in the year ahead. Any rebound in the offshore and marine market is also handicapped by the fact that offshore oil and gas projects now must compete for capital with lower-cost onshore projects.
Despite the uncertainty ahead, there are indications that the worst may be over. Crude oil price have likely seen their low for the current cycle. With the rebalancing of costs across the offshore oil and gas industry, new offshore oil and gas development is becoming profitable again, even at current oil prices. In short, the seeds of the ultimate recovery in the sector have been planted.
The Group will continue to develop ways to increase operational efficiency, cut costs and preserve cash that 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.