financials

Unaudited Financial Statements And Related Announcement for the Year Ended 30 June 2018

Financials Archive

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Statement of profit or loss and other comprehensive income for the financial year ended 30 June 2018

Income Statement

Note: "nm" means not meaningful

Statements of financial position as at 30 June 2018

Income Statement

Review of Performance
Full Year Results - FY ended 30 June 2018 ("FY1718") vs FY ended 30 June 2017 ("FY1617")

The Group recorded a full year loss of US$24.595 million in FY1718, a 39% decrease from prior year's loss of US$40.080 million. US$14.330 million of FY1718 Group's loss were attributable to one-off adjustments which include impairment provision for CHO owned and jointly-owned vessels amounting to US$3.333 million and US$2.101 million respectively, impairment provision for investment in associated company amounting to US$0.239 million and doubtful debt provision amounting to US$8.657 million for outstanding debt due from FEG and its related companies. In addition, the Group shared a loss on disposal of associated company vessels amounting to US$2.409 million. The remaining losses of US$7.856 million were attributable to lower vessel utilization and charter rates and higher operating and financing expenditure incurred. Average vessel utilisation rate including jointly-owned vessels was 53% in FY1718, against an average vessel utilization rate of 63% in FY1617.

Revenue

The Group's revenue decrease by US$6.499 million or 40% as compared to prior year due to lower vessel charter rates and utilisation rate.

Cost of Sales and Gross Profit before Direct Depreciation

The cost of sales increased by 8% from US$4.924 million to US$5.302 million mainly due to higher stacked and repair costs and expenditure incurred to takeover a vessel from a client who has defaulted on the charter contract. Due to the lower revenue and higher cost of sales, the Group's gross profit margin before direct depreciation decrease from 70% to 46% in FY1718.

Other Income

The Group recorded other income of US$0.476 million in FY1718 which was 38% higher than in FY1617. FY1718 Other income comprised mainly of fixed deposit interest income, interest charge to third parties for outstanding debt due to the Group, interest income from loan made to associated company and government grants received. FY1617 other income comprised fixed deposit interest income of US$0.136 million and reversal of prior year over-provided expenses amounting US$0.163 million.

Other Expenses

The Group FY1718 other expense comprised mainly of doubtful debt, vessel impairment and investment in associated company impairment provision adjustments of US$8.657 million, US$3.333 million and US$0.239 million respectively. This is against prior year doubtful debt and vessel impairment provision adjustments of US$2.383 million and US$31.076 million respectively.

Administrative Expenses

Administrative expenses decreased from US$4.543 million in FY1617 to US$3.938 million in FY1718. The decreased was mainly due to prudent cost management.

Share of Results of Associated Companies

The Group's share of associated companies' losses declined 17% from US$6.904 million to US$5.747 million in FY1718. FY1718 share of associates' losses included the Group's share of vessel impairment provision of US$2.101 million and loss on disposal of fixed assets amounting US$2.409 million. Excluding one-off provision adjustments, the Group's share of associated companies' losses would have been US$1.237 million in FY1718 and US$1.720 million in FY1617. The lower adjusted losses, despite a 6% year-on-year reduction in vessel utilisation rate to 42% in FY1718, was mainly due to prudent management of operating expenses.

Income Tax

The deferred tax expense relates to its Singapore-owned, foreign flagged vessels.

FINANCIAL POSITION

The losses incurred by the Group during the financial year has resulted in the decrease of its net assets value from US$121.219 million as at 30 June 17 to US$96.624 million as at 30 June 18. The Group's net asset value per share decreased from 17.20 US cents as at 30 June 2017 to 13.71 US cents as at 30 June 2018.

The Group's cash balance decreased by 9% from US$4.668 million to US$4.249 million mainly due to drydocking expediture incurred on a vessel which was partially offset by the positive cash flow generated from operating activities and repayment from associated companies.

Trade and other receivables decreased US$8.240 million from US$18.040 million as at 30 June 2017 to US$9.800 million as at 30 June 2018 largely due to provision for doubtful debt of US$8.657 million made on amount due from FEG and related parties.

Income Statement

The Group's investment in associates declined US$16.157 million from US$26.226 million as at 30 June 2017 to US$10.069 million as at 30 June 2018 mainly due to reclassification of long term shareholder's loan amounting US$7.413 million from "investment in associates" to "short- and long-term loan to associates" due to revision to the terms of the shareholder's loan agreement. The decline was also due to partial repayment of shareholders' loan by associates amounting US$1.385 million, share of associates losses before deferred gain adjustment of US$7.120 million and impairment provision for investment in associated company amounting US$0.239 million made during the year.

The decline in fixed assets value were mainly due to annual depreciation adjustments of US$7.165 million and vessel impairment provision of US$3.333 million which were partially offset by fixed assets addition of US$2.095 million during the year. 2 vessels were acquired from one associated company by offseting receivables and shareholder's loan due from the associate against the purchase price.

Trade and other payable increased US$1.311 million from US$2.394 million as at 30 June 2017 to US$3.705 million as at 30 June 2018 mainly due to the dry docking expenditure incurred on a vessel.

Withholding tax accrual balance increased due to delay in collections from customers. Withholding tax is only payable upon payment from customers.

The Group's total current and non-current borrowings include term loan and credit line. The variances between current and previous year loan balances were due to unrealised foreign exchange movement. No further loan was taken by the Group during FY1718.

There was no advance from client as at 30 June 2018 as the revenue has been earned during the financial year.

The client deposit has been reclassed from non-current to current as the contract has been terminated by the Group during the financial year.

Deferred gain balance relates to the gain from sale of vessels by CHO to the associated companies previously. The deferred gain was partially reversed against share of result of associated companies due to the sale of 2 jointly-owned vessels by one of the associated company during the year.

Commentary

On 26 July 2018, Baker Technology Limited announced that its wholly-owned subsidiary BT Investment Pte. Ltd. has acquired 371,646,150 shares representing 52.72% of the total shares in the capital of the Company. Following the acquisition, BT Investment Pte. Ltd. has made a mandatory unconditional cash offer for all the remaining shares in the Company at S$0.13 per share. Full details of the mandatory unconditional cash offer are set out in the Company's announcement dated 10 August 2018. As of 26 July 2018, Baker Technology Limited has replaced Falcon Energy Group Limited as the ultimate holding company of the Company

The oil and gas sector are showing sign of improvement with tender activities picking up. If oil prices continue to strengthen through 2018 and 2019, infill well drilling should resume and new production should commence as E&P companies grow more confident of oil price strength. However, in the near term, charter rates are not expected to improve due to the oversupply situation. 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. This is the simple strategy 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.