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For the first nine months ended 31 March 2018 ("9M1718"), the Group recorded a loss after income tax of US$4.946 million. The loss increased 277% as compared to the previous corresponding nine months ended 31 March 2017 ("9M1617") mainly driven by the 32% or US$3.875 million decline in revenue and the recognition of unrealised foreign exchange loss of US$324,000 largely from the revaluation of the Sing dollar loan against the US dollar. An unrealised exchange gain of US$126,000 was recorded in 9M1617.
Revenue declined 32% year-on-year due to lower charter rate as well as vessel utilization rate. Utilization rate decline from 68% in 9M1617 to 63% in 9M1718.
Cost of sales decreased 10% from US$3.851 million to US$3.454 million year-on-year due to aggressive efforts to trim costs while ensuring operational safety. Operating expense has already been trimmed to the minimal and there is little room for further reduction.
Interest income increased by 311% year-on year from US$91,000 to US$374,000 mainly due to interest income earned from the loan made to FEG group and unpaid amount due from a third party.
Administrative expenses decreased 9% to US$2.951 million in 9M1718 from US$3.231 million in 9M1617. The decreased was mainly due to the impact of cost restructuring exercise performed previously.
Higher finance costs were due to the interest expenses incurred on bank loan drawn down in Apr 2017.
Share of loss of associated companies increased from US$0.808 million in 9M1617 to US$1.119 million in 9M1718. The increase in loss was primarily due to charter rate reduction and the off-hire of a vessel for drydocking in 9M1718.
The group's loss increased by 173% from US$1.022 million in 3Q1617 to US$2.794 million in 3Q1718 mainly due to 38% or US$1.338 million decline in revenue, 19% or US$0.187 million increase in costs of sale, 11% or US$0.12 million increase in administrative expense and higher share of loss from associates companies.
3Q1718 revenue was 38% lower than 3Q1617 mainly due to significant decline in charter and vessels' utilization rate. Vessel utilization rate declined from 67% in 3Q1617 to 52% in 3Q1718 due to the off-hire of one vessel in Mar 18 for repair work and termination of 2 charter contracts.
Cost of sales increased 19% from US$0.999 million in 3Q1617 to US$1.186 million in 3Q1718 due to significant increase in vessel repair and maintenance costs incurred in 3Q1718.
The lower revenue and higher costs has resulted in the Group gross profit margin before direct depreciation decreasing from 71% in 3Q1617 to 45% in 3Q1718.
Administrative expenses increased 11% from US$1.127 million in 3Q1617 to US$1.247 million in 3Q1718 due mainly to the back-charge of equipment rental and manpower costs by ultimate holding company to CHO amounting US$0.224 million.
Share of loss of associates companies increased from US$447,000 in 3Q1617 to US$656,000 in 3Q1718 due mainly to the 52% decrease in revenue due to low vessel utilization rate achieved.
The Group has a net assets value ("NAV') of US$116.272 million as at 31 March 2018. This is equivalent to 16.49 US cents per share.
Cash balance has increased from US$4.668 million as at 30 June 2017 to US$5.979 million as at 31 March 2018 mainly due to positive cashflow generated from operations and repayment from associates.
Trade and other receivables has declined from US$18.148 million as at 31 June 2017 to US$17.959 million as at 31 March 2018.
The decline in investment in associated companies was mainly due to the share of associates' loss during the financial year.
Trade and other payable increased US$654K from US$2.472 million as at 30 June 2017 to US$3.126 million as at 31 March 2017 mainly due to significant expenditure incurred on the ongoing dry docking of a vessel and major repair of another vessel.
Advance from client relates to prepaid charter received from a client. The charter service has been earned, resulting in nil balance as at 31 March 2018.
While the global oil market has shown encouraging signs of stability and recovery in recent months, which will ultimately lead to an increase in offshore exploration activity, the OSV industry is still facing a situation of excess supply against a backdrop of slow pick up in demand. This resulted in intense downwards pressure on vessel utilisation rates and charter rates. Customer sentiment has improved with the increase in oil price and promising demand for oil developing. However, due to the time required for planning and permitting of new offshore projects, an increase in demand for offshore supply vessels may only be realized later beyond current financial year. In the meantime, the Group will continue to develop ways to increase operational efficiency, cut costs and preserve cash, which 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.