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financials

Unaudited 1st Half Financial Statement And Related Announcement

Financials Archive

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Statement of profit or loss and other comprehensive income for the first half ("1H1617") ended 31 December 2016

Income Statement

Statements of financial position as at 31 December 2016

Income Statement

Review of Performance
(a) Profit/ (loss) after Tax

The Group incurred a loss of US$295,000 in 1H1617,US$2.571 million lower than 1H1516 profit after income tax of US$2.282 million. 1H1617 loss was incurred in 2Q1617. Overall utilization rate for the Group's vessels including our associates' vessels was 66% in 1H1617, 5% lower than 1H1516 of 71% vessels. The low 1H1516 utilization rate was due to dry docking of vessels.

The Group's 2Q1617 performance was US$1.342 million worse off than 2Q1516. This was mainly due to lower charter rates negotiated and lower utilization rate achieved for CHO owned vessels. Utlization for CHO owned vessels was 54% in 2Q1617, 18% lower than 2Q1516 utilization rate of 72%. The lower utilization rate was due to due to loss of contracts, and in between contract for 2 vessels. The charter rates negotiated for the 2 vessels were significantly lower than the previous contract.

Revenue

Revenue decreased 21.6% from US$11.071 million in 1H1516 to US$8.678 million in 1H1617. 2Q1617 revenue showed a 35.7% decline as compared to corresponding period last year. The decrease was driven by contracts termination and lower charter rates negotiated on new term and spot charters in 2Q1617. 2 vessels were charter free and 1 vessels was on spot job as at 31 Dec 16.

Cost of Sales and Direct Depreciation

1H1617 Operating costs were 7.6% higher than 1H1516 despite revenue reduction. This was mainly due to higher fuel costs incurred for tow jobs and stacking costs incurred on charter free vessels.

2Q1617 operating costs were 14.2% lower than 2Q1516 due to decision made to cold stacked some non-working vessels.

Gross Profit after direct depreciation

With higher costs and lower revenue, gross profit after direct depreciation margin decreased 56% from US$4,612 million in 1H1516 to US$2,029 million in 1H1617. Gross profit margin decreased from 42% in 1H1516 to 23% in 1H1617.

The reduction in gross profit margin is strongly felt in 2Q1617. 2Q1617 Gross profit margin was 14%, 9% lower than 1H1617 gross profit margin of 23% and 26% lower than 2Q1516 gross profit margin of 40%.

Administrative Expenses

Administrative expenses decreased 18.1% to US$2.104 million in 1H1617 as compared to 1H1516. 2Q1617 Administration expenses also showed a 32.3% decline as compared to 2Q1516. The decline was mainly driven by cost rationalization exercise taken and lesser manpower related costs incurred during the current period. Corporate headcount has reduced from a high of 45 to 31 as of 31 Dec 16. In addition, there was also sharing of corporate resources with related parties to further bring down overall administrative expenses.

Share of Results of Associated Companies

Share of results of associated companies dipped 781.1% from a profit of US$53,000 in 1H1516 to a loss of US$361,000 in 1H1617. The decreased was mainly due to the lower utilization rate and charter rate achieved by the associates. Utilization rate reduced from 67% in 1H1516 to 59% in 1H1617. Associates performed slightly better in 2Q1617 than 2Q1516 due to higher utilization rate achieved for its 12000BHP vessel and cold stacking of one of its smaller vessel.

A Review of the Financial Position

The Group net assets value stood at US$161.010 million and net asset value per share was 22.84 US cents per share as at 31 December 2016, not materially different from the end of immediately preceding financial year and. Current ratio was 1.79 as at 31 December 16, an improvement compared to current ratio of 1.41 as at 30 June 16. The improvement was due to partial repayment of bank loan of US$1.853 million in July 16 and increase in trade and other receivables by US$5.557 million.

Trade and other receivables increased US$5.557 million to US$14.780 million mainly due to loan amounting US$3.73 million made to ultimate parent company in 2Q1617, US$0.6M increase in receivable from related party and delay in payment from one of our client and longer payment terms granted to new client. The outstanding from the client has increased US$0.9 million since the end of immediately preceding financial year.

Cash and cash equivalents decreased US$3.477 million to US$6.234 million since the last financial year-end. This was mainly driven by negative operating cashflow of US$1.457 million generated and partial repayment of bank loan amounting US$1.899 million made during the period.

Provision relates to withholding tax provided for a charter contract.

The advance from client as at 30 Jun 16 has been fully earned as at 31 Dec 16. The US$3.812 million advance from client as at 31 Dec 16 relates to another 10-months advance payment received from a client at the end of 2016.

Commentary

The offshore support industry remains challenging. While oil prices have recovered due in large measure to OPEC's historic agreement to cut production commencing in Jan. 2017, offshore activity remains extremely weak, with 2017 capital budgets expected to fall from 2016 levels, hence further reducing the level of offshore activity and offshore support vessels requirements in 2017. Charter rates have continued to demonstrate downwards pressure. The group will continue to trim operating and overhead costs and focus on maintaining and gaining fleet utilization in 2017.

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.


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