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Quarterly Report For The Financial Period Ended 30 September 2017

Financials Archive

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Unaudited Condensed Consolidated Statement Of Profit Or Loss
For The Quarter And Year-To-Date Ended 30 September 2017

 Income Statement

Condensed Consolidated Statement Of Financial Position
As At 30 September 2017

Financial Position

Review of performance of the Company and its principal subsidiaries

(a) Financial review for current quarter and financial year to date

Review of performance

3Q 2017 vs 3Q 2016

Revenue achieved for 3Q2017 was RM15.8 million, increased 14% compared to same period last year. Revenue of both period derived mainly from ship charter.

Cost of sales increased by about RM2 million or 12%, primarily due to increased spending on vessels maintenance and docking in the current quarter to ensure the vessels readiness for charter and also higher crew wages paid to senior ranking crews on Dynamic Position vessel (DP).

Although administration costs for the quarter included forex loss of RM566,000, administration expenses decreased 8% compared to same period last year due to savings derived from costs rationalisation and streamlining of some functions.

Operating loss for the quarter increased RM14.5 million compared to RM5 million reported in the same period last year mainly attributed to the loss on sale of a used offshore support vessel. The vessel was chartered on bareboat contract prior to the sale. Proceeds from the sale was used to pare down part of the Group's borrowing and for working capital. The group suffered a higher loss on disposal attributed to higher valuation on weaker Ringgit Malaysia recognised as per MFRS 121 (the effects of changes on Foreign Exchange Rate ) . The foreign exchange gain was taken up through Other Comprehensive Income (OCI) in previous financial period as per the Accounting Standards (MFRS).

Shipbuilding Division
Revenue for the quarter derived mostly from ship repair. Revenue from ship repair increased by 24% compared to same period last year due to more repair work carried out.

Ship Charter Division
Although utilisation rate for the current quarter was similar to same period last year, income from ship charter increased by 11% due to higher daily charter rates generated by bigger vessels and additonal revenue earned from a long term contract secured in the previous quarter for one of the vessel.

Jan - Sep 2017 vs Jan - Sep 2016

The group achieved total consolidated revenue of RM62.3 million for the current financial period, decreased RM47.4 million compared to RM109.7 million reported for the same period last year due to only 1 vessel was sold in the current financial period whereas revenue of last year included the sale of 3 offfshore support vessels.

Administration cost for the year to date reduced by about 20% attributed to the costs rationalisation carried out since last year.

Loss before tax for the period under review was RM40.7 million included loss on disposal of one of the used offshore marine support vessel amounted to about RM14 million. The results of the Group was also negatively impacted by the share of results of the jointly controlled entity.

Shipbuilding Division
Shipbuilding division recorded revenue of RM21.3 million for the year todate, lower than preceding year by 65% or RM38.8 million due to only 1 vessel sold in the current financial period compared to 3 vessels sold last year.

Ship Charter Division
Revenue from ship charter was lower by RM8.7 million or 17% mainly attributed to reduced billing on long term contracts upon expiry of the original contract term while new charters secured were mostly short terms and some pending outcome of new awards.

Commentary on prospects

Oil price has stabilized around +/- USD50 per barrel in recent months and based on industry analyst reports, oil prices are expected to average around US50 to 60/barrel if OPEC and non-OPEC jointly commit to the production cut and the oil demand from major economies such as China and India are sustained .

Current outlook seems to have improved slightly with increased activities for offshore projects. Contract tenures are still mostly short term as oil companies have yet to increase the offshore exploration, seismic, drilling and production activities significantly. Although the Group's fleet utilisation rate for 3Q2017 is similar to 2Q2017, revenue from charter fee is higher than the preceding quarter due to 1 of the multi purpose hybrid vessel which command higher daily charter rate per day was chartered for a short term during the quarter.

The Group will continue it's emphasis on its core activities of ship building, ship charter and ship repair in a less crowded market space. The Board is cautiously optimistic that demand for offshore marine support vessels will improve with further increase expenditure in offshore oil field development and maintenance work by the oil majors. To prepare for the eventual upturn in the market, the group will also be forming strategic alliances and partnership to capture the market share. The Board cautioned that notwithstanding that, any significant uptick is still some time away. Internally, with the ongoing initiatives in costs rationalization we believe the Group is well positioned to tide over the current business challenges.

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