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Review of Performance

The Group’s revenue for FY2016 decreased by 9.8% or US$2.5 million to US$23.1 million, from US$25.7 million for FY2015. This was mainly due to a significant decrease in revenue contribution by the Subsurface and Wells business segment of US$6.2 million as it has reduced its operational footprint in areas of low activity, such as Australia and Papua New Guinea while remaining focussed on the Asia and the Middle East markets. The decrease was partially offset by revenue of US$1.8 million generated by NauticAWT Engineering Pte. Ltd. (formerly known as Marine Engineering Services Pte. Ltd.) which was acquired in the second half of FY2015 (the “Acquired Subsidiary”) and the increase in revenue from Subsea segment of US$1.9 million.

The Group’s gross profit for FY2016 increased by 48.0% or US$2.4 million to US$7.4 million, from US$5.0 million for FY2015. This was mainly due to the increase in revenue from Subsea segment which normally carries higher margins as compared to Subsurface and Wells and Facilities segments.

The Group’s gross profit margin for FY2016 increased by 12.6 percentage points, from 19.6% for FY2015 to 32.1% for FY2016.

The Group’s administrative expenses decreased significantly by US$3.4 million or 29.8%, from US$11.4 million in FY2015 to US$8.0 million in FY2016 mainly due to the following:

  1. US$2.9 million reduction in administrative expenses incurred as a result of the restructuring through reorganisation andimplementation of certain cost cutting measures since 3Q2015;
  2. one-off IPO expenses of US$1.1 million incurred in FY2015; and
  3. an additional US$0.4 million of administrative expenses incurred by the Acquired Subsidiary.

Other income increased by US$0.3 million or 27.4%, from US$1.2 million in FY2015 to US$1.6 million in FY2016. In FY2015, other income comprised primarily the reversal of provision for deferred purchase consideration liability arising from the acquisition of AWT. In FY2016, other income comprised mainly the following:

  1. insurance claim of US$0.1 million; and
  2. gain on disposal of a subsidiary of US$0.7 million.

The Group recorded an income tax credit of US$0.3 million in FY2016, mainly due to the recognition of deferred tax assets, arising from the unutilised tax losses and capital allowances. The increase is partially offset by the write-off of withholding tax. In FY2015, the Group impaired deferred tax asset of US$2.1 million associated with the tax losses of AWT.

As a result of the above, the Group recorded a profit for the year of US$0.7 million in FY2016 as compared to a loss for the year of US$8.7 million in FY2015.

Review of Performance

The Group’s current assets increased by US$2.8 million, from US$12.9 million as at 31 December 2015 to US$15.7 million as at 31 December 2016. The increase was mainly due to the following:

  1. an increase in trade and other receivables of US$3.8 million;
  2. a decrease in cash and bank balances of US$0.3 million (please refer to the review of cash flows below); and
  3. a decrease in inventories of US$0.6 million.

The Group’s non-current assets increased by US$4.9 million, from US$5.4 million as at 31 December 2015 to US$10.3 million as at 31 December 2016. The increase was mainly due to the following:

  1. the acquisition of freehold land and production facility in Malaysia of US$4.1 million;
  2. an increase in intangibles of US$0.4 million and the acquisition of laboratory equipment of US$0.5 million in relation tothe Company’s Materials Development Project; and
  3. recognition of the deferred tax assets of US$0.6 million, arising from the unutilised tax losses and capital allowances.

The increase was partially offset by the depreciation charge of US$0.9 million of property, plant and equipment.

The Group’s current liabilities increased by US$4.3 million, from US$11.0 million as at 31 December 2015 to US$15.3 million as at 31 December 2016. The increase was mainly due to the following:

  1. an increase in trade and other payables of US$3.8 million;
  2. a receipt of government grant of US$0.2 million for the Company’s Materials Development Project;
  3. an increase in liabilities for trade bills discounted with recourse of US$0.4 million as more projects are now funded underthis credit facility arrangement; and
  4. a decrease in tax payables of US$0.4 million.

The Group’s non-current liabilities increased by US$2.5 million, from US$1.1 million as at 31 December 2015 to US$3.6 million as at 31 December 2016. The increase was mainly due to two term loan draw downs in relation to the acquisition of freehold land and a production facility in Malaysia and equipment in addition to a 3-year interest bearing loan from a third party during the current financial year.

The Group reported a positive working capital of US$0.5 million as at 31 December 2016 as compared to US$1.9 million as at 31 December 2015.

Review of Performance

Net cash generated from operating activities in FY2016 amounted to US$1.7 million. The Group had a net cash inflow of US$1.4 million from its operating activities before changes in working capital. Working capital movement included an increase in trade and other receivables of US$5.1 million, an increase in trade and other payables of US$4.7 million, an increase in trade bills discounted with recourse of US$0.4 million and a decrease in inventories of US$0.6 million.

Net cash used in investing activities in FY2016 amounted to US$4.7 million mainly due to the acquisition of freehold land and production facility in Malaysia of US$4.1 million.

Net cash from financing activities for FY2016 amounted to US$2.7 million mainly due to proceeds from bank borrowings and an interest bearing loan from a related company of US$4.0 million and US$0.3 million respectively which were partially offset by the repayment of bank borrowings of US$1.5 million.

As a result of the above, the Group’s cash and cash equivalents decreased by US$0.4 million, from US$63,000 as of 31 December 2015 to a deficit of US$0.3 million as of 31 December 2016, net of fixed deposit pledged and bank overdrafts.