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Group's revenue decreased by US$208.7 million (64%) for the financial year ended 31 August 2017 ("FY17"), when compared to the corresponding period for the financial year ended 31 August 2016 ("FY16").
The decrease was mainly due to:
Currently the Group is in discussion/negotiation with the respective customers and financiers of the existing projects with an aim to minimise the liquidated damages and deliver the vessel successfully to the clients.
Gross loss for FY17 was US$60.1 million as compared with gross profit of US$55.4 million registered in FY16. Gross loss in FY17 was attributable to the factors explained above which is mainly as a result of extremely competitive market environment and tight liquidity in offshore and marine industry, particularly in Singapore.
Other income for FY17 was US$0.7 million as compared with other expenses of US$0.2 million in FY16. The income in FY17 was mainly related to sales of scrap, reversal of expired provisional warranty and fair value gain on derivative instruments.
No material change in FY17 from its comparative period.
The breakdown of the provision and impairments of assets amounting to US$68.2 million in FY17 is tabled as below: As explained in the announcement dated 28 July 2017, due to the prolonged depressed state of oil & gas industry as well as the extremely competitive market environment, the carrying value of certain assets was negatively impacted. As a result, after due consideration, the Group has made provisions and allowances for impairment of the above assets.
Financial expenses for FY17 increased by US$3.7 million (76%) as compared to FY16. The increase was mainly as a result of higher amount of borrowings as well as due to increase in cost of borrowing.
Loss before tax for FY17 was US$163.0 million, compared to profit before tax for FY16 of US$19.6 million. The loss before tax for FY17 was mainly due to gross loss and allowance for impairment of assets and higher interest expenses as mentioned above.
Tax credit for FY17 was US$0.5 million compared to tax expense for FY16 of US$1.8 million. The tax credit for FY17 was in line with the loss before tax incurred during the financial year.
The decrease in non-current assets was mainly due to:
In view of the Group’s performance for FY17 and its financial position as at 31 August 2017, the Company has provided impairment loss on investment in subsidiaries amounting to approximately US$150 million.
The decrease in current assets was mainly due:
The decreases were partially offset by:
The Group is currently in discussion/negotiation with the respective customers and financiers with an aim to deliver the projects successfully. Concurrently, the Group has been in active and continuous engagement with various parties to recapitalise its balance sheet and improve the liquidity of the Group. The outcome of such discussions/negotiations is yet to be ascertained. The Group will make continuous assessment of the situation and necessary provision will be made, should there be a material change in value of its assets.
The increase in current liabilities was mainly due to:
The above increases were partially offset by:
Following by the net loss incurred during the financial year, certain financial covenants of certain loan agreements were breached by the end of FY17. The Group has engaged with the relevant banks for further action as it would be required by the banks. All the related bank borrowings have been classified under current liabilities.
The decrease in non-current liabilities was mainly due to reclassification from non-current liabilities to current liabilities for bank term loans during the financial year.
The decrease in shareholders' equity was mainly due to net loss incurred during the financial year.
The Group recorded net cash used in operating activities of US$23.0 million in FY17, mainly due to net increase in inventories and work-in-progress reflecting higher stockholding for the on-going shipbuilding and fabrication projects.
The above was partially offset by:
Net cash used in investing activities was US$2.1 million in FY17, mainly due to purchase of certain operating equipment and upgrade of the facilities at two of the yards in Vietnam and purchase of intangible assets. This was partially offset by proceeds from disposal of assets held for sale.
Net cash from financing activities was US$16.8 million in FY17, as a result of net loan drawdown for working capital which was partially offset by increase in cash pledged.
The Group's net debt to equity ratio (defined as ratio of total external indebtedness (net of cash and cash equivalents including cash pledged) owing to bank and financial institutions to shareholders' equity) increased from 0.50 to 2.26 times, in FY17 compared to FY16. Approximately 98% of the Group borrowings as at 31 August 2017 relates to working capital financing.
As at 31 August 2017, the Group was in net current liabilities position of US$60.8 million and incurred net loss after tax of US$162.5 million for the financial year ended 31 August 2017. As at the date of announcement, the Group has defaulted certain bank facilities and currently in discussion with the respective lenders for a mutually acceptable settlement.
For the Group and Company to continue as going concern, the management continues to actively pursue the following course of actions:
FY2017 was a difficult year for the Group in terms of its ability to secure the necessary financing for its projects, notably after the related/affiliated entities of Ezra Holdings Limited have filed Chapter 11 of the United States Bankruptcy Code in early 2017. Compounded by the effect of extremely tight liquidity in the market and competitive market environment in offshore and marine industry, the Group suffered cost overrun and liquidated damages as a result of significant slow-down in progress of the existing projects. As at the date of this announcement, the Group has received notice of cancellation from its client in relation to two of its shipbuilding contracts.
As announced on 6 September 2017 and 27 October 2017, to preserve value for its stakeholders, the Group is in active and continuous engagement with various parties to recapitalise its balance sheet and improve the liquidity of the Group, which may include, inter alia, potential fund raising via new loans and issue of new securities. Meantime, the Group is in discussions with its existing lenders and customers to obtain requisite financing as such that the projects can be delivered to the client. As at the date of this announcement, no definitive agreements in relation to any of these discussion/negotiations have been entered into by the Group, and there can be no assurance or reasonable certainty that any discussions or prospects will be successfully concluded.
While the Group will continue its focus on strengthening its balance sheet, improving the liquidity, streamlining its operation with the aim to achieve positive operating cashflow, it is foreseen that next 12 months will remain extremely challenging for the Group.