First Quarter Financial Year 2017 Results
Profit & Loss
Consolidated Statement of Profit or Loss and Other Comprehensive Income
The discussion below refers to the three months ended 30 November 2016 ("1Q FY2017") and the corresponding figures covers the three months ended 30 November 2015 ("1Q FY2016") for the Group's consolidated financial information.
Revenue for 1Q FY2017 amounted to USD42.5 million, a 15% decrease from the corresponding period. The decrease was mainly due to general weakness in the offshore industry. The shallow water platform support vessels ("PSV") and anchor handling, towing and supply vessels ("AHTS") segment continues to remain weak.
Cost of sales
Cost of sales for 1Q FY2017 amounted to USD42.8 million, as compared to USD50.8 million in 1Q FY2016, a 16% decrease. The decrease in cost of sales is mainly due to lower bareboat cost incurred which is partially offset by higher depreciation, following the lease modification of 7 vessels that are now accounted for under finance lease arrangement.
Other income, net
The higher other income, net for 1Q FY2017 relates to the favourable USD exchange rate movements against the Singapore Dollar and Malaysia Ringgit.
Administrative expenses for 1Q FY2017 amounted to USD3.9 million, a 15% increase. The increase is mainly due to absence of reversal of IPO related costs, which was recorded in 1Q FY2016.
Financial income is recognised mainly in relation to the amortisation of interest income on the long term receivables. Financial income increased by 375% in 1Q FY2017 due to non-recurring interest savings of USD2.2 million arising from the modification of operating lease arrangements mentioned above.
The increase in 1Q FY2017 is mainly due to the interest costs of lease obligations that were recognised in the statement of financial position in tandem with the new leased assets arising from finance lease accounting.
Share of results of associates
The share of results of associates for the current quarter refers to the share of results of Intan Offshore Sdn Bhd. Share of results of associates decreased quarter-on-quarter as the Group ceased to share the profits of PV Keez Pte Ltd with effect from 1 March 2016, following its reclassification to asset held for sale.
Share of results of joint ventures
The share of results of joint ventures is mainly derived from Emas Victoria (L) Bhd. 1Q FY2017 share of results decreased by 14% from the previous corresponding quarter due to the reduction in charter rates for Perisai Kamelia effected in Q3 FY2016.
Income tax relates to the amount paid or expected to be paid to the respective tax authorities. The Group has exposure to income tax in various jurisdictions. The tax rates and tax laws used to compute the amounts are those that had been enacted or substantively enacted at the end of the reporting periods.
Consolidated Statement of Financial Position
The discussion below refers to the financial position of the Group as at 30 November 2016 and 31 August 2016.
The Group's total assets amounted to USD1,235.2 million as at 30 November 2016 and USD1,133.9 million as at 31 August 2016. Property, plant and equipment increased by USD90.3 million mainly due to the net increase from vessels being placed on finance lease arrangements following the modification of operating lease arrangement. This is partially offset by depreciation of USD13.6 million.
The Group's total liabilities increased by USD104.4 million to USD1,147.7 million as at 30 November 2016. The increase is mainly due to the recognition of finance lease obligations of USD118.1 million and the reversal of provisions of USD21.9 million following the modification of lease arrangement.
The market environment in the offshore oil and gas industry is expected to remain extremely challenging.
Offshore oil and gas activities have not increased significantly and this trend is expected to continue and will have a negative impact on the Group's financial performance.
The Group continues to execute its plans to improve operational efficiency and overall fleet utilisation as well as dispose of non-core assets.
As announced by the Company: -
- in October 2016, Perisai Petroleum Teknologi Berhad (“PPT”), together with Perisai Capital (L) Inc, a wholly-owned subsidiary of PPT made several announcements which effectively resulted in PPT being classified to the status of being not solvent, i.e. “PN17”;
- on 18 November 2016, PPT made an application to Malaysia's Corporate Debt Restructuring Committee (“CDRC”) whose application was accepted by CDRC on 9 November 2016. As a result of PPT's application to CDRC, it is understood that all affected lenders of PPT are required with immediate effect to observe an informal standstill, and withhold proceedings against PPT and its subsidiaries. This includes SJR Marine (L) Ltd, EMAS Victoria (L) Bhd and Intan Offshore (L) Ltd, which are either associated or joint venture companies of the Group. PPT has 60 days from 9 November 2016 to submit its proposal for the proposed debt restructuring scheme and
CDRC shall thereafter call for a meeting with its lenders;
- on 13 December 2016, the Group reached an agreement on 12 December 2016 with all its financial lenders to refinance its financial obligations over a period of 5 years from 12 December 2016 (“Refinancing”). Among other terms and conditions, the agreement also contemplates the raising of new working capital facilities and includes provisions that would retrospectively discharge the Group from complying with financial covenants until FY2020. The Refinancing will be subject to documentation and conditions that would be set out in definitive agreements to be entered into between the parties within sixty (60) days from 12 December 2016; and
- on 23 December 2016, the Group reached a settlement agreement with PPT with respect to disputes arising from the put option held by PPT for the acquisition of 51.0% equity stake in SJR Marine (L) Ltd, subject to the fulfilment of the various conditions precedent as detailed in the announcement.
The Group is continuing with its efforts to finalise agreements that would result in the provision of additional working capital facilities. As a result of the uncertainties including those surrounding PPT's developments, the completion of the refinancing exercise and obtaining additional working capital facilities have been delayed.
The completion dates of these agreements are currently targeted to be concluded before the end of the second quarter of financial year 2017. In the event that these efforts do not achieve a favourable and timely outcome, the Group will be faced with a going concern issue.
As disclosed in Note 10 of its Q4 FY2016 Financial Statement results announcement by Ezra Holdings Limited on 29 November 2016, Ezra Holdings Limited and its subsidiaries (“Ezra Group”) are in discussions with various stakeholders and consolidating funding requirements. In the event that these efforts do not achieve a favourable and timely outcome, Ezra Group will be faced with a going concern issue. Ezra Holdings Limited is a guarantor to various financial obligations of the
Group and accordingly, this development may have a negative impact on the Group.