Investor Relations

Unaudited Results For The First Quarter Ended 31 March 2012

Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Profit & Loss

Review of Performance

Income Statement Overview

Revenue

We derive our revenue mainly from the following business segments:-

1. Module Business, which consists of fabrication of Topside Modules
2. Ad Hoc Projects, which consists of fabrication of other steel or mechanical structures

Revenue decreased by $15.1m or 39.1% from $38.6m for the first quarter ended 31 March 2011 ("1Q2011") to $23.5m for the first quarter ended 31 March 2012 ("1Q2012"). As most of the projects in 1Q2012 are in the early stages of fabrication, revenue recognition based on percentage of completion is slower at these stages.

Gross Profit

Gross profit decreased by $7.5m or 52.5% from $14.3m in 1Q2011 to $6.8m in 1Q2012 partly in line with lesser revenue recognised. Gross profit margin for 1Q2012 was 28.8% as compared to 36.9% in 1Q2011. Gross profit margin was higher in 1Q2011 due to recognition of certain variation orders with higher margins and project adjustments from completed projects.

Other Income

Other income remained at $1.3m for both periods due to fair value gain on financial instrument of $0.9m and foreign exchange gain of $0.3m in 1Q2012 versus a write back of bad debt provision of $1.4m and foreign exchange loss of $0.2m in 1Q2011.

Administrative Expenses

Administrative expenses decreased by $3.2m from $7.3m in 1Q2011 to $4.1m in 1Q2012, mainly due to a decrease in employee compensation of $1.8m, legal and professional fee of $1.0m and printing and stationery of $0.3m. The decrease in employee compensation was due to lower project bonus accrued resulting from lower volume of work undertaken during the period leading up to 1Q2012.

Finance expenses

Finance expenses were mainly interest expenses on bank borrowings and finance leases which were minimal for both quarters under review.

Income Tax expense

The income tax expense for 1Q2012 and 1Q2011 were provided at the prevailing Singapore corporate tax rate of 17%. However, the effective tax rates for 1Q2012 and 1Q2011 were 14.5% and 15.3% respectively due to tax refunds received from IRAS.

Profit after tax

Profit after tax decreased by $3.5m from $6.8m in 1Q2011 to $3.3m in 1Q2012. Profit after tax margin decreased from 17.6% in 1Q2011 to 14.2% in 1Q2012. The decrease in net profit margin was mainly due to a decrease in gross profit margin as explained in the section "Gross Profit".

Statement of Financial Position

Current Assets

The Group's current assets increased by S$20.6m to S$90.0m as at 31 March 2012 due to increases in cash and cash equivalents, trade and other receivables, derivative financial instruments and construction contract work-in-progress. The increase in current assets was partially offset by a reduction in inventory levels.

Cash and cash equivalents increased by $9.1m from $28.2m as at 31 December 2011 to $37.3m as at 31 March 2012 mainly due to proceeds from short term bank borrowings.

Trade and other receivables increased by $9.0m from $36.5m as at 31 December 2011 to $45.5m as at 31 March 2012 due to higher milestone billings as at 1Q2012.

Derivative financial instrument increased by $0.9m from $(0.1m) as at 31 December 2011 to $0.8m as at 31 March 2012 due to favourable movements in contracted USD forward rates against market spot rates.

Construction contract work-in-progress increased by $2.2m from $0.7m as at 31 December 2011 to $2.9m as at 31 March 2012 due to variation orders incurred for the new projects undertaken in 1Q2012.

Inventories decreased by $1.0m from $1.4m as at 31 December 2011 to $0.4m as at 31 March 2012 due to sale of steel plates to a third party.

Non-Current Assets

Non-current assets increased by $4.2m from $89.7m as at 31 December 2011 to $93.9m as at 31 March 2012 mainly due to additions in property, plant and equipment of $5.8m. The costs of fixed assets additions were reduced partially by depreciation charges of $1.6m for the financial period.

Current Liabilities

Trade and other payables increased by $10.0m from $36.0m as at 31 December 2011 to $46.0m as at 31 March 2012 as higher purchases were required in the initial stages of most of the projects in 1Q2012.

Current income tax liabilities decreased by $0.3m from $2.9m as at 31 December 2011 to $2.6m as at 31 March 2012 due to lower tax liability in the current quarter.

Borrowings increased by $11.8m from $0.3m as at 31 December 2011 to $12.2m as at 31 March 2012 mainly due to the utilization of banking facilities to bridge working capital requirements.

Consolidated Cash Flow

As at 31 March 2012, the Group had cash and cash equivalents of $17.3m. The Group generated cash from operating activities before working capital changes of $4.5m. Net cash provided by working capital amounted to $3.8m due mainly to increase in trade and other receivables of $9.0m, increase in construction contract work-in-progress of $2.2m, increase in other current assets of $0.6m and increase in trade and other payable of $10.0m partially offset by decrease in inventory of $1.0m.

Cash provided by investing activities amounted to $4.3m in 1Q2012 mainly due to the decrease in bank deposits with maturity more than three months.

Cash used in financing activities amounted to $8.2m in 1Q2012 mainly due to pledging of $20.0m bank deposits to obtain banking facilities of $12.0m to bridge working capital requirements as most of the projects are at the early stages of construction.

Commentary

We have secured two new orders in the second quarter of 2012, for a total contract value of US$31.6m. These orders are for the fabrication of four units of Manifold Racks for SBM and three units of topside module for Bumi Armada As of now, our order book stands at S$201.0m, after recognising S$24.0m as revenue in 1Q2012. Due to capacity requirement, we have rented additional yard space of approximately 100,000 square feet at a yard nearby our main yard to cope with the current order book. Majority of our projects is expected to be completed in financial year 2012.

We remain cautiously optimistic of our performance this year.

Balance Sheet