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UNAUDITED FINANCIAL STATEMENTS FOR THE SIX-MONTH PERIOD ENDED 30 SEPTEMBER 2017

Financials Archive
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Consolidated Income Statement

Income Statement

Statement of comprehensive income for the financial year ended 30 September 2017

Comprehensive Income

Statements of Financial Position

Financial Position

REVIEW OF PERFORMANCE

REVIEW OF FINANCIAL PERFORMANCE OF THE GROUP

Six months ended 30 September 2017 ("HY2018") compared to six months ended 30 September 2016 ("HY2017")

The Group's revenue is derived from three business segments: (i) sale of goods; (ii) rendering of services; and (iii) airtime revenue. Sale of goods is mostly project-based and relates to the design, supply, integration and installation of a comprehensive range of radio and satellite communication, navigation and marine automation systems. Rendering of services relates to equipment leasing and provision of maintenance and support services including repair works, troubleshooting, commissioning, radio survey and annual performance tests. Airtime revenue relates to provision of airtime for satellite communication systems.

The Group's total revenue decreased by approximately S$4.3 million or 24.0% from approximately S$17.9 million in HY2017 to approximately S$13.6 million in HY2018. The decrease came from the sale of goods segment and airtime revenue segment, which recorded a decrease of approximately S$3.6 million and approximately S$1.2 million respectively in HY2018. These were partially offset by an increase in revenue from the rendering of services segment of approximately S$0.5 million. The Group's revenue from both the sale of goods segment and airtime revenue segment decreased mainly due to lower project sales and a decrease in the number of airtime packages taken up by customers during HY2018, attributable to the downturn in the marine and offshore industry. The Group's revenue from the rendering of services segment increased marginally, mainly due to more service work rendered and equipment leasing income generated.

The Group's cost of sales decreased by approximately S$4.1 million or 28.9% from S$14.0 million in HY2017 to S$9.9 million in HY2018, mainly due to the Group's continued efforts to improve its operational efficiency and cost management.

The Group's gross profit decreased by approximately S$0.2 million or 6.6% from approximately S$3.9 million in HY2017 to approximately S$3.7 million in HY2018. The overall gross profit margin however increased from 21.9% in HY2017 to 26.9% in HY2018.

Other items of income (including interest income) decreased by approximately S$0.1 million or 39.2% from approximately S$0.3 million in HY2017 to approximately S$0.2 million in HY2018 mainly due to the absence of a net exchange gain of approximately S$61,000 and a decrease in grant income of approximately S$42,000.

The Group's distribution costs decreased by approximately S$0.7 million or 21.2% from approximately S$3.0 million in HY2017 to approximately S$2.3 million in HY2018. This was due mainly to the decrease in salaries and bonuses for sales, marketing and support staff of approximately S$0.7 million.

The Group's general and administrative expenses decreased by approximately S$0.3 million or 14.5% from approximately S$2.5 million in HY2017 to approximately S$2.2 million in HY2018. This was due to the decrease in salaries and bonuses for general and administrative staff and executive directors of approximately S$0.1 million, as well as the decrease in rental of premises and repair and maintenance expenses of approximately S$0.2 million in total.

The Group's other expenses increased by approximately S$0.3 million or 32.5% from approximately S$0.7 million in HY2017 to approximately S$1.0 million in HY2018. This was due mainly to the increase in net exchange loss of approximately S$0.4 million, the increase in allowance for impairment loss on available-for-sale financial assets of approximately S$35,000 and the increase in fair value loss of derivative financial instruments of approximately S$0.5 million which was partially offset by the decrease in allowance for doubtful trade receivables of approximately S$0.7 million.

The Group's share of results from associates decreased by approximately S$139,000 or 73.2% from approximately S$190,000 in HY2017 to approximately S$51,000 in HY2018.

The Group's income tax expense was approximately S$13,000 for HY2018 as compared to an income tax benefit of approximately S$3,000 for HY2017.

As a result of the foregoing, loss after income tax attributable to owners of the parent for HY2018 was approximately S$1.7 million as compared to a loss after income tax attributable to owners of the parent of approximately S$2.2 million in HY2017.

REVIEW OF STATEMENT OF FINANCIAL POSITION OF THE GROUP

Total non-current assets increased by approximately S$12.5 million, from approximately S$3.3 million as at 31 March 2017 to approximately S$15.8 million as at 30 September 2017. This was mainly due to an increase in net gain on fair value changes of available-for-sale financial assets of approximately S$12.7 million which was partially offset by a decrease in plant and equipment of approximately S$0.1 million, allowance for impairment loss on available-for-sale financial asset of approximately S$35,000 and share of results of associates of approximately S$51,000.

The net gain on fair value changes of available-for-sale financial asset relate to the Group's investment in e-Marine Co., Ltd ("e-Marine"). In July 2017, e-Marine undertook a corporate exercise pursuant to which it became a wholly owned subsidiary of Pollex, Inc. ("Pollex") which is listed on the OTCQX market in the U.S. As a result of the corporate exercise, the Group's equity interest of approximately 9.6% in e-Marine was exchanged into approximately 6.7% in Pollex. Pollex subsequently changed its name to eMarine Global Inc. ("eMarine Global") in September 2017. The Group's stake of 6.7% in eMarine Global is subject to a lock-up period of 6 months from 25 July 2017. Depending on market conditions and other relevant factors, the gain, if any, that the Group may be able to realise on its investment in eMarine Global may not necessarily be the same or close to the accounting gain reflected in the Group's unaudited consolidated financial statements for HY2018. Such accounting gain may also be subject to further adjustments during the audit of the Group's full year results.

Total current assets decreased by approximately S$2.0 million, from approximately S$34.4 million as at 31 March 2017 to approximately S$32.4 million as at 30 September 2017. This was due mainly to the decrease in cash and cash equivalents of approximately S$4.1 million and the decrease in derivative financial instruments of approximately S$0.5 million which was partially offset by the increase in trade and other receivables of approximately S$1.0 million and inventories of approximately S$1.4 million.

Total current liabilities decreased by approximately S$0.5 million, from approximately S$15.3 million as at 31 March 2017 to approximately S$14.8 million as at 30 September 2017. This was due mainly to a decrease in deferred revenue of approximately S$0.6 million and which was partially offset by the increase in trade and other payables of approximately S$0.1 million.

Total non-current liabilities increased by approximately S$5.1 million, from approximately S$50,000 as at 31 March 2017 to approximately S$5.1 million as at 30 September 2017. This was due mainly to the recognition of deferred tax liabilities arising from the fair value gain on available-for-sale financial assets.

As at 30 September 2017, capital and reserves amounted to approximately S$28.2 million comprising mainly share capital of approximately S$18.0 million, fair value adjustment reserve of approximately S$7.6 million and retained earnings of approximately S$2.9 million, offset by treasury shares held of approximately S$0.3 million.

REVIEW OF STATEMENT OF CASH FLOWS OF THE GROUP

In HY2018, net cash outflow from operating activities before working capital changes was approximately S$1.0 million. Net cash used in working capital amounted to approximately S$3.0 million which was due mainly to an increase in inventories of approximately S$1.5 million, an increase in trade and other receivables of approximately S$1.0 million and a decrease in deferred revenue of approximately S$0.6 million, which were offset by an increase in trade and other payables of approximately S$0.1 million. After payment of income tax expenses of approximately S$6,000 and receipt of interest income of approximately S$56,000, the net cash used in operating activities amounted to approximately S$4.0 million in HY2018 as compared to net cash generated from operating activities of approximately S$6.2 million in HY2017.

Net cash used in investing activities in HY2018 was approximately S$0.1 million. The net cash used in investing activities in HY2018 was due mainly to purchase of plant and equipment of approximately S$0.1 million.

No cash was generated or used in financing activities in HY2018 and HY2017.


COMMENTARY

The Group expects market conditions to remain challenging and its financial performance will continue to be affected by the uncertainties and developments in the marine and oil and gas industry. Weak demand for goods and services coupled by intense market competition will continue to exert pressure on margins.

The Group will focus on strengthening its existing business and look for opportunities to increase business activities by creating value for customers and leveraging on technology. At the same time, the Group will actively exercise prudence in managing operational costs.