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3rd Quarter 2019 ("Q3 FY19") vs 3rd Quarter 2018 ("Q3 FY18")
The Group registered revenue of US$73.3 million in Q3 FY19, an 8% decrease from US$79.7 million in Q3 FY18. Higher revenue in OSV, T&I and HSER segments were offset by lower contributions from OA.
Revenue increased by 4% to US$25.4 million (Q3 FY18: US$24.4 million) mainly due to improved vessel utilisation of 76% (Q3 FY18: 75%). The segment recorded a gross profit of US$2.7 million in Q3 FY19 compared to US$1.0 million gross loss in Q3 FY18. This was mainly attributable to lower project costs and vessel operating expenses in Q3 FY19 compared to the corresponding period in FY18.
Revenue decreased 31% to US$31.9 million (Q3 FY18: US$46.2 million). In Q3 FY19, POSH Xanadu continued to be on charter to Petrobras and POSH Arcadia was off-hired in July 2019 after her short-term charter in South-East Asia. This is compared with Q3 FY18, when both of the Group's Semi-Submersible Accommodation Vessels ("SSAVs") were fully deployed. The segment's performance was partially mitigated by contribution from the monohull fleet where all four Light Construction Vessels ("LCVs") and three Multi-Purpose Support Vessels ("MPSVs") were deployed during the quarter. Correspondingly, gross profit declined 30% to US$9.8 million (Q3 FY18: US$14.0 million).
Revenue increased 139% to US$9.3 million (Q3 FY18: US$3.9 million), mainly attributable to contribution from the offshore renewables operations and improved vessel utilisation of 77% from the T&I fleet (Q3 FY18: 67%). As a result, the segment registered higher gross profit of US$3.0 million in Q3 FY19 (Q3 FY18: US$29,000).
HSER recorded 28% increase in revenue to US$6.7 million (Q3 FY18: US$5.3 million), mainly due to higher revenue generated from overseas jobs. Gross profit grew by 9% to US$0.7 million (Q3 FY18: US$0.6 million).
General & Administrative expenses and Other Income
General and administrative expenses increased by US$0.5 million or 7% to US$8.3 million (Q3 FY18: US$7.8 million) mainly due to increased personnel costs in Q3 FY19.
Finance costs increased by 2% to US$7.7 million (Q3 FY18: US$7.5 million) due to higher borrowings and interest rates in Q3 FY19.
In Q3 FY19, the Group recorded an impairment amount of US$25.4 million for its investment in POSH Terasea Pte. Ltd. ("PTPL"), which is a 50% owned joint venture by the Group. In addition, the Group also impaired a loan amount of US$14.4 million due from PTPL. These impairments were made in relation to the liquidation of PTPL. However, POSH does not expect any impact to its operating cash flow. Independent of PTPL, POSH's own fleet of Anchor Handling Tug Supply ("AHTS") remains well-positioned to service our customers in the ocean towage sector globally. Please refer to Company's General Announcements dated 19 September 2019, 21 September 2019 and 24 October 2019 for more details.
The Group's share of results from JVs was a loss of US$0.8 million (Q3 FY18: US$0.8 million).
The Group recorded a net loss attributable to equity holders of the Company of US$40.4 million in Q3 FY19 as compared to US$5.3 million loss in Q3 FY18, mainly due to the impairments mentioned above.
9 Months ended 30 September 2019 ("9M FY19") vs 9 Months ended 30 September 2018 ("9M FY18")
The Group registered revenue of US$209.1 million in 9M FY19, a 10% decrease from US$233.4 million in 9M FY18. Higher revenue in the OSV, T&I and HSER segments were offset by lower contribution from OA.
Revenue increased 6% to US$76.7 million (9M FY18: US$ 72.2 million) mainly due to income from mobilising two vessels for work in Mexico and improved vessel utilisation of 74% (9M FY18: 73%). The segment recorded a gross profit of US$1.3 million in 9M FY19 compared to gross loss of US$0.5 million in 9M FY18.
Revenue decreased 37% to US$81.6 million (9M FY18: US$130.4 million) mainly due to lower utilisation of POSH Arcadia compared to 9M FY18. In 9M FY19, POSH Xanadu was deployed for her charter to Petrobras since January and POSH Arcadia was on-hired for a short-term charter. This is compared with 9M FY18, when both of the Group's SSAVs were fully deployed. Correspondingly, gross profit declined 43% to US$19.9 million (9M FY18: US$35.0 million). The segment's performance was mitigated by contribution from the monohull fleet where all four LCVs and three MPSVs were deployed during 9M FY19.
Revenue increased 131% to US$31.2 million (9M FY18: US$13.5 million) mainly due to contributions from subsea and renewables operations as well as improved vessel utilisation of 71% from the remaining vessels (9M FY18: 65%). As a result, the segment registered higher gross profit of US$7.0 million in 9M FY19 compared to US$1.3 million in the previous corresponding period.
HSER recorded a 13% increase in revenue to US$19.5 million (9M FY18: US$17.3 million), mainly due to an increase in the number of overseas charters for harbour tugs. Correspondingly, gross profit grew by 57% to US$3.1 million (9M FY18: US$2.0 million), due to higher margins from these overseas charters.
General & Administrative expenses and Other Income
General and administrative expenses increased by US$5.5 million or 23% to US$29.3 million (9M FY18: US$23.8 million) mainly due to increased personnel costs and legal fees due to Mexico arbitration case in 9M FY19.
Finance costs increased by 7% to US$23.2 million (9M FY18: US$21.6 million) due to higher borrowings and interest rates in 9M FY19.
The Group's share of results from JVs was a loss of US$4.2 million in 9M FY19 as compared to US$1.3 million loss in 9M FY18. This was mainly due to lower vessel utilisation from our PTPL JV.
The Group recorded a net loss attributable to equity holders of the Company of US$61.8 million in 9M FY19 as compared to US$18.3 million loss in 9M FY18, mainly due to impairments mentioned earlier pertaining to the PTPL JV.
Statement of Financial Position
The Group's net asset was US$290.1 million as at 30 September 2019.
The Group has net current liabilities of US$266.5 million mainly due to bank borrowings due within one year.
Statement of Cash Flows
The Group generated net operating cash flow of US$6.6 million for 9M FY19, against US$18.1 million for 9M FY18. This was mainly due to (i) lower operating gross profit; (ii) legal fee for the Mexico arbitration case and (iii) tax provided for in FY18 and paid in Q2 FY19.
The Group's net cash used in investing activities was US$11.3 million in 9M FY19, lower than US$16.2 million used in 9M FY18, mainly due to lower spending for acquisition of fixed assets.
Net cash generated from financing activities was US$3.3 million in 9M FY19 compared to US$1.5 million used in 9M FY18 mainly due to higher loan drawdowns during 9M FY19.
Liquidation of POSH Terasea joint venture
In October, POSH came to an agreement with its joint venture partner to wind up POSH Terasea Pte Ltd ("PTPL"). The financial impact arising from the liquidation of PTPL was US$39.8 million which has been fully provided for in Q3 2019. It is expected that no further provision is required. This is lower than US$42 million as previously disclosed. The Group is now working with PTPL stakeholders to ensure an orderly wind up of the joint venture. Independent of PTPL, POSH's own fleet of Anchor Handling Tug Supply ("AHTS") vessels remains well-positioned to service customers in the ocean towage sector globally.
Strategic Business Initiatives
POSH continued to deliver against its ongoing comprehensive business review across both core and new business segments.
In October 2019, the Group acquired the remaining equity stake in its harbour services joint venture Pacific Workboats Pte Ltd ("PWPL"). As the 100% shareholder of PWPL, POSH is now more agile in capturing related opportunities in the sector, including re-deploying select assets for longer-term charters overseas while continuing to serve clients in Singapore.
In the same month, POSH divested its Emergency Response ("ER") business to an international salvage company. The divestment of this non-core business segment allows POSH to further reposition its resources, so as to focus on core and new businesses that are better aligned with its longer-term growth strategies. POSH does not expect any material impact to its operating cash flow arising from this transaction.
Core Business Update
POSH continues to see growth opportunities in select overseas markets despite the continued oversupply in the OSV sector. In Q3 2019, POSH secured three long-term charters with a National Oil Company in the Middle East, in addition to the 13 ongoing long-term charters in the region. These newly awarded charters will commence in Q1 2020 with a five-year firm period and two-year option.
For the OA segment, POSH Xanadu continued to be on charter to Petrobras in Q3 2019, with an eightmonth extension period beginning September 2019. In October 2019, the Group also secured a three-year charter with one-year option for POSH Endurance, which will begin in Q2 2020, for the provision of accommodation support during the maintenance campaign of oil and gas assets in Brunei.
In September, POSH entered into a ship management agreement with Ocean Challenger, part of the CIMC Group, for the semi-submersible crane accommodation vessel CIMC Gretha. This agreement grants POSH exclusive marketing rights over the CIMC Gretha, thereby enhancing the Group's service capabilities to undertake decommissioning and heavy construction activities.
Notwithstanding, due to continued oversupply putting pressure on utilisation and charter rates, the Group expects the fleet to be further impaired by year end. The impairment amount has yet to be determined and we believe it to be a lesser extent than previous year, but it is expected to materially impact negatively the results of Q4 2019 and FY2019.
New Business Update
The Group's new businesses continued to see sustained growth momentum. In September and October 2019, POSH Subsea secured two new contracts with a National Oil and Gas company in India, which will commence in Q4 2019 and Q1 2020. In the renewables sector, POSH Kerry Renewables ("POSH Kerry") continued to deliver on its charters to support offshore survey and preparatory works for windfarm construction in Taiwan while exploring further opportunities to grow its orderbook. We expect these new business segments to contribute positively to the Group in the next 12 months.
Taken together, the new contracts won by POSH across its core and new businesses amount to US$130 million.