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4th Quarter 2017 ("Q4 FY17") vs 4th Quarter 2016 ("Q4 FY16")
The Group registered a 71% increase in revenue to US$62.7 million as compared to US$36.7 million in Q4 FY16. This was mainly due to higher contribution from OSV and OA segments.
OSV segment revenue increased by 14% to US$19.0 million (Q4 FY16: US$16.7 million) due to long-term charters to the Middle East and vessels chartered to the Shell Prelude project. Utilisation in Q4 FY17 was 61% (Q4 FY16: 62%). While revenue has improved, the contribution margin was lower due to lower average charter rates which resulted in gross loss of US$6.1 million (Q4 FY16: Gross loss US$4.9 million).
OA segment revenue increased by 203% to US$35.9 million (Q4 FY16: US$11.8 million) as POSH Arcadia, a Semi-Submersible Accommodation Vessel ("SSAV") continued her charter on the Shell Prelude project. Three of the Light Construction Vessels ("LCVs") are under charter while one remained idle during the quarter. Consequently, the segment registered gross profit of US$5.2 million in Q4 FY17 instead of gross loss of US$2.2 million in Q4 FY16.
While utilisation improved to 42% (Q4 FY16: 34%), charter rates remained low. Hence, T&I segment revenue decreased by 6% to US$3.3 million (Q4 FY16: US$3.4 million). With the lower operating expenses in current quarter, the segment registered a lower gross loss of US$1.2 million in Q4 FY17 (Q4 FY16: US$2.8 million).
HSER revenue decreased by 4% to US$4.5 million (Q4 FY16: US$4.7 million) mainly due to lower overseas and spot charters for Harbour Tugs. Gross profit improved by 87% to US$0.8 million (Q4 FY16: US$0.4 million).
General & administrative ("G&A") expenses and other income
G&A expenses decreased by US$0.6 million or 9% to US$6.0 million (Q4 FY16: US$6.6 million) mainly due to lower personnel expenses incurred in Q4 FY17.
Impairment of fixed assets and goodwill for Q4 FY17 was US$108.3 million and US$57.1 million respectively, compared to US$198.9 million and US$111.2 million in Q4 FY16.
Finance costs increased by 61% or US$2.5 million due to higher loan balance and higher interest rates in Q4 FY17. The higher loan balance was mainly due to financing for the construction of OSV vessels for the long-term charters in the Middle East.
The Group's share of results from joint ventures ("JVs") registered a loss of US$9.7 million in Q4 FY17 compared to US$15.5 million in Q4 FY16. This was mainly due to higher impairment of vessels (Q4 FY17: US$15.5 million) compared to last year (Q4 FY16: US$12.5 million), offset by higher contribution from POSH Terasea.
The Group recorded a lower net loss attributable to shareholders of US$193.0 million in Q4 FY17 compared to US$345.4 million in Q4 FY16.
12 Months ended 31 December 2017 ("FY17") vs 12 Months ended 31 December 2016 ("FY16")
During the year, the Group registered revenue of US$192.2 million (FY16: US$183.1 million), a 5% increase or US$9.1 million. This was mainly due to higher contribution from across the major business segments. However, the Group recorded gross loss of US$13.4 million in FY17 compared to gross profit of US$5.0 million in FY16 due to losses from OA segment.
Although the current market is slowly picking up, the market remains competitive and this led to lower charter rates and utilisation across all vessels in the OSV segment. In FY17, the segment registered revenue of US$75.0 million (FY16: US$74.2 million) mainly due to contribution from vessels currently working in the Middle East. The segment recorded lower gross loss of US$11.1 million in FY17 (FY16: US$12.5 million) due to lower operating expenses.
OA segment revenue increased by 14% to US$81.8 million (FY16: US$72.0 million) mainly due to contribution from POSH Arcadia ("SSAV") offset by lower revenue contribution from POSH Xanadu ("SSAV") which ended its charter in March 2017 and was not working for the remaining year, together with lower utilisation of other accommodation vessels. However, the segment recorded gross loss of US$6.4 million in FY17 compared to gross profit of US$14.6 million in FY16 mainly due to higher operating expenses.
T&I segment revenue decreased by 12% to US$14.1 million (FY16: US$16.0 million) mainly due to lower charter rates. With the lower operating cost in FY17, gross loss was lower at US$0.3 million (FY16: US$1.6 million).
HSER segment registered a 3% increase in revenue to US$21.4 million (FY16: US$20.9 million) mainly due to higher revenue from Heavy Lift, salvage and diving revenue offset by lower charters for Harbour Tugs. Gross profit remained flat at US$4.4 million in FY17 due to higher operating costs and depreciation expenses as new vessels were added to the division.
General & administrative ("G&A") expenses and other expenses/income
G&A expenses decreased by 10% or US$2.7 million to US$25.0 million (FY16: US$27.6 million) mainly due to lower personnel expenses incurred in FY17.
Finance costs increased by 59% or US$8.4 million to US$22.8 million (FY16: US$14.4 million) mainly due to higher interest rates and higher loan balance in FY17. The higher loan balance was mainly due to financing for the construction of OSV vessels for the long-term charters to the Middle East.
The Group's share of profit from joint ventures' was US$2.4 million in FY17 (FY16: losses of US$13.8 million) mainly contributed from POSH Terasea in FY17 with the completion of several major towage and positioning projects off-set by impairment of vessels of US$15.5 million (FY16: US$12.5 million) across the JVs.
The Group's net loss attributable to shareholders was US$230.3 million in FY17 as compared to US$371.4 million in FY16.
Statement of Financial Position
The Group's net asset was US$460.2 million as at 31 December 2017.
Goodwill of US$57.1 million allocated to T&I segment was fully impaired in FY17.
Fixed assets decreased by US$73.0 million mainly due to vessels impairment, partially offset by payment for vessels under construction. Increase in receivables and other current assets were mainly due to higher turnover days in the period.
The Group has net current liabilities of US$188.4 million mainly due to bank borrowings due within one year.
Statement of Cash Flows
The Group generated net operating cash flow of US$20.3 million in FY17 compared to US$38.2 million in FY16. The lower net operating cash flow was mainly due to higher operating expenses and interest expenses in FY17.
Net cash used in investing activities of US$79.1 million in FY17 (FY16: US$173.4 million) was mainly due to payment for vessels under construction.
The Group's net cash generated from financing activities in FY17 was US$60.6 million mainly due to proceeds from bank borrowings (FY16: US$136.2 million) to finance new vessels.
Whilst there is some positive sentiment in the market, with oil prices averaging above US$50 per barrel in 2017, offshore oil production activities remain subdued. Day rates remain under pressure, mainly due to an oversupply of vessels.
Nevertheless, there remain pockets of growth in this challenging market. Specifically for the Middle East, eight Engineering, Procurement, Construction and Installation ("EPCI") projects were awarded by Saudi Aramco in 2017. This is the highest number of EPCI contracts awarded by Saudi Aramco since the market downturn began in 2014.
As at Q4 2017, ten POSH vessels have been deployed to the Middle East on long term charters, with another three to be deployed progressively in Q1 and Q2 FY2018. This includes a newly awarded charter secured in Q4 FY2017 for a firm period of five years, with options to extend. In addition, LCV POSH Enterprise was deployed to provide accommodation support for an EPCI contractor.
Upon the arrival of the Shell Prelude Floating Liquefied Natural Gas ("FLNG") facility at the Prelude field off the North West coast of Australia in August 2017, SSAV POSH Arcadia commenced her charter, providing accommodation support for the hook-up and commissioning phase of the project. Our clients are pleased with her excellent uptime performance and extended her contract into Q2 FY2018.
SSAV POSH Xanadu was awarded a contract by Chevron U.S.A. Inc. ("Chevron") to provide accommodation support for the hook-up and commissioning of the Chevron's Big Foot tension-leg platform ("TLP") in the Gulf of Mexico. This charter will commence in Q1 FY2018.
POSH Terasea commenced the towage of the Egina FPSO from South Korea in Q4 FY2017, and successfully delivered the vessel to the owner, TOTAL Nigeria, in January 2018.
The Group will continue to focus on safety excellence, while improving its cost competitiveness and maximizing its fleet utilisation. To widen its market reach and provide better and more responsive support to our clients overseas, several overseas offices in key growth markets will be established, while existing overseas offices will be strengthened.