Dear Shareholders

The main highlight of the Group for the past year was the successful completion of the scheme of arrangement, resulting in the restructuring of debts of the Company and the resumption of trading of the Company’s securities on the Singapore Exchange Securities Trading Limited (“SGX-ST”) in the third quarter of 2021. For that, we thank all our shareholders, employees, customers, suppliers, and creditors for their patience and support during the restructuring period.

With the many challenges we encountered during the restructuring effort, the global pandemic situation, the continued laggard of the offshore and marine industry, business sustainability and cashflow conservancy were the key priorities for the Group in the year 2021.

Offshore and Marine Services

In the offshore and marine services business segments, we were able to continue to meaningfully operate the business, albeit under much financial constraints. We had to take the difficult but necessary measures to reduce our workforce and wages, and scrutinise every discretionary spending.

Our order intake for the year was lower as compared to the prior year across all the lines of business. This was consistent with the industry trend of slower and lower newbuild opportunities in the offshore sector. Furthermore, the marine sector was also impacted with deferment of projects due to disruption of supply chain as a result of the pandemic. The low current year activities coupled with the lower orderbook carried forward from the prior year further exacerbated our business performance.

To negate the low newbuild segment, we focused our efforts on the supply of parts and services which continued to see decent demand. Unfortunately, the safety measures arising from the pandemic management and travelling restrictions impacted the securing and the execution of service jobs. As a result, our overall business levels were compromised.

These trends in the industry and in our business performance were also reflected in the geographical markets we serve. Lesser newbuilds in the offshore sector impacted major ship building/conversion countries such as China and Singapore, resulting in a corresponding decrease in revenue contribution from these markets.

We anticipate the difficult industry conditions to persist and the pandemic situation to remain uncertain. To sustain and navigate our Offshore and Marine Services business through this period will require us to relentlessly pursue higher order intake rates in parts and services areas, while selectively bidding on the limited new turnkey projects with our reduced resources capacity. We recognise and expect that continued stringent expense management and spending discipline, remains necessary for us to sustain the business going forward.

Asset Management Services

Given the current difficult conditions facing the industry, we have divested out of this business segment. Our focus in this segment is primarily centred around the recovery of outstanding receivables from the defaulted charterers as well as actively seeking opportunities to monetise any possible assets.

Corporate Restructuring

The Company had successfully restructured its debts pursuant to a Scheme of Arrangement on 17 August 2021. The lifting of trading suspension and resumption of trading of the Company’s securities on the SGX-ST took place on 23 August 2021 after more than two years of suspension for the Group to undertake its debt restructuring activities. The Group will continue to focus on conserving its cash and liquidity while looking into avenues to monetise its capital assets to strengthen its working capital.

Financial Review

The Group’s revenue decreased to S$10.8 million in FY2021, as compared to S$17.2 million in FY2020, mainly due to the lower order intake for the year and lowered orderbook carried forward from the prior year as a result of the continued difficult industry conditions.

While gross profit margin improved year-on-year from 29% in FY2020 to 32% for the year due to better revenue mix of parts and services components which generally yielded higher margins, the gross profit is lower in tandem with the overall lower revenue for the year.

The increase in other income was mainly attributable to non-cash gain of S$24.0 million from the reversal of liabilities after the conclusion of the Scheme of Arrangement on 17 August 2021 and foreign exchange gains of S$1.2 million in FY2021 (FY2020: foreign exchange loss of S$0.5 million) due to strengthening of the US Dollars. The aforesaid increases were partially offset by lower government grants in FY2021 and the absence of gain from the final settlement from legal dispute of S$0.5 million recorded in FY2020. These are one-off items that are not expected to recur in the future.

Total expenses, excluding one-off impairment charges, decreased year-on-year with the exception of marketing expenses and distribution expenses due to increase in shipping and travelling costs as a result of Covid-19 restrictions. The lower expenses in general were expected given the prudent expense management efforts coupled with lower discretionary spending from lower business levels. The expense reduction would otherwise be more profound if not for the incurring of restructuring and corporate activities-related expenses. The impairment charges mainly resulted from accounting for valuation of goodwill, inventories, trade and other receivables and contract assets on the Group’s balance sheet as at 31 December 2021; and were recorded in Impairment losses on financial assets and contract assets. The impairment loss on goodwill of S$0.8 million was made in view of the lower carrying value of the offshore and marine services businesses due to weaker orderbooks and cashflows projections; the impairment loss on inventories of S$1.7 million pertaining to slower moving stocks and work-inprogress due to the business slowdowns and cancellations; trade and other receivables and contract assets were impaired by S$1.2 million due to long over payments and postponement of contracts with no current visible delivery dates.

As a result of the above, the Group recorded a net profit after tax of S$15.5 million. Despite the reversal of the majority of the Group’s liabilities, the Group’s net liabilities stood at S$2.4 million as at 31 December 2021.

The above explained impairment losses resulted in the corresponding reduction in non-current assets, inventories, trade and other receivables and contract assets accordingly in the Group’s balance sheet as at 31 December 2021. The reduction in non-current assets was due to the depreciation of property, plant and equipment and write down of intangible assets. The reduction of inventories during the financial year was largely due to write down as a result of inventory obsolescence. Both trade receivables, and other payables and accruals decreased mainly attributable to the set-off of amounts due to and due from the charterer of the land rigs of approximately S$16.5 million. The reductions of other payables and accruals, term loans and redeemable exchangeable bonds were attributable to the cash settlements and issuance of conversion shares to the Scheme Creditors. Other receivables and deposits decreased as the Group managed to recover the amounts due during the year. The decrease in net amount of contract assets and contract liabilities was a result of timing of project billing milestones and reduction in project contracts and impairment of contract assets.. The Group reported an improvement of its working capital position in FY2021, from negative S$21.7 million as at 31 December 2020, to negative S$2.5 million as at 31 December 2021. Subsequent to 31 December 2021, the Company completed a placement exercise on 28 January 2022, and raised net proceeds of S$0.88 million. In addition, interest free loan from existing and previous shareholders as at 31 December 2021 amounting to S$1.49 million due in less than 1 year from 31 December 2021 were negotiated and agreed in the first quarter of 2022 to be repaid in the second half of 2023. These effectively improved the working capital position of the Group to a breakeven position.

Cash and cash equivalents as at 31 December 2021 was lower than that at the prior year-end. The cashflow used in operations were mainly due to repayment of liabilities that were put on hold during the Group’s restructuring exercise. This was offset by the net inflow from financing activities due to the proceeds from issuance of shares pursuant to placement exercise, and loans and borrowings from Blue Ocean Capital Partners Pte. Ltd. and Mr Ng Yeau Chong. While the Group recorded a net profit for the year, a large contribution to the profits were non-cash written back items.

Looking Ahead and Going Forward

By no means are we out of the woods. While oil prices are seeing some recovery, the ongoing challenges in the offshore and marine industry will continue. While we have come a long way in our fight against the pandemic, we still have adjustments to be made before being accustomed to a new normal. With the gradual reopening of borders with less stringent requirements, economic recovery, if any, will be gradual and business activities will be measured.

On 18 November 2021, the Company announced, inter alia, a mandatory unconditional cash offer by a group of persons consisting of 4 corporate entities and 1 individual (collectively, the “Joint Offerors”) for all the existing shares and outstanding warrants of the Company. The Joint Offerors had acquired a major portion of the Company’s shares of approximately 87% of the total issued shares (excluding treasury shares) of the Company, at the purchase consideration of S$0.01 per share. Subsequently, on 4 January 2022, the Company announced the close of the cash offer, which saw the shareholdings of the Joint Offerors increasing to approximately 87% of the total issued shares (excluding treasury shares) of the Company.

The new chapter for the Group will be an exciting one. The Company is proposing a business diversification to include supply chain management business and lifestyle retail business, subject to shareholders approval at an extraordinary general meeting to be convened in due course. The Company intends to make a strong entry into the supply chain management industry by providing products and services integrated with trendy technologies including the artificial intelligence to customers in various commercial fields and industries ranging from the food and beverage, hotel and hospitality, customer service to sanitisation and disinfection. Further to the foregoing, the Group will explore the opportunities of acquiring and operating lifestyle retail business, more specifically in the line of family entertainment and lifestyle convenience, which the Group believes that such industries will show strong recovery in the post-pandemic economy. These new businesses will be led and managed by a team of personnel who have established experiences in the relevant industries and will continue to be brought into the Group. We see potential in these new businesses in providing additional and recurrent revenue streams with sustainable and long-term prospects of profitability and growth for the Group.

A lot has happened, we have come a long way and more needs to be done with the objective focusing on enhancing the Group’s business performance and shareholder value. Let us work together and press on to overcome these challenges to succeed in the new world order.

Thank you

Datuk Low Kim Leng
Chairman and Independent Non-Executive Director

Ng Yeau Chong
Chief Executive Officer and Executive Director

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