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Financials

UNAUDITED FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE FIRST FINANCIAL QUARTER ("Q1FY2017") IN RESPECT OF THE FINANCIAL YEAR ENDING 30 SEPTEMBER 2017 ("FY2017")

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UNAUDITED FINANCIAL STATEMENTS AND DIVIDEND ANNOUNCEMENT FOR THE SECOND FINANCIAL QUARTER ("Q2FY2017") AND HALF YEAR FINANCIAL YEAR ENDED 31 MARCH 2017 ("H1FY2017") IN RESPECT OF THE FINANCIAL YEAR ENDING 30 SEPTEMBER 2017 ("FY2017")

Financials Archive

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Profit & Loss

Statement of Comprehensive Income

"Q2FY2017" denotes the second financial quarter of the financial year ended 30 September 2017 ("FY2017").

"H1FY2017" denotes the first half financial year of FY2017.

"Q2FY2016" denotes the second financial quarter of the financial year ended 30 September 2016 ("FY2016").

"H1FY2016" denotes the first half financial year of FY2016.

"% Change" denotes increase/(decrease) in the relevant profit or loss item as compared with the comparative figure.

"NM" denotes not meaningful.

Statement of Comprehensive Income

Statement of Comprehensive Income

Balance Sheet

balance sheet

Review of Performance

Overview

The Group, comprising Marco Polo Marine Ltd (the "Company") and its subsidiaries, is a reputable regional integrated marine logistic company which principally engages in shipping and shipyard businesses.

The shipping business of the Group relates to the chartering of Offshore Supply Vessels ("OSVs"), which comprise mainly Anchor Handling Tug Supply ("AHTS") vessels for deployment in the regional waters, including the Gulf of Thailand, Malaysia, Indonesia and Australia, as well as the chartering of tugboats and barges to customers, especially those which engaged in the mining, commodities, construction, infrastructure and land reclamation industries.

The shipyard business of the Group relates to ship building as well as the provision of ship maintenance, repair, outfitting and conversion services which are being carried out through its shipyard located in Batam, Indonesia. Occupying a total land area of approximately 34 hectares with a seafront of approximately 650 meters, the modern shipyard also houses three dry docks which boosted the Group's technical capabilities and service offerings to undertake projects involving mid-sized and sophisticated vessels.

Review of financial performance of the Group for Q1FY2017 compared to Q1FY2016

Our Group's revenues for H1FY2017 (vis--vis H1FY2016) and Q2FY2017 (vis-a-vis Q2FY2016) were as follow: financial performance

The Group recorded a revenue of S$12.8 million in Q2FY2017, an increase of 8% from that of S$11.9 million registered in Q2FY2016, and a revenue of S$24.2 million in H1FY2017, a decrease of 16% from that of S$29.0 million registered in H1FY2016.

Relative to the corresponding reporting period of Q2FY2016, the Ship Chartering Operations' revenue of the Group decreased by 9% to S$4.1 million in Q2FY2017. The decrease in revenue was mainly due to lower utilization and charter rates of the Group's OSVs fleet as a result of the slowdown in the marine and offshore industry following the recent oil price crisis; albeit some improvements in the utilization of the Group's fleet of tugboats and barges.

The Ship Building & Repair Operations of the Group recorded an increase of 17% to S$8.7 million in revenue in Q2FY2017 relative to Q2FY2016, mainly contributed to a marginal increase in dry-dock and repair jobs in Q2FY2017. On a half-year basis, the Ship Building & Repair Operations recorded a decrease of 13% in revenue to S$15.7 million in H1FY2017 relative to H1FY2016 due mainly to reduced ship building projects.

Due largely to reduced gross profit margin attributed to certain low yielding shipbuilding as well as repair jobs coupled with an increase in depreciation attributed to newly built three vessels which had yet to be chartered, the Group recorded a gross loss of S$1.3 million in Q2FY2017 compared to a gross profit of S$4.1 million in Q2FY2016. On a half-year basis, the Group's overall gross profit decreased by 73% in H1FY2017 compared to H1FY2016.

The Group's other operating income decreased marginally by S$0.1 million or 29% to S$0.4 million in Q2FY2017 from S$0.5 million in Q2FY2016. Chiefly as a result of foreign exchange gains recognized in H1FY2017, the Group's other operating income increased by S$1.5 million to S$2.1 million in H1FY2017 from S$0.6 million in H1Y2016

The Group's administrative expenses was S$1.3 million in Q2FY2017 compared to S$1.1 million in Q2FY2016, and S$2.9 million in H1FY2017 compared to S$2.7 million in H1FY2016.

The Group's other operating expenses increased to S$2.8 million in Q2FY2017 from S$1.7 million in Q2FY2016, primarily due to a higher foreign exchange loss registered in Q2FY2017. The Group's other operating expenses decreased to S$1.3 million in H1FY2017 from S$3.1 million in H1FY2016 mainly as a result of higher foreign exchange loss recorded in H1FY2016.

Due largely to an increase in interest rate attributed to the restructured Notes as announced by the Company on 18 October 2016, the finance costs of the Group increased by S$0.4 million or 26% to S$2.0 million in Q2FY2017 from S$1.6 million in Q2FY2016 and by S$1.2 million or 46% to S$3.9 million in H1FY2017 from S$2.7 million in H1FY2016.

The share of losses from jointly controlled companies was S$1.1 million in Q2FY2017 compared to S$0.2 million in Q2FY2016 and S$0.4 million in H1FY2017 compared to S$1.4 million in H1FY2016. The share of losses from jointly controlled companies was mainly attributable to the share of losses of BBR.

(b) Review of financial position of the Group as at 31 March 2017 compared to that as at 30 September 2016

The non-current assets of the Group decreased by S$7.5 million or 2%, from S$318.9 million as at 30 September 2016 to S$311.4 million as at 31 March 2017. The decrease was attributable mainly to depreciation of AHTS and share of losses in jointly controlled companies.

The increase in trade receivables was mainly due to lower debts collection as at 31 March 2017

The amounts due from customers for construction contracts decreased by S$2.0 million or 4% to S$45.4 million as at 31 March 2017 from S$47.4 million as at 30 September 2016, mainly as a result of billing made to a customer in respect of a vessel under construction.

The increase in other receivable, deposits and prepayment were mainly due to increase in deposits paid for equipment required for the building/repair of vessels.

The increase in trade payables was mainly due to the purchase of parts in facilitating the building/repair of vessels as well as slower settlement of existing debts.

The decrease in other payables and accruals were mainly due to reduced accrued project costs for the building/repair of vessels.

The Group's total interest-bearing borrowings decreased marginally by S$0.6 million or 0.2% to S$249.2 million as at 31 March 2017 from S$249.8 million as at 30 September 2016.

The Group reported a net cash used in operating activities of S$1.6 million for H1FY2017, compared to a net cash generated from operating activities of S$12.1 million in H1FY2016, principally as a result of reduced in project costs and hence a decrease in other payables and increase in trade and other receivables. The cash and cash equivalent of the Group was S$2.6 million as at 31 March 2017 and S$9.8 million as at 30 September 2016.

Following from the above:

  1. the negative working capital of the Group reduced from S$26.0 million as at 30 September 2016 to S$18.7 million as at 31 March 2017;
  2. the net gearing of the Group (defined as the ratio of the aggregate of interest bearing loans net of cash and cash equivalents to total equity) increased to 159.0% as at 31 March 2017 from 151.1% as at 30 September 2016; and
  3. the net asset value per share of the Group decreased to 46.1 cents as at 31 March 2017 from 47.2 cents as at 30 September 2016.

Commentary On Current Year Prospects

As announced by the Company on 1 May 2017, the Company had actively engaged various banks and financial institutions (the "Lenders") to discuss a preliminary proposal that included fresh funding from a few strategic investors who have signed non-binding term sheets as part of the Proposed Refinancing and Debt Restructuring. Unfortunately, the Company experienced resistance from some Lenders to the preliminary proposal. Further, based on the feedback received so far from some of the Lenders and though the Company is not of the present view that a failure of the Proposed Refinancing and Debt Restructuring is imminent, the Company is not confident at this juncture that it would be able to eventually bridge the gap between the expectations of the Lenders and the conditions set by the strategic investors as part of the Proposed Refinancing and Debt Restructuring. The Group has also seen, in recent days, an increasing number of reservation of rights letters and demand letters, including a statutory demand, from creditors.

In light of the above (and to ensure that no person is trading in the shares of the Company without sufficient information that is required to enable such a person to make an informed decision) and in anticipation of the Company having to reach out to a larger group of stakeholders (including trade creditors and the Noteholders) to discuss the Proposed Refinancing and Debt Restructuring as well as to explore all options that are available (including looking for potential strategic investors for additional funding), the trading of the shares of the Company was suspended from 1 May 2017.

Appropriate announcement concerning the Proposed Refinancing and Debt Restructuring will be made by the Company as and when there is any significant development.

Some of the statements in this release constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. These forward-looking statements reflect our current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks and factors such as general economic and business conditions, including the uncertainties of the pace of recovery of the United States of America economy, continued concerns of the scale of the possible adverse fallouts and their implications on the global scene triggered by the current Euro zone debt crisis, inflationary pressures and currency appreciation which will affect the continued strong growth in Asia, especially East Asia; timing or delay in signing, commencement, implementation and performance of programs, or the delivery of products or services under them; relationships with customers; competition; and ability to attract personnel. Because actual results could differ materially from our intentions, plans, expectations, assumptions and beliefs about the future and any negative impacts arising from these issues will affect the performance of the Group's businesses, undue reliance must not be placed on these statements.