News

Half Year Financial Statement for the Period Ended 31 Dec 2003

NOTE:
Net profit for the period was arrived at after crediting/ (charging):-





1(b)(i) A balance sheet (for the issuer and group), together with a comparative statement

as at the end of the immediately preceding financial year.

Secured	Unsecured	Secured	Unsecured
$'000 8,424	$'000 1,373	$'000 12,647	$'000 -

Secured	Unsecured	Secured	Unsecured
$'000 12,297	$'000 -	$'000 16,451	$'000 -

1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or

1(d)(ii) Details of any changes in the company's share capital arising from rights issue,

on and the corresponding period of the immediately preceding financial year,
after deducting any provision for preference dividends.

(a) current financial period reported on; and
(b) immediately preceding financial year.

(a) any significant factors that affected the turnover, costs, and earnings of the
group for the current financial period reported on, including (where applicable)
seasonal or cyclical factors; and

(b) any material factors that affected the cash flow, working capital, assets or
liabilities of the group during the current financial period reported on.

REVIEW OF OPERATING PERFORMANCE FOR THE HALF YEAR ENDED 31 DECEMBER 2003

Revenue

Group revenue increased by 77.3% from $26.3 million for half year ended 31 December 2002 ("1H2003") to $46.6 million for half year ended 31 December 2003 ("1H2004"), mainly attributable to the increase in revenue from shipbuilding operations by 266.8%, shiprepairs and other marine related services by 26.6% and shipchartering and rental operations by 25.1%.

Revenue from shipbuilding operations increased by $15.0 million from $5.6 million in 1H2003 to $20.6 million in 1H2004. The higher revenue was attributable to the recognition of revenue for the construction of 6 tugboats and 18 barges in 1H2004, compared to 2 tugboats and 7 barges in 1H2003.

Revenue from shiprepairs and other marine related services for 1H2004 was $9.9 million, an increase of 26.6% compared to 1H2003. The increase was due to more shiprepairs and other marine related services undertaken in 1H2004 as compared to 1H2003.

Revenue from shipchartering and rental operations increased by $3.2 million from $12.8 million in 1H2003 to $16.0 million in 1H2004 due mainly to increased demand in shipchartering services by new customers from the coal industry.

Gross profit and gross profit margin

For 1H2004, overall gross profit was $4.2 million, a decrease of 33.3% compared to 1H2003. Overall, gross profit margin decreased from 24.2% to 9.1% due to lower gross profit margins from shipbuilding, shiprepairs and shipchartering operations.

Gross loss from shipbuilding operations was $0.1 million for 1H2004, a decrease of $0.7 million compared to 1H2003, resulting in a decrease in gross profit margin from 10.6% in 1H2003 to -0.5% in 1H2004. The gross loss was mainly attributable to cost overruns of $0.7 million for four projects delivered in 1H2004. In addition, gross profit margin declined as projects carried forward to 1H2004 enjoy much lower profit margin. Further, the more profitable projects secured in late FY2003 have yet to be recognised as they have not reached the 20% revenue recognition threshold.

Gross profit from shiprepairs and other marine related services increased from $2.7 million in 1H2003 to $3.0 million in 1H2004, an increase of $0.3 million. Gross profit margin decreased from 34.7% in 1H2003 to 29.8% in 1H2004. The decrease was mainly due to lower margins derived from the shiprepair projects as compared to 1H2003.

Gross profit from shipchartering and rental operations was $1.4 million, a decrease of $1.6 million as compared to $3.0 million in 1H2003. Gross profit margin for shipchartering and rental operations declined from 23.7% in 1H2003 to 8.6% in 1H2004. The declines were mainly due to the lower utilisation of our own vessels, higher repair and improvement costs, one-off mobilisation costs and higher third parties vessels charter costs.

Other income

Other income increased by $1.2 million from $1.5 million in 1H2003 to $2.7 million in 1H2004. Other income in 1H2004 comprised mainly gain on disposal of plant and equipment of $0.4 million, miscellaneous income of $1.4 million and write back of allowance for doubtful trade receivables of $0.8 million. Miscellaneous income comprised mainly insurance compensation of $0.4 million and sale of metal scrap of $0.9 million.

Administrative expenses

Administrative expenses were $2.4 million in 1H2004 compared to $1.5 million in 1H2003. The increase was mainly attributable to higher staff salaries and related costs due to the increase in headcount and salaries costs as a result of increased business activities.

Other operating expenses

Other operating expenses were $0.3 million in 1H2003 compared to $9,000 in 1H2004. Other operating expenses in 1H2003 comprised mainly allowance made for doubtful trade receivables of $0.2 million.

Finance costs

Finance costs were $0.6 million in 1H2004 compared to $0.5 million in 1H2003. The increase was in line with the increase in business activities but was partially mitigated by the lower cost of borrowings. Finance costs comprised substantially $0.5 million incurred for term loans meant substantially for our operational needs.

Profit before taxation

The Group achieved a profit before taxation of $3.9 million and $5.6 million for 1H2004 and 1H2003 respectively. The decrease of $1.7 million or 31.0% was due to the 33.3% decline in gross profit and the higher administrative expenses.

Income tax expense

The Group's taxation charge in 1H2004 was $1.0 million compared to $1.1 million in 1H2003, a decrease of $0.1 million or 5.7%. The Group's effective tax rate was 25.7% for 1H2004 compared to 19.3% for 1H2003 as the non-exempt shipping income cannot be offset against the exempt income losses.

Operating cashflow

Net cash inflow from operating activities increased by 60.6% from $7.5 million in 1H2003 to $12.1 million in 1H2004. This was mainly due to the higher amounts of advance payment received from certain customers in accordance with agreed milestones.


REVIEW OF FINANCIAL POSITIONS AS AT 31 DECEMBER 2003 AND 30 JUNE 2003

Non-current assets

Non-current assets comprised mainly property, plant and equipment which are stated at cost less depreciation, amortisation and impairment loss, and investment in associate. Non-current assets increased by $4.0 million to $62.6 million as at 30 December 2003 from $58.6 million as at 30 June 2003. The increase was due to acquisition of vessels, plant and equipment of $7.0 million partially offset by disposal of vessels and plant and equipment of net book value totalling $1.3 million and depreciation charge for the period amounted to $2.8 million. In 1H2004, the Group also invested $1.5 million in an associate.

Current Assets

Current assets comprised inventories, construction work-in-progress, trade and other receivables, amount due from associate as well as cash and cash equivalents.

Current assets increased by $2.1 million to $58.2 million as at 31 December 2003 from $56.1 million as at 30 June 2003. The increase was mainly due to the increase in trade and other receivables and amount due from associate, partially offset by decreases in inventories, construction work-in-progress and cash and cash equivalents. Trade and other receivables increased by $14.2 million due to the overall increase in revenue and the substantially higher revenue billed in December 2003 in accordance with the terms of the sales contracts which were not due for payments until the third quarter of FY2004. Amount due from associate of $2.1 million comprised billings for shipbuilding projects, chartering of vessels and sale of a vessel to the associate. Inventories decreased marginally by $0.3 million due to sale of customer-specified equipments of $1.5 million which was offset by the increase in steel plates the Group has purchased in view of the increasing shipbuilding projects. As at 31 December 2003, construction work-in-progress was lower than that as at 30 June 2003 by $8.8 million as we completed and delivered 14 newbuilts, leaving a balance of 32 shipbuilding projects (majority in early stages of progress) as at 31 December 2003 compared to 28 such projects (majority in late stages of completion) as at 30 June 2003. The decrease of cash and cash equivalents by $5.2 million to $4.6 million as at 31 December 2003 was mainly due to acquisition of plant and equipment, investment in associate and repayment of trust receipts.

Current Liabilities

Current liabilities comprised bank overdrafts, trade and other payables, progress billings in excess of construction work-in-progress, amount due to associate, trust receipts, current portions of interest-bearing borrowings and hire purchase creditors and current tax payables.

Current liabilities increased by $9.7 million to $55.1 million as at 31 December 2003 from $45.4 million as at 30 June 2003. Bank overdraft, progress billings in excess of construction work-in-progress, amount due to associate and current portions of interest-bearing borrowings increased by $1.4 million, $15.3 million, $0.6 million and $3.3 million respectively while trade payables and trust receipts decreased by $3.5 million and $7.5 million respectively. The increase in bank overdraft resulted from the increased use of such facility to repay trust receipts. Progress billings in excess of construction work-in-progress increased mainly due to advance billings made for tugboats in accordance with agreed milestones. Amount due to associate of $0.6 million was due to purchase of one vessel from the associate. The increase in current portions of interest-bearing borrowings was due to the expected redemption of 2 loans amounted to $1.7 million within the next 12 months, commencement of repayments for a few term loans as well as addition of a $1.4 million term loan of which $0.3 million are repayable within the next 12 months. The decrease in trade payables was primarily due to the earlier settlement of payables to take advantage of certain trade discounts. Trust receipts decreased due to settlement made from utilisation of cash and cash-equivalents, overdraft and term loan drawndown in FY2003.

Non-current liabilities

Non-current liabilities comprised interest-bearing borrowings, hire purchase creditors and deferred tax liabilities. Non-current liabilities decreased by $3.8 million to $15.5 million as at 31 December 2003 from $19.3 million as at 30 June 2003. The decrease was mainly due to repayment of interest-bearing borrowings and hire purchase creditors as well as the reclassification of 2 loans that are expected to be redeemed within the next 12 months partially offset by the non-current portion of the $1.4 million new term loan drawndown during the period.

Share Capital and Reserves
Shareholder's equity, comprising share capital, share premium and accumulated profits, increased by $0.1 million or 0.2% to $50.2 million as at 31 December 2003 from $50.1 million as at 30 June 2003. This was due to the net profits of $2.9 million earned by the Group for 1H2004 net off against dividend of $2.8 million paid for FY2003.


9. Where a forecast, or a prospect statement, has been previously disclosed to

shareholders, any variance between it and the actual results.
Overall, the gross profit margin for 1H2004 is lower than the prospect statement indicated in the full year result announcement on 18 September 2003 owing to the disproportionate recognition of revenue and profit in the half-year period. However, the gross profit for FY2004 is still expected to be at least comparable to that of FY2003 though the gross profit margin is expected to decline in view of the much higher proportion of shipbuilding revenue.


10. A commentary at the date of the announcement of the significant trends and

competitive conditions of the industry in which the group operates and any
known factors or events that may affect the group in the next reporting period
and the next 12 months.
Industry Outlook
The local marine industry is expected to continue its positive industry outlook.

As such, the Group is confident of achieving revenue growth and maintaining profitability for FY2004, barring the adverse impacts that may be caused by further increases in insurance premium and prices of steel and fuel.

Shipyard Operations

As at 31 December 2003, the Group has an outstanding order book for shipbuilding of approximately $84.2 million. Approximately 40% of these projects are expected to be recognised within FY2004, with the balance to be substantially recognised in the financial year ending 30 June 2005 ("FY2005"). Subsequent to 31 December 2003, additional contracts for the construction of 2 tugboats and 21 barges worth $25.9 million were secured. Overall, barring any unforeseen circumstances, the gross profit margin for shipbuilding operations in FY2004 is expected to be higher than that of FY2003 whereas the revenue and gross profit margin for shiprepairs and other marine related services in FY2004 is expected to be lower than that of FY2003.

The building of the Group's floating dock facility in the Batam shipyard is expected to be completed in the second half of FY2004 and commence operations in FY 2005. To further expand our shipbuilding and shiprepair capability, the Group is exploring the building of a graving dry dock in our Batam yard that will enable the Group to build and repair larger vessels.

Shipchartering Operations

As at 31 December 2003, the Group have an outstanding order book for shipchartering of approximately $4.6 million. This is in addition to a significant portion of shipchartering revenue which is short-term and ad-hoc. Subsequent to 31 December 2003, additional long term charter contracts worth $10.3 million were secured. Further, the Group's associate, ASL Energy Pte Ltd ("ASL Energy"), secured a $127 million contract to transport coal in Indonesia waters for a period of 5 years.

From 30 June 2003 to 31 December 2003, the Group have taken delivery of 7 vessels worth $3.3 million, another 3 vessels worth $10.7 million is expected to be delivered by June 2005. Further, ASL Energy have taken delivery of 4 vessels worth $2.6 million. ASL Energy is acquiring 40 sets of tugboats and barges, of varying sizes, to be completed and delivered by December 2006. Once more vessels are delivered, charter from third parties will be gradually retired and margin should improve.

For the longer term, to strengthen our foothold in the Indonesian coal industry and to secure continuity to the operations, the Group is actively looking into acquiring a strategic stake in certain coal concession.

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