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.

The Group recorded a revenue of S$11.4 million in Q1FY2017, a decrease of 33% from that of S$17.0 million in Q1FY2016. Relative to Q1FY2016, the Ship Chartering Operations’ revenue of the Group decreased by 31% to S$4.4 million in Q1FY2017. The decrease was mainly due to the lower utilization and charter rate for the Group’s offshore fleet.

The Ship Building & Repair Operations of the Group also recorded a decrease in revenue of 34% in Q1FY2017 relative to Q1FY2016. The decrease was due mainly to reduced ship building projects. The Group recorded a gross profit margin of 34% in Q1FY2017 relative to that of 30% in Q1FY2017, chiefly due to reduced project costs. The Group’s other operating income increased by S$3.86 million to S$3.9 million in Q1FY2017 from S$54,000 in Q1Y2016.

The increase was mainly due to an unrealised foreign exchange gain recorded in Q1FY2017 compared to an unrealised foreign exchange loss sustained in Q1FY2016 recorded under “Other operating expenses”. In line with reduced business activities and as a result of cost containment measures, the Group’s administrative expenses decreased by S$0.1 million or 4% to S$1.6 million in Q1FY2017 from S$1.7 million in Q1FY2016. The Group’s other operating expenses decreased by S$0.7 million to S$0.7 million in Q1FY2017 and from S$1.4 million in Q1FY2016, attributed largely to the unrealised foreign exchange loss recorded in Q1FY2016.

Due to increased borrowings and higher bond interest rate, the finance costs of the Group increased by S$0.9 million or 74% to S$2.0 million in in Q1FY2017 from S$1.1 million in Q1FY2016. The share of results from jointly controlled companies reversed from a loss of S$1.2 million in Q1FY2016 to a profit of S$0.7 million in Q1FY2017. The reversal in results was mainly attributed to the positive contribution from the jointly controlled entity that principally engages in the chartering of Maintenance Work Vessel, offsetting the share of losses of BBR.

Review of financial position of the Group as at 31 December 2016 compared to that as at 30 September 2016

The non-current assets of the Group increased by S$8.1 million or 2% from S$318.9 million as at 30 September 2016 to S$327.0 million as at 31 December 2016. The increase was attributed mainly to the strengthening of US$ against the presentation currency of the Group in S$ and its effects on vessels of the relevant subsidiaries of the Group which have US$ being their functional currency as well as share of improved results from investment in joint ventures. The amounts due from customers for construction contracts increased by S$0.7 million or 1% to S$46.2 million as at 31 December 2016 from S$47.4 million as at 30 September 2016. The increase in other receivable, deposits and prepayment from S$42.6 million or 5% to S$44.6 million as at 31 December 2016 was attributed mainly to deposits paid for equipment required for the building of vessels. The trade payables of the Group decreased by S$1.1 million or 11% to S$9.4 million as at 31 December 2016 from S$10.5 million as at 30 September 2016.

The decrease was in line with reduced business activities. The decrease in other payables and accruals was mainly due to reduced accrued project costs for the building of vessels. The Group’s total interest-bearing borrowings increased by S$2.5 million or 1% to S$252.3 million as at 31 December 2016 from S$249.8 million as at 30 September 2016, primarily attributed to its US$ denominated loans as a result of the strengthening US$ vis-a-vis S$. 11 The Group reported a net cash used in operating activities of S$0.8 million for 1QFY2017 compared to net cash generated in operating activities of S$13.1 million in 1QFY2016, principally as a result of reduced project costs and payments made for and hence a decrease in trade and other payables. The cash and cash equivalent of the Group was S$8.0 million as at 31 December 2016 and S$11.8 million as at 30 September 2016.

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