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BH GLOBAL MARINE LIMITED
ANNUAL REPORT 2012
CEO’S OPERATIONAL
AND FINANCIAL REVIEW (CONT’D)
Our subsidiary, Oil & Gas Solutions Pte Ltd (“OGS”),
was held up by their first major project as an EIT
service provider. This tied down most of their
manpower resources since December 2011. Labour
costs were incurred but the recovery of relevant
costs from customer due to variation orders is
uncertain. With limited capacity to accommodate
new projects and provision made to cushion against
potentially irrecoverable project costs, OGS’s financial
performance was adversely affected.
We are currently on a learning curve. Tighter control
measures will be enforced and we will work closely
with our customer to pursue recovery of variation
orders. I believe we can rise up to the challenge
and emerge stronger once we gain more project
management experience and exposure.
Revenue contribution from the Engineering Services
declined by 52% or S$16.1 million to S$15.0 million
in FY2012, representing approximately 15% of the
Group’s revenue in FY2012. The decrease in revenue
was due to the absence of new significant orders
received and lower revenues recognized fromongoing
projects which were completed in December 2012.
As the ongoing projects from EPCM services division
was contracted in US Dollars, the depreciation of US
Dollars from 1.3160 in 4Q2011 to 1.2227 in 4Q2012
also led to lower revenues recognized.
FINANCIAL REVIEW
GROUP OVERVIEW
The Group’s revenue declined 11% from S$110.3
million in FY2011 to S$97.7 million in FY2012 due
largely to a drop in revenue contribution from the
Engineering Services Division and GSW sub-division
from the Manufacturing Division. The 52% decrease
in Engineering Services Division’s revenue from
S$31.1 million in FY2011 to S$15.0 million in FY2012
was due to reduced new orders, lower revenue
recognized from ongoing projects and depreciation
of the US Dollars. GSW’s revenue declined 42% from
S$5.2 million in FY2011 to S$3.0 million in FY2012
as the resources were deployed to the construction
of the Oman steel wire plant.
Singapore remains the traditional foothold of the
Group, contributing S$61.7 million or 63% to the
Group’s revenue in FY2012 (FY2011: S$58.9 million
or 53% of the Group’s revenue). Revenue derived
from South-East Asia and East Asia grew 47% y-o-y
to S$18.0 million in FY2012 (FY2011: S$12.2 million).
This is in line with the Group’s strategy to expand
our geographical footprints beyond the Singapore
market.
The Group’s gross profit decreased 44% y-o-y
from S$35.1 million for FY2011 to S$19.5 million
for FY2012 in line with lower revenue. Gross profit
margin declined 12 percentage points to 20% for
FY2012 as compared to 32% for FY2011. The lower
gross profit margin was a result of the depreciation
of US Dollars against Singapore Dollar and cost
overruns for certain projects from the Engineering
Services business division.
Operating expenses, including administrative, selling
and distribution expenses, increased marginally by
3% from S$18.2 million in FY2011 to S$18.7 million
in FY2012. Selling & distribution expense decreased
28% to S$8.0 million for FY2012 (FY2011: S$11.2
million) in tandem with lower revenue while
administrative expense jumped 54% to S$10.8million
in FY2012 (FY2011: S$7.0 million). The higher
administration expense is due to the consolidation of
Gulf Steel Specialty Steel LLC which commenced its
construction of our steel wire factory and associated
higher manpower cost.
The Group concluded FY2012 with a net loss
attributable to shareholders of S$26.7 million
(FY2011: net profit attributable to shareholders of
S$13.3 million). This was represented by a loss per
ordinary share of 5.57 Singapore cents for FY2012
(FY2011: Basic earnings per ordinary share of 2.69
Singapore cents).
This is our first ever loss since listing and it is due
to losses incurred on the Group’s discontinued
operations of our subsidiary, PT BH Marine &
Offshore Engineering (“PT BHE”), which is in charge
of the Batam operations. The Group recorded a
loss from discontinued operations, net off tax, of
S$32.7 million. S$10.1 million of this loss arose
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