KIM HENG OFFSHORE & MARINE HOLDINGS LIMITED
18
Offshore Rig Services &Supply ChainManagement
The Offshore Rig Services and Supply Chain Management
(“
ORS-SCM
”) segment accounted for 85.9% of the Group’s
revenue for the full year ended 31December 2015 (“
FY2015
”).
Revenuewas down by 35.9%year-on-year (“
y-o-y
”) to S$44.4
million for FY2015. The prevalence of low oil prices resulted in
lower demand for themaintenance of rigs and related services,
delays in projects, as well as downward pressure on pricing.
The Group expects industry conditions to remain challenging
in FY2016 as upstream players continue to consolidate their
losses and effect changes to their operating structures. That
being said, a leaner and more efficient oil industry will provide
reduced costs and higher margins in the years following this.
Kim Heng is actively diversifying its range of services to
meet the needs of non-oil industries such as the marine
infrastructure, power, and water industries. Furthering the
Group’s competitiveness, through new investments into
its yard and surrounding structures, the Group has had a
substantial gain in operational capabilities. In line with a more
dynamic structure, the Group has gained the ability to take on
larger vessels, undertake the upslip of vessels within its yards
and do its own maintenance instead of outsourcing, thereby
reducing its costs.
Moreover, starting Kim Heng’s preparations ahead of time
gives the Group ample buffer to position itself positively for a
reversal of the current industry sentiment.
Vessel Sales &Newbuild
The Vessel Sales and Newbuild (“
VS-NB
”) segment contributed
the remaining 14.1% of the Group’s revenue for FY2015.
Revenue in this segment decreased by S$1.3 million to S$7.3
million in FY2015 due to no vessels sold and lower-value new
build projects undertaken. We have secured and delivered six
newbuildprojectswhichtousindicatesthetrustandconfidence
that our customers have in us despite the slowdown in the
industry.
This segment has proven to be strategically beneficial to the
Group’s business, especially as a revenue source during the
currentindustrydownturn,andtheGroupwillmaintainitsstand
on leveraging profitable opportunities that are presented.
Financial Performance Review
The Group’s financial performance faced much challenges
in FY2015 as sluggish demand and a competitive offshore
marine sector put a strain on the business. Revenue dipped by
33.6% y-o-y to S$51.8 million in FY2015, from S$78.0 million
inFY2014. Thiswas a result of lower revenue contribution from
theORS-SCMsegmentduetolowerdemandforrigmaintenance
and relatedgoods and services and lower revenue fromtheVS-
NB segment due to no vessels being sold and lower-value new
build projects undertaken.
Singapore remained the largest market for the Group,
contributing S$16.0million or 30.8% to the Group’s revenue.
In FY2015, cost of sales decreased by S$12.8 million or
25.1% to S$38.2 million. This was in line with lower revenue
generated. Consequently, gross profit also decreased by
49.7% y-o-y to S$13.6 million in FY2015, from S$27.0 million
in FY2014. Similarly, gross profit margin decreased to 26.2%
from 34.6% as a result of a shift in revenue mix, with a fall in
contribution from the higher-margin ORS-SCM segment.
The Group reported a loss for FY2015 of S$4.9 million,
compared to a net profit of S$5.6million in FY2014.
The Group’s total assets were S$133.1 million as at 31
December 2015, representing an increase of 2.4% y-o-y.
This was mainly due to an increase of S$20.8 million in non-
current assets from the purchase of newmachineries and yard
development, offset partially by decrease of S$17.7 million in
current assets.
As at 31 December 2015, the Group’s total liabilities increased
by 35.4% y-o-y to S$43.3 million. This was mainly due to an
OPERATIONS & FINANCIAL REVIEW
