Technics, an integrated specialist services provider for gas compression systems and topside process modules catering to customers in the global oil and gas industry, has announced the positive reversal from Q1 FY08's nominal loss of $241,000 to a net profit attributable to
Q1 FY09 revenue grew 63% year-on-year (“yoy”) to $31.72 million from $19.42 million recorded for Q1 FY08, mainly attributed to the revenue recognised for work-in-progress carried out on the Group’s three major EPCC projects.
The three projects are: the OHN-HNE booster compressor station project (six natural gas pipeline booster compressor packages) which was completed in Q1 FY09; the fast-track Bumi Armada Berhad project (four natural gas booster compression systems) and the BW
Gross profit increased 68% to $7.38 million in Q1 FY09 from $4.39 million in Q1 FY08. Gross profit margin was maintained at about 23%, as the cost of sales in Q1 FY09 was inflated by the higher utilization of sub-contractor services while the new yard space and new facilities are being constructed on the additional adjoining land parcel.
The Group achieved profit after tax of $1.26 million before minority interest for Q1 FY09, compared to a marginal loss after tax of $5,000 in Q1 FY2008. Basic earnings per share for Q1 FY09 was 0.84 Singapore cents; or 0.80 Singapore cents on a fully diluted basis
Commenting on the Group’s performance, Mr. Robin Ting, Executive Chairman and founder, said, "The financial results over the last few quarters have reflected our increasing level of operating expenses, which included non-productive temporary overheads, but do not indicate the full potential of our earnings capacity once the expansion program is completed. Regardless, given our total outstanding order-book and current project schedules, we are anticipating a better performance in FY09 compared to FY08."
As at February 12, 2009, the Group's total outstanding order book stands at $155 million (inclusive of $31.72 million Q1 FY09 revenue), for progressive delivery through to Q2 FY2010, i.e., the quarter ending December 31, 2009.
With regard to the prospects for the Group's premier EPCC and contract engineering services going forward against a backdrop of unfavorable sentiments due to the global financial crisis, the Group continues to be encouraged by the positive feedback from the specific oil and gas market segments that it operates in, over the last four months since the start of our new financial year in October 2008.
"Customers are maintaining longer term perspectives on their forward operation requirements, and are not affected by the prevailing low energy prices. Regional projects in the pipeline for which the Group has already submitted proposals, or is continuing to follow up with prospective customers, are proceeding ahead and indicative timelines are remaining on-track. Moreover, the current low prices for steel and other key metals can amount to significant structural material cost savings for mega-size process equipment," explained Mr. Ting.
Nevertheless, given the unprecedented extent of the global credit crunch on the world's major economies, the Group remains alert on new challenges that may arise in its external environment.
"Our optimism is buoyed by the expected completion of Technics' yard expansion program in late FY09. Additional personnel who were recruited in advance during FY08 are being trained and will be ready for deployment. We will soon have the new capacity to take on more jobs and are well-positioned to capitalize on any urgent or fast-track projects that may emerge down the road."
The improved bottom-line performance in Q1 FY09 compared to Q1 FY08 was achieved despite incurring higher operating, administrative and financial expenses due to the yard expansion program and growth in revenue base.
Administrative expenses rose by $1.40 million to $5.04 million in Q1 FY09. Additional rental expenses for another 8,006.5 sqm of land area kicked in when the new lease that commenced March 21, 2008. Staff costs also increased significantly with the additional headcount as the Group believes in recruiting new personnel in advance to provide adequate training time.
Business scope was widened from Q3 FY08, e.g., the leasing of gas compression systems to complement its core outright sale business, as well as the production of crankshafts in Suzhou, PRC.
Financial expenses increased by $0.13 million to $0.43 million in line with the higher working capital requirements and as banks worldwide hiked interest rates due to the global financial crisis.
The Group also improved its net cash generated from operating activities to a positive $2.53 million in Q1 FY09, compared to net cash used of $11.84 million in Q1 FY08. Due to tighter credit control, Trade Receivables, which comprise Accounts Receivables and 'Contract Work-in-progress', decreased by $2.59 million to $41.19 million as at December 31, 2008. The progress billing for each project is based on certain key milestones achieved by Technics as specified in the respective contract. Typically, approximately 90% of the project value would be collected within 45 days of project delivery.
Trade and other payables decreased by $1.81 million to $20.72 million as suppliers requested for down-payment due to the global credit crunch.
Short term borrowings increased $1.55 million to $23.36 million was due to the higher utilization of trade facilities to purchase equipment and supplies in Q1 FY2009 for EPCC contracts. Long term borrowings decreased by $0.48 to $20.54 million, mainly attributable to the partial repayment of the US$15 million RZB syndicated loan.
Cash and cash equivalent increased by $1.92 million to $21.96 million. Net gearing ratio is 0.74 as at December 31, 2008.
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