MIS Co. Ltd. Inc. reports a very positive start to the financial year, with its results for the 1st Quarter 2009, operating and financial highlights of which are as follows:
Revenue continued to grow in the quarter, reflecting both the company's success in building new-build backlog during 2008 and the continued strength of its traditional business. Profit measures at every level reflect both the additional volume and an improving level of profitability in the new build business. Net interest costs in the period amounted to $1.6 million (versus $0.8 million in Q1 2008 and $1.3 million in Q4 2008), as average borrowings increased.
CASHFLOW AND BORROWINGS
Despite the improvement in net income referred to above, net operating cashflow declined compared to the same period last year as working capital increased substantially, reflecting both the higher level of new build activity and delayed receipts from certain customers. All major receivables that were delayed in the quarter have been subsequently received.
Investing activities include capital expenditures in the period of $4.5 million (primarily equipment and facilities for our Sharjah operations), compared with $1.3 million in the 1st quarter of 2008. We expect such expenditure to be somewhat lower over the balance of 2009.
Bank borrowings (net of cash) increased by $36.8 million to $134.4 million, to meet the company's working capital needs.
As a result, we expect a much lower level of average debt during the balance of the year than that experienced in the last two quarters.
PROSPECTS AND MARKET OUTLOOK
The high level of backlog reported above will ensure that revenue for 2009 as a whole is ahead of last year and the progress made in improving our new-build productivity and other lessons learnt on the first two rigs, should result in a continuing improvement in profitability.
The impact of lower oil prices and other financial factors on the health of the offshore drilling industry, however, makes it unlikely that MIS will be able to replenish its new-build backlog in the near future. MIS' strategy is to offset the effects of any temporary reduction in new-build revenue by reducing its cost base and concentrating in the short term on the growth of other areas of our business which are less cyclical and therefore less affected by the economic crisis, particularly Refurb (rig refurbishment), EPC (engineering, procurement and construction) and our safety services business, Sunbelt, where we are pursuing opportunities for profitable expansion into new territories within the GCC and the wider Middle East region. MIS remains uniquely positioned in its ability to offer complete turnkey solutions to all its clients across the oil and gas industry’s spectrum of services.
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