EMAS Offshore Construction (EOCL) ›› Financial

	3 MONTHS ENDED 31st AUG 2011	3 MONTHS ENDED 31st AUG 2010	% Increase / (decrease)	Year ended 31st AUG 2011	Year ended 31st AUG 2010	% increase / (Decrease)
Revenue	64,326	31,844	102%	178,130	113,333	57%
Cost of sales	(50,494)	(19,207)	163%	(139,625)	(72,407)	93%
Gross profit	13,832	12,637	9%	38,505	40,926	(6%)
Other operating income/ (expenses)	90	(523)	n.m.	394	(691)	n.m.
Administrative expenses	(3,543)	(3,673)	(4%)	(8,015)	(10,194)	(21%)
Profit from operations	10,379	8,441	23%	30,884	30,041	3%
Financial income	49	928	(95%).	1,335	1,522	(12%)
Financial expenses	(1,431)	(2,073)	(31%)	(12,050)	(9,249)	30%
Share of loss of associated company	(134)	-	n.m	(134)	-	n.m
Profit before income tax	8,863	7,296	21%	20,035	22,314	(10%)
Income tax	(1,891)	(1)	n.m.	(2,441)	(1,561)	56%
Profit for the financial period	6,972	7,295	(4%)	17,594	20,753	(15%)
Other Comprehensive income
Net gain / (loss) on cash flow hedges	31	(109)	n.m.	535	(145)	n.m.
Total comprehensive (loss) / income for the financial period	7,003	7,186	(3%)	18,129	20,608	(12%)

Earnings per share (cents)	6.28	6.57	(4%)	15.86	18.70	(15%)

To position our company for growth, we intend to capitalize on the buoyant market for floating production and storage services. This entails focusing the company’s resources and capabilities on growing our FPSO fleet thereby allowing us to reap benefits from greater efficiencies of scale; Expanding our marketing activities to actively engage opportunities in regions beyond our traditional sphere of operations; and continuing to forge new strategic partnerships with key players along the FPSO value chain thereby aligning our interests with those of our partners and further strengthening our value proposition vis-à-vis our competitors.

For the Construction division, our key strategy is to lower our exposure to lump-sum offshore engineering, procurement and installation projects and focus on long-term vessel leasing contracts. This would provide us with a base level of recurring income whilst allowing engineering resources to be focused on FPSO projects where greater economies of scale can be achieved.

The cash flows and robust earnings from our long term contracts will bolster our capital base and enable the Group to build up our cash reserves and enhance debt capacity, thereby funding our future expansion plans. The Group manages its revenue and cash flows from a portfolio standpoint with an emphasis on longer term contracts.

Growing demand for energy in developing countries and firm oil prices are expected to underpine and even lead to an increase in offshore oil and gas exploration activities globally. Offshore Exploration and Production activity on a global scale is forecasted to expand substantially as oil companies move into new frontiers and re-visit marginal fields in a bid to maintain and grow their oil and gas reserves.

This will provide significant opportunities for contractors in both the offshore construction and floating production sectors. Already, the total number of FPSO contracts awarded has grown from 6 in 2009 to around 20 in 2011, and the strong demand for FPSOs is expected to lead to an increase of between 25% to 50% in FPSO fleets worldwide between 2011 and 2016.

We believe that EOC is in a good position to capitalise on these opportunities as the Group prepares to expand beyond our traditional sphere of influence into the European and West African markets with potential partners.

The discussion below refers to the 3 months for the financial period ended 31 Aug 2011 (“4Q FY2011”) and the corresponding figures are for the 3 months for the financial period ended 31 Aug 2010 (“4Q FY2010”) for the Group’s consolidated financial information. The discussion should be read in conjunction with the first quarter announcement for the 3 months period ended 30 November 2010 released on 12 January 2011, second quarter announcement for the 3 months period ended 28 February 2011 released on 14 April 2011 and third quarter announcement for the 3 months period ended 31 May 2011 released on 14 July 2011 to obtain an overall understanding of the full year results.

Revenue for 4Q FY2011 was USD 64.3 million, an increase of 102% or USD 32.5 million from USD 31.8 million in 4Q FY2010. The increase was mainly due to:

(i) Increased contribution of revenue from Lewek Champion of approximately USD 3.5 million as the vessel undertook higher value construction projects in Thailand as compared to 4Q FY2010 where the vessel was on a time charter contract; and

(ii) An increased one-off revenue contribution of approximately USD 27.6 million in 4Q FY2011 from a riser installation, hook-up and commissioning project that commenced in 2Q FY2011 for FPSO Lewek Emas.

Gross profit for the 4Q FY2011 amounted to USD 13.8 million, as compared to
USD 12.6 million in 4Q FY2010. The increase in gross profit was due to the above projects undertaken by the Group in 4Q FY2011, which are of higher value albeit lower gross profit margins.

Other operating income/(expenses), net, changed from net expense of USD 523,000 in 4Q FY2010 to net income of USD 90,000 in 4Q FY2011. The change was mainly due to
(i) Fair value gain on interest rate hedging in 4Q FY2011, as compared to a loss in 4Q FY2010; and
(ii) Lower foreign exchange loss in 4Q FY2011 as compared to 4Q FY2010 due to marginal depreciation of USD against other major currencies experienced in this quarter as compared 4Q FY2010.

Administrative expenses remain relatively stable as compared with the corresponding previous quarter.

Financial income mainly relates to interest income derived from loans to an associate as well as cash and fixed deposit accounts placed with the banks.

Financial expenses largely relate to interest incurred on bank loans. Financial expenses decreased from USD 2.1 million in 4Q FY2010 to USD 1.4 million in 4Q FY2011, mainly due to adjustment made on one-off facility fees against outstanding loan balances, amortised over the loan tenor in 4Q FY2011.

The share of loss of associated company was mainly due to the Vietnam office setup cost incurred by PV KEEZ Pte Ltd.

Income tax expense pertains to the amount paid/expected to be paid to the respective taxation authorities. The Group has exposure to income taxes in respective jurisdictions. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the end of the reporting periods.
The increase in effective tax rate was mainly due to higher corporate tax expenses incurred arising from increased activities undertaken in Thailand and Vietnam.

The discussion below refers to the financial position of the Group as at 31 August 2011 and 31 August 2010.

Total assets for the Group as at 31 August 2011 and 31 August 2010 amounted to
USD 672.4 million and USD 653.6 million respectively. The increase in total assets was mainly due to increase in trade receivables relating to installation of platform and pipeline for Lewek Champion, as well as other construction and installation projects undertaken by the Group.

Total liabilities as at 31 August 2011 remain relatively stable as compared to 31 August 2010.