OTTO MARINE LIMITED & ITS SUBSIDIARIES Registration Number: 197902647M FIRST QUARTER 2009 FINANCIAL STATEMENTS ANNOUNCEMENT TABLE OF CONTENTS Description Page 1. Group Profit and Loss Statement 1 2 2. Balance Sheets 3 4 3. Consolidated Cash Flow Statement 5 6 4. Statements of Changes in Equity 7 8 5. Audit 10 6. Auditor s Report 10 7. Accounting Policies 10 8. Changes in Accounting Policies 10 9. Earnings and Net Asset Value per Ordinary Shares 10 10. Review of Group Performance and Balance Sheet 11 13 11. Variance from Prospect Statement 14 12. Prospects 14 13. Dividend Distribution 14 14. Annual Dividend 14 15. Interested Person Transactions 15
OTTO MARINE LIMITED (co regn no : 197902647M) First Quarter Financial Statements PART I INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS 1(a)(i) An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year The Group 1Q 2009 1Q 2008 +/(-) S$ 000 S$ 000 % Revenue 71,741 57,302 25.2 Cost of sales (56,718) (43,660) 29.9 Gross profit 15,023 13,642 10.1 Other income (expenses) (2,102) 3,930 n.m. Administrative expenses (4,960) (4,759) 4.2 Share of profits of associates 545 2,560 (78.7) Finance costs (1,656) (3,478) (52.4) Profit before income tax 6,850 11,895 (42.4) Income tax expense (300) (300) 0.0 Profit for the period 6,550 11,595 (43.5) Attributable to: Shareholders of the Company 6,550 8,392 (21.9) Minority interest - 3,203 n.m. 6,550 11,595 (43.5) Earnings per share (cents) Basic & diluted 0.55 0.86 (36.0) 1
1(a)(ii) items, which if significant must be included in the income statement. The Group 1Q 2009 1Q 2008 +/(-) S$ 000 S$ 000 % Depreciation of property, plant and equipment Included in cost of sales 532 565 (5.8) Included in administrative expenses 65 37 75.7 Capitalised in construction in progress 859 550 56.2 1,456 1,152 26.4 Interest on borrowings: Included in finance costs 1,656 3,478 (52.4) Capitalised in cost of vessels under construction 3,603 - n.m. 5,259 3,478 51.2 Bad trade receivables recovered - 112 n.m. Interest income 229 2,178 (89.5) Net foreign exchange income (losses) (1,977) 1,631 n.m. Reversal of unrealised profit for sale of vessels to associates 635 - n.m. 2
1(b) (i) A balance sheet (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year Balance Sheets The Group The Company 31-Mar-2009 31-Dec-2008 31-Mar-2009 31-Dec-2008 S$ 000 S$ 000 S$ 000 S$ 000 ASSETS Current assets Cash and bank balances 108,435 120,526 103,955 116,841 Pledged deposits 132,614 128,143 132,614 128,143 Trade receivables 4,101 12,730 263,463 248,234 Gross amount due from customers for contract work 241,293 216,278 - - Deposits, prepayments and other receivables 104,955 106,995 92,119 106,101 Current portion of loan receivables - - 11,940 3,134 Inventories 167,329 147,907 - - Total current assets 758,727 732,579 604,091 602,453 Non-current assets Loan receivables - - 10,636 11,010 Investment in subsidiaries - - 54,490 54,490 Investment in associates 55,888 53,327 - - Available-for-sale investments 3,221 2,930 - - Goodwill 40,370 40,370 - - Property, plant and equipment 162,466 149,239 923 893 Total non-current assets 261,945 245,866 66,049 66,393 Total assets 1,020,672 978,445 670,140 668,846 LIABILITIES AND EQUITY Current liabilities Borrowings from financial institutions 256,627 259,302 176,034 198,672 Trade payables 235,165 227,004 190,289 176,524 Gross amount due to customers for contract work 104,954 104,842 - - Other payables 16,243 14,635 6,888 7,293 Deferred gain short-term 482 482 - - Current portion of finance leases 86 85 86 85 Loan from related parties 10,400 10,400 10,400 10,400 Income tax payable 1,182 1,028 1,182 1,028 Total current liabilities 625,139 617,778 384,879 394,002 Non-current liabilities Borrowings from financial institutions 73,353 53,312 71,603 51,412 Deferred gain long-term 12,017 12,137 - - Finance leases 241 263 241 263 Loan from related parties 73,326 75,926 73,326 75,926 Total non-current liabilities 158,937 141,638 145,170 127,601 Capital, reserves and minority interests Share capital 136,019 134,693 136,019 134,693 Capital reserves 1,330 766 1,943 1,553 Translation reserves (deficit) 2,945 (6,182) (87) (28) Accumulated profits 96,302 89,752 2,216 11,025 Equity attributable to equity holders of the Company 236,596 219,029 140,091 147,243 Minority interests - - - - Total equity 236,596 219,029 140,091 147,243 Total liabilities and equity 1,020,672 978,445 670,140 668,846 3
1(b) (ii) Aggregate amount of group s borrowings and debt securities Amount repayable in one year or less, or on demand As at 31 March 2009 As at 31 December 2008 Secured Unsecured Secured Unsecured S$ 000 S$ 000 S$ 000 S$ 000 256,713 10,400 259,387 10,400 Amount repayable after one year As at 31 March 2009 As at 31 December 2008 Secured Unsecured Secured Unsecured S$ 000 S$ 000 S$ 000 S$ 000 73,594 73,326 53,575 75,926 Details of collateral The Group s borrowings are primarily secured by a personal guarantee from a director, a charge over related parties interest in quoted shares, the mortgage of the relevant vessels and certain property plant and equipment and inventory, assignments of corporate guarantee from a supplier, shipyard contracts, insurance taken over the mortgaged vessels, charter agreements and income and refund guarantee provided by the shipyards. 4
1(c) A cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year The Group 1Q 2009 1Q 2008 S$ 000 S$ 000 Cash flow from operating activities: Operating activities Profit before income tax 6,850 11,895 Adjustments for: Share of profits of associates (545) (2,560) Depreciation of property, plant and equipment 597 602 Gain arising from changes in fair value of forward contract (937) - Interest expense 1,656 3,478 Interest income (229) (2,178) Reversal of unrealised profit for sale of vessels to associates 635 - Share award expense 1,342 - Operating cash flows before movements in working capital 9,369 11,237 Trade receivables 15,753 21,103 Other receivables (129) (20,931) Inventories (41,662) (26,530) Construction work-in-progress (48,821) (32,021) Trade payables 60,598 11,438 Other payables 2,557 702 Cash used in operations (2,335) (35,002) Income tax paid (146) - Interest received 229 2,178 Net cash used in operating activities (2,252) (32,824) Investing activities Purchases of property, plant and equipment (10,729) (8,671) Net cash used in investing activities (10,729) (8,671) 5
The Group 1Q 2009 1Q 2008 S$ 000 S$ 000 Financing activities Proceeds on borrowings from financial institutions 42,997 35,350 Repayment of borrowings from financial institutions (37,125) (19,723) Repayment of finance lease obligations (21) (19) Repayment of loans from a related party (2,600) (6,874) Loan from a related party - 16,002 Interest paid (4,722) (3,468) Net cash (used in) from financing activities (1,471) 21,268 Net decrease in cash and bank balances (14,452) (20,227) Cash and bank balances at beginning of period 248,669 213,904 Effects of exchange rate changes on the balance of cash held in foreign currencies 6,832 (7,246) Cash and bank balances at end of period 241,049 186,431 Cash and bank balances at end of year include the following: Cash 108,435 18,007 Pledged deposits 132,614 168,424 241,049 186,431 6
1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalization issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year Statements of Changes in Equity for the period ended 31 March 2009 and 2008 GROUP Attributable to equity holders of the Company Attributable to equity holders of Share Capital Translation Accumulated the Minority Total Capital reserves Reserves profits Company Interests Equity S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 1Q 2009 At 1 January 2009 134,693 766 (6,182) 89,752 219,029-219,029 Gain on available-for-sale investment - 174 - - 174-174 Currency translation differences - - 9,127-9,127-9,127 Net income recognized directly in equity - 174 9,127-9,301-9,301 Profit for the period - - - 6,550 6,550-6,550 Total recognized income and expense for the period - 174 9,127 6,550 15,851-15,851 Issue of shares pursuant to the share award scheme 1,326 - - - 1,326-1,326 Waiver of interest on related party loans - 390 - - 390-390 Balance at 31 March 2009 136,019 1,330 2,945 96,302 236,596-236,596 GROUP Share Capital Capital reserves Translation Reserves Accumulated profits Attributable to equity holders of the Company Minority Interests Total Equity S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 1Q 2008 At 1 January 2008 32,500 1,656 (5,249) 32,904 61,811 (4,007) 57,804 Currency translation differences - - (11,831) - (11,831) - (11,831) Net expense recognized directly in equity - - (11,831) - (11,831) - (11,831) Profit for the period - - - 8,392 8,392 3,203 11,595 Total recognized income and expense for the period - - (11,831) 8,392 (3,439) 3,203 (236) Acquisition of additional shares from minority interest - - - - - 810 810 Waiver of interest on related party loans - 10 - - 10-10 Balance at 31 March 2008 32,500 1,666 (17,080) 41,296 58,382 6 58,388 7
Statements of Changes in Equity for the period ended 31 March 2009 and 2008 COMPANY Share Capital Translation Accumulated Total capital Reserves Reserves Profits S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 1Q 2009 At 1 January 2009 134,693 1,553 (28) 11,025 147,243 Issue of shares pursuant to the share award scheme 1,326 - - - 1,326 Currency translation differences - - (59) - (59) Waiver of interest on related party loans - 390 - - 390 Loss for the period - - - (8,809) (8,809) At 31 March 2009 136,019 1,943 (87) 2,216 140,091 1Q 2008 Share Capital Translation Accumulated Total capital Reserves Reserves Losses S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 At 1 January 2008 32,500 1,194 - (2,880) 30,814 Waiver of interest on related party loans - 10 - - 10 Loss for the period - - - (1,411) (1,411) At 31 March 2008 32,500 1,204 - (4,291) 29,413 8
1(d)(ii) Details of any changes in the company s share capital arising from rights issue, bonus issue, share buybacks, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration of acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. Pursuant to the Otto Marine Share Award Scheme (the Scheme ), (1) 3,120,000 shares were issued at the market price of S$0.425 per share for the 3 months ended 31 March 2009; and (2) 3,120,000 shares will be vested with the participants of the Scheme on 30 April 2009. 1(d)(iii) and (iv) Statement showing all sales, transfers, disposals, cancellation and/or use of treasury shares as at the end of the current financial year reported on. Information pursuant to clause 1(d) (iii): As at 31 Mar 2009 As at 31 Dec 2008 Total number of issued shares excluding treasury shares ( 000) 1,184,165 1,181,045 Information pursuant to clause 1(d) (iv): The Company does not have any treasury shares as at end of the immediately preceding financial year and during the current financial period. 1(e) Negative assurance confirmation on interim financial results pursuant to rule 705(4) of the Listing Manual We, the undersigned, hereby confirm that to the best of our knowledge, nothing has come to the attention of the Board of Directors of the Company which may render the unaudited interim financial results for the three months ended 31 March 2009 to be false or misleading in any material aspect. On behalf of the Board of Directors Yaw Chee Siew Executive Chairman Lee Kok Wah Group Managing Director Singapore 8 May 2009 9
2. Whether the figures have been audited, or reviewed and in accordance with which auditing standard or practice The figures have neither been audited nor reviewed. 3. Where the figures have been audited or reviewed, the auditor s report (including any qualifications or emphasis of a matter) Not applicable. 4. Whether the same accounting policies and methods of computation as in the issuer s most recently audited annual financial statements have been applied The Group has applied the same accounting policies and methods of computation in the financial statements for the current financial period compared with those of the audited financial statements as at 31 December 2008 except for the changes mentioned in Section 5. 5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reason for, and the effect of, the change In the current financial year, the Group and the Company have adopted all new and revised FRSs and Interpretations of FRS ( INT FRS ) that are relevant to its operations and effective for annual periods beginning on or after 1 January 2009. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Group s and the Company s accounting policies and have no material effect on the financial statements except for FRS 23-Borrowing Costs (Revised). FRS 23-Borrowing Costs (Revised) requires an entity to capitalise borrowing cost that are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset by eliminating the option to expense off the borrowing costs when incurred. The adoption of FRS 23-Borrowing Costs (Revised) results in a change in accounting policy of the Group. The provisions under FRS 23-Borrowing Costs (Revised) require the change to be applied prospectively. As a result, borrowing costs relating to qualifying assets incurred on or after 1 January 2009, which amounted to S$3,416,000 for the three months ended 31 March 2009, are capitalized and no adjustments are made to prior years comparison. 6. Earnings per ordinary share of the group for the current period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends 10 The Company 1Q 2009 1Q 2008 Earnings per ordinary share of the Group for the financial period based on net profit attributable to shareholders: (i) Based on the weighted average number of shares (cents) 0.55 0.86 (36.0) Weighted average number of shares 1,183,159,667 975,000,000 21.3 (ii) On a fully diluted basis (cents) 0.55 0.86 (36.0) Adjusted weighted average number of shares 1,183,159,667 975,000,000 21.3 The weighted average number of shares of 975,000,000 Q1 2008 is adjusted for the share sub-division as if it had taken place at the beginning of FY 2008. +/(-) %
7. Net asset value (for the issuer and group) per ordinary share based on issued share capital of the issuer at the end of the (a) current period reported on and (b) immediately preceding financial year. The Group 1Q 2009 Dec 2008 The Company +/(-) % 1Q2009 Dec 2008 Net asset value per ordinary share based on issued share capital at the end of the financial period (cents) 19.98 18.55 7.7 11.83 12.47 (5.1) 8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the group s business. It must include a discussion of the following: (a) any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and (b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current period reported on Review of Group Performance Q1 2009 versus Q1 2008 +/(-) % Q1 2009 Q1 2008 Variance Group Revenue Gross profit Revenue Gross profit Revenue Gross profit S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 % S$ 000 % Shipbuilding 66,024 11,640 48,665 7,368 17,359 35.7 4,272 58.0 Chartering 3,653 1,816 3,711 3,206 (58) (1.6) (1,390) (43.4) Ship Repair and 2,064 1,567 4,926 3,068 (2,862) (58.1) (1,501) (48.9) conversion 71,741 15,023 57,302 13,642 14,439 25.2 1,381 10.1 Revenue Revenue increased by 25.2% from $57.3 million in Q1 2008 to $71.7 million in Q1 2009. This increase is contributed primarily by shipbuilding, partially offset by the decrease in revenue from chartering and ship repair and conversion business. Revenue from shipbuilding increased by 35.7% from $48.7 million in Q1 2008 to $66.0 million in Q1 2009 mainly due to the increase in the number of vessels the Group constructed and the progressive revenue recognised for higher value vessels that are being constructed. The revenue from ship repair and conversion decreased by 58.1% from $4.9 million in Q1 2008 to $2.1 million in Q1 2009 as we shift the Group s focus away from ship repair and conversion to shipbuilding. 11
Gross profit The increase in gross profit by 10.1% from $13.6 million in Q1 2008 to $15.0 million in Q1 2009 is due primarily to the increase in the Group s shipbuilding business, partially offset by the decrease in gross profit from chartering and ship repair and conversion business. The increase in the gross profit in the Group s shipbuilding business is in line with the increase in the number of vessels the Group constructed and particularly the construction of larger and higher specification vessels. The decrease in gross profit in the chartering business is primarily due to the increase in ship management costs. The decrease in the gross profit in the shipbuilding is in line with the shift of the Group s focus away from ship repair and conversion to shipbuilding. Other income (expenses) The other income (expenses) changes from an income of $3.9 million in Q1 2008 to an expense of $2.1 million in Q1 2009 was primarily due to a decrease in interest income of $1.9 million, an increase in the reversal of unrealised profit on sale of vessels to associates of $0.6 million and a change from foreign exchange adjustment gain of $1.6 million in Q1 2008 to a foreign exchange loss of $1.9 million in Q1 2009. Administrative expenses The marginal increase in administrative expenses by 4.2% from $4.8 million in Q1 2008 to $5.0 million in Q1 2009 is primarily due to an increase in staff costs of $1.8 million resulting from an increase in number of staff employed and share award expenses partially offset by a decrease in professional fees of $1.6 million resulting from the completion of the initial public offering exercise last year (2008). Share of profits of associates The decrease in the share of profits of associates by 78.7% from $2.6 million in Q1 2008 to $0.5 million in Q1 2009 is mainly attributable to Group s share of the lower profits generated by one of its associates. Finance cost The decrease in finance costs by 52.4% from $3.5 million in Q1 2008 to $1.7 million Q1 2009 is primarily attributable to the capitalisation of borrowing costs resulting from the adoption of FRS 23-Borrowing Costs (Revised). Please refer to Section 5 above for details. Minority interests The profit attributable to minority interests of $3.2 million in Q1 2008 was due to the minority interests share of profits in one of the subsidiaries prior to the Group s acquisition of the additional shares of the subsidiary from the minority interests in March 2008. 12
Review of Balance Sheet Current assets The increase in current assets of $26.1 million from $732.6 million in FY2008 to $758.7 million in Q1 2009 is primarily attributable to the increase in pledged deposits, gross amount due from customers for contract work and inventories of $4.4 million, $25.0 million and $19.4 million respectively, partially offset by the decrease in cash and bank balances, trade receivables and deposits, prepayments and other receivables of $12.1 million, $8.6 million and $2.0 million respectively. The increase in pledged deposits is primarily due to favourable foreign exchange rates vis-à-vis the Singapore dollars and the net increase in deposits pledged with the banks. This was because of a proportionately higher amount of deposits collected as compared to the amount of deposits released when vessels were delivered. The increase in gross amount due from customers for contract work and inventories net of the decrease in deposits, prepayments and other receivables is primarily due to the higher number of vessels being built. The decrease in trade receivables is primarily due to the collection of the amount invoiced. Non-current assets The increase in non-current assets of $16.1 million from $$245.8 million in FY2008 to $261.9 million in Q1 2009 is primarily attributable to the increase in investment in associates, available-for-sale investments and property, plant and equipment of $2.6 million, $0.3 million and $13.2 million respectively. The increase in investment in associates is attributable to share of associates profits and the appreciation of the associates functional currency against the Singapore dollars. The increase in property, plant and equipment is primarily due to the increase in costs incurred in the construction of vessels for the Group s chartering fleet and the capital expenditure incurred in the development of the Group s shipyard in Batam, Indonesia. Current liabilities The increase in current liabilities of $7.3 million from $617.8 million in FY2008 to $625.1 million in Q1 2009 is primarily attributable to the increase in trade payables and other payables of $8.2 million and $1.6 million respectively partially offset by the decrease in borrowings from financial institutions of $2.8 million. The increase in trade payables and other payables is primarily attributable to the increase in the Group s shipbuilding activities. The decrease in borrowings from financial institutions is primarily due to the repayment of project financing loans when completed vessels are delivered. Non-current liabilities The increase in non-current liabilities of $17.3 million from $141.6 million in FY2008 to $158.9 million in Q1 2009 is primarily attributable to an increase in borrowings from financial institutions of $20.0 million partially offset by a decrease in loan from related parties of $2.6 million. The increase in borrowings from financial institutions is attributable primarily to increased financing obtained to support the increase in the Group s shipbuilding activities. The decrease in the loan from related parties is due to repayment of loan in accordance with the terms of the loan agreement with the related party. 13
9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results. Not applicable. 10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months. The focus and prospects of our Group, which have been detailed in our Fully Year Financial Statements and Dividend Announcement dated 24 February 2009 and as set out on pages 6 to 10 in our Annual Report 2008, remain unchanged. Barring unforeseen circumstances and possible further deterioration of in the conditions of the financial markets and the risk of a protracted global recession, we are cautiously confident that we will be able to ride through the current economic situation. 11. Dividend (a) Current Financial Period Reported On Any dividend recommended for the current financial period reported on? No. (b) Corresponding Period of the Immediately Preceding Financial Year Any dividend recommended for the current financial period reported on? No. (c) Date payable Not applicable. (d) Books closure date Not applicable. 12. If no dividend has been declared/(recommended), a statement to that effect Not applicable. 14
13. Interested Person Transactions Purchase of timber from Rimalco Aggregate value of all Interested person transactions conducted under shareholders mandate pursuant to Rule 920 (excluding transactions less than $100,000) 1Q 2009 S$ 000 Nil Aggregate value of all transactions excluding transactions conducted under shareholders mandate pursuant to Rule 920 of the SGX Listing Manual 1Q 2009 S$ 000 Transactions with Samling Singapore Pte Ltd Rent expense 171 Transactions with Brizill International Limited Interest expense to Brizill International Limited 865 Total 1,036 BY ORDER OF THE BOARD SEE KIAN HENG COMPANY SECRETARY 8 May 2009 15