Profit & Loss
N/M - Not meaningful
when differences +/- greater than 1000%
Cash Flow Statements
Review of Performance
Consolidated Statement of Comprehensive Income
In 3Q2017, the Group’s revenue was generated mainly from its ship-design service, sale of vessels, shipbuilding construction service and shipbuilding project management and financing services. The Group’s revenue increased by RMB58.7 million or 39% to RMB208.2 million in 3Q2017 compared with 3Q2016. The increase was mainly due to: (1) Shipbuilding construction service revenue increasing by RMB41.5 million to RMB42.3 million contributed by a new shipbuilding contract for four vessels that commenced during the current year; (2) Ship-design service revenue increasing by RMB15.5 million to RMB63.3 million; and (3) Shipbuilding project financing income increasing by RMB11.6 million to RMB13.5 million arising from provision of financing to related party shipyards for the construction of vessels. Partially offsetting the increase was the RMB6.7 million reduction in Shipbuilding Project management service income.
Cost of sales and gross profit
Cost of sales increased RMB46.1 million or 42% to RMB155.2 million in 3Q2017, attributed mainly to the new shipbuilding contract. Gross profit increased 31% to RMB53.0 million in 3Q2017, due mainly to increased contributions from shipbuilding project financing services, ship-design service and shipbuilding construction service.
Gross profit margin decreased from 27% to 25%, mainly attributed to the increase in revenue from shipbuilding construction service which had a lower gross profit margin.
Other income consisted mainly of government grants and interest income. Other income increased by RMB0.7 million to RMB1.9 million in 3Q2017, mainly due to increase in government grants
Other gains/(losses) - net
Other gains in 3Q2017 amounted to RMB2.4 million which was attributed mainly to foreign exchange gains arising from receivables denominated in SGD which had strengthened against the USD.
Distribution and marketing expenses
Distribution and marketing expenses consisted mainly of sales and marketing department’s office rental, employee benefits expenses and travelling expenses.
For 3Q2017, the decrease in marketing and distribution expense of RMB4.5 million was mainly due to reclassification of certain staff expenses to administrative expenses.
Administrative expenses comprised office rental and office expenses, depreciation expenses, amortisation expenses, professional fees incurred to maintain the Group’s listing status, employee benefits and travelling expenses.
Administrative expenses increased RMB5.6 million or 23% to RMB30.0 million in 3Q2017. The increase was mainly due to reclassification of certain staff expenses as research and development expenses and accrual of staff incentive payments.
The depreciation charge for plant and equipment amounted to RMB0.8 million in 3Q2017. Amortisation of intangible assets amounted to RMB1.3 million in 3Q2017, mainly arising from the amortisation of software, technical knowhow and brand name from Deltamarin Group.
Finance expenses increased RMB6.4 million or 109% to RMB12.4 million in 3Q2017, mainly due to increased borrowings.
Share of profit of associated companies
The share of profit from associated companies in 3Q2017 amounted to RMB1.6 million compared to loss of RMB0.1 million in 3Q2016.
Income tax expense
The operating subsidiaries in China and Finland are subject to income tax rates of 25% and 20% respectively. Income tax expense decreased RMB1.2 million to RMB0.5 million in 3Q2017. The decrease was due to lower profits earned by the Group’s subsidiaries in China during the period.
Profit for the period
After taking into account income tax expense and non-controlling interests, net profit attributable to shareholders for 3Q2017 was RMB1.3 million, compared to a RMB5.7 million loss in 3Q2016.
Statement of Financial Position
As at 30 September 2017, the Group’s cash at bank and on hand balances amounted to RMB221.8 million, an increase of RMB37.0 million from RMB184.8 million as at 31 December 2016. As at 30 September 2017, all of the Group’s fixed deposits had matured, and were not renewed. Cash pledged with bank decreased RMB59.7 million to RMB31.9 million and this was mainly due to release of payment for shipbuilding supplies.
Trade receivables comprised mainly advance payments on construction contracts, receivables arising from ship-design service and receivables arising from shipbuilding project management services. Trade receivables increased RMB61.0 million to RMB175.8 million and this was mainly due to an increase of RMB64.4 million receivables arising from sale of vessels.
Other receivables, amounting to RMB1,486.4 million as at 30 September 2017, comprised mainly nontrade receivables due from related corporations and prepayments. Other receivables increased RMB738.3 million, mainly due to an increased amount of RMB807.4 million receivables arising from shipbuilding project financing services provided to related party shipyards, partially offset by a RMB63.7 million decrease in receivables from a third party shipyard.
Finance lease receivables, amounting to RMB14.2 million as at 30 September 2017, arose from the sale of tug boats under a finance lease agreement.
Property, plant and equipment comprised motor vehicles, computers and software, furniture and fixtures, and office equipment.
Investment in associated companies represented the total amount of investment in non-controlling entities held by the Deltamarin Group.
Available-for-sale financial assets represented investment shares held by the Deltamarin Group.
Intangible assets comprised software licenses, brand name and technical knowhow. Intangible assets amounted to RMB76.8 million as at 30 September 2017, an increase of RMB1.8 million. The increase was due to a translation gain arising from the appreciation of Euro against the RMB, partially offset by the current amortisation.
The Group’s goodwill had arisen from the acquisition of the Deltamarin Group in 2013. The goodwill amounted to RMB114.9 million as at 30 September 2017, RMB8.1 million higher than the RMB106.8 million as at 31 December 2016. The increase was due to a translation gain arising from the appreciation of Euro against the RMB.
Deferred tax assets represented the timing differences between accounting and tax bases, and were derived from the operating subsidiaries in China and Finland.
Non-current portion of finance lease receivables decreased RMB12.3 million to RMB38.3 million as at 30 September 2017 as a result of payment received for vessels sold under a finance lease agreement..
Short-term loan and current portion of long-term loan represented that portion of the loans raised which were repayable within 12 months as at 30 September 2017. Short-term loans totalled RMB1,567.0 million due to reclassification of long term loans to short term loans, and further bank loans obtained to finance working capital requirements.
Trade payables amounted to RMB279.2 million as at 30 September 2017 compared to RM253.9 million as at 31 December 2016. The increase was mainly attributed to increase of accrued construction costs and advance receipts from shipbuilding management services.
Other payables and accruals consisted of VAT taxes payable, sales tax and surcharges payable, accrued operating and office expenses, and amount due to related parties. Other payables and accruals decreased by RMB54.3 million, attributed mainly to decrease in amount due to related parties from shipbuilding management services.
Income tax payable decreased by RMB0.6 million from RMB19.2 million to RMB18.6 million as at 30 September 2017.
Long-term loan amounting to RMB492.2 million as at 31 December 2016 became current as at 30 September 2017and was reclassified to short term borrowings.
Deferred tax liabilities represented the tax liabilities for the timing differences arising from the recognition of the intangible assets, deferred ship-design fee income and fair valuation of the Deltamarin Group’s assets.
The amount of capital reserve as at 30 September 2017 comprised a deemed contribution from the former immediate holding company as a result of initial recognition of shareholder’s loan at fair value during the financial year ended 31 December 2012. There was no movement in capital reserve in 3Q2017.
Consolidated cash flow statements
Net cash outflow from operating activities in 3Q2017 was RMB356.7 million compared to net cash outflow of RMB137.7 million in the corresponding quarter last year. The increased cash outflow was due mainly to increase in receivables arising from increased shipbuilding project financing services provided to related party shipyards.
In 3Q2017, net cash inflow from financing activities amounted to RMB20.6 million, compared to net cash inflow of RMB169.3 million in 3Q2016 and this was mainly due to decrease in proceeds from borrowings offset by decrease in cash pledged with bank.
The mild recovery in China and other major economies in the world, higher demand for commodities and higher volume of international trade led to a strong rebound in the Baltic Dry Index1 , easing the overcapacity situation in the shipping and shipbuilding market. In the first 9 months of 2017, China shipbuilding companies received new orders of 201.3 million DWT, an increase of 8.7% compared to the same period last year2.
The business environment for shipbuilding industry has become more favourable generally compared to last year. While the sustainability and the strength of the recovery on the shipbuilding market remain uncertain, the Group will continue its strategy to focus on specialized, high-tech and high value-added vessels, where demand is more resilient and promising, and enhance its competitiveness in these areas.
In July 2017, Deltamarin entered into contracts with Xiamen Shipbuilding Industry Co., Ltd in China to provide basic and detailed design, engineering and construction support services for a ro-pax vessel to be built for a renowned Finnish customer. In August 2017, Deltamarin signed contracts with Rauma Marine Constructions (RMC) for the basic design of deck outfitting and machinery for four multi-role corvettes. In view of the increasing utilisation of inland waterways, Deltamarin has developed a multipurpose inland vessel, DeltaBreaker. Together with the largest mega passenger vessel design contract received in 2016, Deltamarin will see high capacity utilization in 2017 and 2018.