6
ANNUAL REPORT 2015/2016
that and excluding asset impairments, Neptune
recorded a modest operating loss. Steady contributions
were recorded by most of the businesses, with focus
on executing well on niche services and packaging
services effectively. ROV utilization was lower from the
4th quarter of the year. The UK businesses also suffered
from reduced engineering and fabrication inquiries
throughout the year.
Our activities are very much focused on shallow water
subsea and production activity, mostly in Australia
but increasingly in South East Asia and the Middle
East. While maintenance on existing platforms and
installations has remained, the reduction in new
development expenditure and competitive pricing
has put pressure on overall margins this year.
Downsizing among oil companies and international
service companies has been very noticeable in Perth
throughout 2015/16. We discontinued our vessel
joint venture on the Dryden but continue to look for
opportunities to partner with vessel owners on diving
and survey opportunities. Our track record with oil
majors operating in Australia has continued to grow.
Utilization of our ROV fleet started to decline in the 4th
quarter as a combination of expenditure reduction and
new assets created excess supply. We have reviewed
the carrying values of our ROV fleet of some S$15
million and felt that some impairment is warranted in
this current market. Consequently, a charge of S$7.1
million was recorded in the 4th quarter of the year.
We continue to remain active in marketing our fleet,
focusing on some of the newer assets we have acquired
in the last 24 months. Good progress continues to
be made in the Middle East in growing the subsea
stabilization business outside of Australia. We continue
to remain a partner with oil producers like BP andTotal
in supporting their engineering activities in the North
Sea. Our focus remains to build a reputation as a strong
regional service provider, with our customer-focused
mindset differentiating us from larger international
competitors. However, in this current market, price
competition is intense.
Overall, our Oilfield Engineering and Neptune Marine
businesses are making good progress in helping MTQ
Group to develop its presence as a specialist subsea
service provider of choice in its chosen markets. Our
strategy of developing a more comprehensive range
of services, both geographically and functionally, so
that our potential work scopes with our oil and gas
customers can increase remains a sound one. However,
we have to focus on utilization of our capabilities and
trim where needed in the short term while preparing
for recovery.
ENGINE SYSTEMS – IMPROVING OUR
RETURN ON EQUITY
The Engine Systems business remained profitable
but also suffered lower revenue for the full year. The
mining sector has suffered this past year and this has
affected revenue in key markets. The composition of
our network has been static for several years and we
took a decision to close Darwin, which has struggled
as well as consolidate activities within Queensland to
reduce duplication. There has been some consolidation
within the industry for independent distributors
so we will continue to watch developments. In the
meantime, the management team remains focused on
branch profitability and serving national and regional
customers in a cost effective manner.
GROUP CEO’S
STATEMENT
