MTQ Corporation Limited

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Third Quarter Financial Statement And Dividend Announcement

BackJan 27, 2003

PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS

    1(a) An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year

      Group
      S$'000
      %
      S$000
      %
      3 months to 31.12.02
      3 months to 31.12.01
      Change
      9 months to 31.12.02
      9 months to 31.12.01
      Change
      Revenue
      12,063
      11,363
      6
      35,276
      32,655
      8
      Investment income
      43
      0
      n/m
      43
      0
      n/m
      Other income including interest income (Note A)
      126
      43
      193
      355
      180
      97
      12,232
      11,406
      7
      35,674
      32,835
      9
      Cost of sales (Note B)
      (7,885)
      (7,185)
      10
      (23,275)
      (20,908)
      11
      4,347
      4,221
      3
      12,399
      11,927
      4
      Staff costs
      (2,051)
      (2,058)
      0
      (6,040)
      (6,012)
      0
      Other operating expenses (Note C, D)
      (1,236)
      (1,421)
      (13)
      (794)
      (4,392)
      (82)
      Profit from operating activities
      1,060
      742
      43
      5,565
      1,523
      265
      Interest on borrowings (Note E)
      (184)
      (94)
      96
      (433)
      (277)
      56
      Profit from operations before taxation
      876
      648
      35
      5,132
      1,246
      312
      Taxation (Note F)
      (160)
      (70)
      129
      (395)
      (512)
      (23)
      Net profit from operations
      716
      578
      24
      4,737
      734
      545
      Minority interests
      62
      46
      35
      (123)
      125
      n/m
      Profit before extraordinary items
      778
      624
      25
      4,614
      859
      437
      Extraordinary items, net
      0
      0
      n/m
      0
      0
      n/m
      Net profit attributable to shareholders
      778
      624
      25
      4,614
      859
      437



      n/m: not meaningful


      Note A - Other income (including interest income) comprises:

      Group
      S$'000
      %
      S$'000
      %
      3 months to 31.12.02
      3 months to 31.12.01
      Change
      9 months to 31.12.02
      9 months to 31.12.01
      Change
      Interest income
      35
      9
      289
      58
      53
      9
      Profit on sales of quoted investments
      0
      0
      n/m
      0
      2
      n/m
      Commission received
      0
      3
      n/m
      0
      31
      n/m
      Government grant
      79
      0
      n/m
      262
      0
      n/m
      Other income
      12
      31
      (61)
      35
      94
      (63)
      126
      43
      193
      355
      180
      97



      Note B - Cost of sales includes:

      Group
      S$'000
      %
      S$'000
      %
      3 months to 31.12.02
      3 months to 31.12.01
      Change
      9 months to 31.12.02
      9 months to 31.12.01
      Change
      Depreciation of property, plant and equipment
      541
      313
      73
      1,311
      800
      64



      Note C - Other operating expenses includes:

      Group
      S$'000
      %
      S$'000
      %
      3 months to 31.12.02
      3 months to 31.12.01
      Change
      9 months to 31.12.02
      9 months to 31.12.01
      Change
      Depreciation of property, plant and equipment
      205
      258
      (21)
      598
      728
      (18)
      Amortisation of goodwill
      23
      0
      n/m
      35
      0
      n/m
      Foreign exchange gain
      (48)
      (196)
      (76)
      (353)
      (117)
      202
      Allowance for doubtful debts and bad debts written (back)/off
      (16)
      95
      n/m
      106
      144
      (26)
      Allowance for stock obsolescence and stocks written off
      26
      177
      (85)
      74
      244
      (70)
      Loss/(Gain) on sale of property, plant & equipment
      2
      0
      n/m
      (25)
      (7)
      257
      Exceptional items (Note D)
      0
      (4)
      n/m
      2,799
      (221)
      n/m



Note D - Exceptional items comprises:

Group
S$'000
%
S$'000
%
3 months to 31.12.02
3 months to 31.12.01
Change
9 months to 31.12.02
9 months to 31.12.01
Change
Gain on sale of business assets of a subsidiary company
0
0
n/m
3,484
0
n/m
Provision for diminution in value of investment
0
0
n/m
(685)
0
n/m
Insurance claim in relation to property, plant and equipment written off*
2,007
0
n/m
2,007
0
n/m
Property, plant and equipment written off*
(2,007)
0
n/m
(2,007)
0
n/m
Severance pay arising from streamlining of operations
0
(4)
n/m
0
(222)
n/m
Gain on disposition of discontinuing operation
0
0
n/m
0
1
n/m
0
(4)
n/m
2,799
(221)
n/m


      *This relates to the loss of a submersible remotely operated vehicle ("ROV") unit belonging to MTQ Subsea Technology Pte Ltd, a 72.73% owned subsidiary of the Metalock (Singapore) Limited, during an undersea operation. The ROV unit is part of a complete ROV system which was engaged for the operation. Save for the ROV unit, the rest of the ROV system remains intact. The ROV unit is fully insured and the claim has been submitted to the insurers. As of today's date, we have not received confirmation of the acceptance of the claim from the underwriters but the Directors have no reason to believe that the claim will not be paid.



Note E - Interest on borrowings comprises:

Group
S$'000
%
S$'000
%
3 months to 31.12.02
3 months to 31.12.01
Change
9 months to 31.12.02
9 months to 31.12.01
Change
Interest on bank loans and overdrafts
181
90
101
423
264
60
Interest on finance leases
3
4
(25)
10
13
(23)
184
94
96
433
277
56


      Note F - Amount of any adjustment for under or overprovision of tax in respect of prior years:

      Group
      S$'000
      %
      S$'000
      %
      3 months to 31.12.02
      3 months to 31.12.01
      Change
      9 months to 31.12.02
      9 months to 31.12.01
      Change
      Underprovision/(overprovision) in respect of previous years:
      - current taxation
      3
      (39)
      n/m
      32
      (39)
      n/m
      - deferred taxation
      0
      0
      n/m
      0
      0
      n/m
      3
      (39)
      n/m
      32
      (39)
      n/m


       

    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



       

      Group
      Group
      Company
      Company
      31.12.02
      31.03.02
      31.12.02
      31.03.02
      S$'000
      S$'000
      S$'000
      S$'000
      Share capital
      19,800
      19,800
      19,800
      19,800
      Reserves
      10,632
      8,134
      13,672
      15,597
      Shareholders' funds
      30,432
      27,934
      33,472
      35,397
      Minority interests
      1,329
      894
      -
      -
      Capital employed
      31,761
      28,828
      33,472
      35,397
      Represented by:
      Non-current assets
      Goodwill
      1,880
      0
      0
      0
      Property, plant and equipment, net
      23,108
      21,773
      2,424
      4,307
      Subsidiary companies
      0
      0
      25,127
      27,584
      Investments
      2,636
      685
      0
      685
      Other receivables
      341
      290
      82
      98
      27,965
      22,748
      27,633
      32,674
      Current assets
      Inventories and work-in-progress
      5,999
      6,510
      0
      0
      Receivables
      13,474
      10,504
      450
      987
      Fixed deposits
      6,223
      2,032
      6,220
      2,029
      Cast at bank and in hand
      2,285
      5,849
      267
      1,419
      27,981
      24,895
      6,937
      4,435
      Current liabilities
      Payables: amounts falling due within one year
      (20,216)
      (14,693)
      (863)
      (987)
      (20,216)
      (14,693)
      (863)
      (987)
      Net current assets
      7,765
      10,202
      6,074
      3,448
      Non-current liabilities
      Payables: amounts falling due after one year
      (3,916)
      (3,628)
      0
      0
      Deferred taxation
      (53)
      (494)
      (235)
      (725)
      (3,969)
      (4,122)
      (235)
      (725)
      Net assets
      31,761
      28,828
      33,472
      35,397



      The goodwill arose from the Group's two recent acquisitions of fuel injection business from RM Diesel Pty Ltd as well as a turbocharger business from Turbo Torque Pty Ltd.

      Property, plant and equipment also increased considerably as of 31 December 2002, in tandem with the progression of the Subsea Robotics division's ROV build program. This was offset by the current year depreciation charges, coupled with the sale of property, plant and equipment as part of the divestment of the Marine Repairs Services business.

      Net Investment also closed higher with the Group's purchase of a 19.99% stake in RCR Tomlinson Ltd.

      Net current assets was relatively lower compared to 31 March 2002 due to higher current liability as fresh loans were taken to finance the Group's new invesments and the building of new ROVs. Decrease in net current assets arising from the divestment of the Marine Repairs Services business was mitigated by proceeds from the sale.

    1(b)(ii) Aggregate amount of group's borrowings and debt securities


      Amount repayable in one year or less, or on demand

      As at 31/12/2002
      As at 31/03/2002
      Secured
      Unsecured
      Secured
      Unsecured
      S$'000
      8,872
      S$'000
      0
      S$'000
      3,593
      S$'000
      0



      Amount repayable after one year

      As at 31/12/2002
      As at 31/03/2002
      Secured
      Unsecured
      Secured
      Unsecured
      S$'000
      3,907
      S$'000
      0
      S$'000
      3,562
      S$'000
      0



      Details of any collateral

      The Group's borrowings consist of secured bank overdraft and bank loans of two subsidiary companies.

      The bank overdraft and bank loans of one subsidiary are secured by a floating charge over its assets, corporate guarantees from its wholly owned subsidiary company as well as the Company, and personal guarantee from a minority shareholder of the subsidiary company.

      The loan of another subsidiary company is secured by a mortgage over its freehold land and buildings and a fixed and floating charge over its assets.

    1(c) A cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year



       

      Group
      S$'000
      3 months to 31.12.02
      3 months to 31.12.01
      Cash flows from operating activities:
      Profit before taxation
      876
      648
      Add/(Less):
      Amortisation of goodwill
      23
      -
      Depreciation of property, plant and equipment
      746
      571
      Loss on sale of property, plant and equipment
      2
      -
      Investment and interest income
      (78)
      (9)
      Interest expense
      184
      94
      Goodwill written off for acquisition of additional interest in a subsidiary company
      6
      -
      Operating income before reinvestment in working capital
      1,759
      1,304
      Increase in receivable
      (150)
      (312)
      (Increase) / decrease in inventories and work-in-progress
      (219)
      326
      Decrease in payable
      (112)
      (1,190)
      Currency re-alignment
      (19)
      92
      Cash generated from operations
      1,259
      220
      Investment and interest income received
      78
      9
      Interest expense paid
      (184)
      (94)
      Income taxes paid
      (85)
      (317)
      Net cash provided by/(used in) operating activities
      1,068
      (182)
      Cash flows from investing activities:
      Purchase of property, plant and equipment
      (3,233)
      (2,471)
      Proceeds from sale of property, plant and equipment
      27
      29
      Investment in new business
      (613)
      -
      Purchase of quoted equity investments
      (22)
      -
      (New staff loans)/repayment of staff loans, net
      (33)
      224
      Subscription for shares in a subsidiary company by minority shareholders
      300
      -
      Net cash used in investing activities
      (3,574)
      (2,218)
      Cash flows from financing activities:
      Dividend paid
      (618)
      -
      Repayment of finance leases
      (22)
      (36)
      Proceeds from bank overdraft, secured
      105
      105
      Proceeds from term loans, secured
      295
      576
      Repayment of term loans, secured
      -
      (900)
      Proceeds from long-term loans, secured
      884
      860
      Repayment of long-term loans
      (767)
      (295)
      Proceeds from finance leases
      -
      7
      Net cash (used in)/provided by financing activities
      (123)
      317
      Net change in cash and cash equivalents
      (2,629)
      (2,083)
      Cash and cash equivalents at beginning of financial period
      11,137
      8,206
      Cash and cash equivalents at end of financial period
      8,508
      6,123



      Net increase in cash generated by the operating activities was mainly due to working capital movements. Cash used in investing activities increased correspondingly with the acquisition of the business assets of Turbo Torque Pty Ltd in November 2002 as well as continuing build program undertaken by the Subsea Robotics division. Cash used in financing activities rose with the payment of an interim dividend of 4%, less tax.

    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 capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year



       

      Group
      Share Capital
      Share Premium
      Foreign Currency Translation Reserve
      Retained Earnings
      Share Capital & Reserves
      S$'000
      S$'000
      S$'000
      S$'000
      S$'000
      Balance as at 1 October 2002
      19,800
      1,944
      606
      7,914
      30,264
      Exchange difference on translation of overseas subsidiary companies
      8
      8
      Net profit attributable to shareholders
      778
      778
      Interim dividend paid in respect of current financial year, less tax
      (618)
      (618)
      Balance as at 31 December 2002
      19,800
      1,944
      614
      8,074
      30,432
      Balance as at 1 October 2001
      19,800
      1,944
      519
      4,376
      26,639
      Exchange difference on translation of overseas subsidiary companies
      52
      52
      Net profit attributable to shareholders
      624
      624
      Balance as at 31 December 2001
      19,800
      1,944
      571
      5,000
      27,315



       

      Company
      Share Capital
      Share Premium
      Retained Earnings
      Share Capital & Reserve
      S$'000
      S$'000
      S$'000
      S$'000
      Balance as at 1 October 2002
      19,800
      1,944
      12,351
      34,095
      Net profit attributable to shareholders
      (5)
      (5)
      Interim dividend paid in respect of current financial year, less tax
      (618)
      (618)
      Balance as at 31 December 2002
      19,800
      1,944
      11,728
      33,472
      Balance as at 1 October 2001
      19,800
      1,944
      13,531
      35,275
      Net loss attributable to shareholders
      (198)
      (198)
      Balance as at 31 December 2001
      19,800
      1,944
      13,333
      35,077



       

    1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares or cash or as consideration for 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


      There have been no changes in the company's issued share capital.


      31.12.02
      ('000)
      31.12.01
      ('000)
      Number of shares that may be issued upon exercising all outstanding options
      1,465
      2,135



       

    2. Whether the figures have been audited, or reviewed and in accordance with which standard (e.g. the Singapore Standard on Auditing 910 (Engagements to Review Financial Statements), or an equivalent standard)


      The figures have not been audited or reviewed in accordance with the Singapore Standard on Auditing 910 (Engagements to Review Financial Statements).

    3. Where the figures have been audited or reviewed, the auditors' report (including any qualifications or emphasis of 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 Company has adopted the same accounting policies and methods of computation for the current financial period as those for the financial year ended 31 March 2002.

      The presentation and classification of certain items in the financial statements have been changed to provide proper comparisons with the current year's presentation.

    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 reasons for, and the effect of, the change


      No changes in the accounting policies and methods of computation.

    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



       

      Group
      3 months ended 31.12.02 (cents)
      3 months ended 31.12.01 (cents)
      Earnings per ordinary share:
      - Based on weighted average number of ordinary shares on issue
      0.98
      0.79
      - On a fully diluted basis (Detailing any adjustments made to the earnings
      0.98
      0.79


       

      Note B: The earnings per share based on existing share capital is calculated on the profit set out in 1(a) above and the weighted average number of ordinary shares in issue of 79.20m (YTD December 2001: 79.20m) during the period under review.
      Note C: The earnings per share on a fully diluted basis is calculated on the profit set out in 1(a) above and the weighted average number of ordinary shares of 79.39m (YTD December 2001: 79.26m) in issue during the period under review (adjusted for the effects of dilutive potential ordinary shares being the share options granted to employees).



       

    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



       

      Group
      Company
      31.12.02
      (cents)
      31.03.02
      (cents)
      31.12.02
      (cents)
      31.03.02
      (cents)
      Net asset value per ordinary share based on issued share capital
      38.42
      35.27
      42.26
      44.69



       

    8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the group's business. The review must discuss 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. It must also discuss any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on


      Turnover

      Turnover for 3Q2003 was S$12,063,000, 6% above that achieved over the corresponding period last financial year. The increase was led by growing business activities experienced across the Group's key operating units. The growth was achieved notwithstanding the sale of the Marine Repair Services division in May 2002.

      During 3Q2003, the Group's Oilfield division continued to benefit from buoyant oil exploration activities and continuous efforts to expand its scope of services.

      The turbocharger & fuel injection division also achieved an improved turnover mainly from the newly acquired businesses of RM Diesel Pty Ltd (for its fuel injection business) and Turbo Torque Pty Ltd (as an extension of the turbocharger business).

      Meanwhile, 3Q2003 also saw a higher turnover contribution from the Subsea Robotics division supported by its enlarged fleet of remotely-operated vehicles (ROVs). The division also introduced a new mid-range Swift ROV system in December 2002.

      Year-to-date, the Group achieved a turnover of S$35,276,000 for the nine months ended 31 December 2002, representing an 8% improvement over the corresponding period last financial year notwithstanding the absence of revenue contributions from the Marine Repair Services division since its divestment in May 2002.

      Profitability

      The Group posted a higher profit before tax of S$876,000 for the quarter under review, principally due to the absence of losses from the Marine Repair Services division. The result is 35% above the profit of S$648,000 in the last financial year.

      The Turbocharger & Fuel Injection division performed close to expectation.

      While the Oilfield division enjoyed healthy turnover growth, competition experienced in first half of the financial year did not ease and the division saw a downward pressure on its profit margins.

      Performance of the Subsea Robotics division weakened in the current quarter as its North Sea operations experienced unusually severe winter conditions. In addition, the division suffered the loss of a heavy work class ROV unit during an operation in November 2002. The ROV unit is fully insured and construction of the replacement unit has since been undertaken. The replacement unit is expected to be commissioned early in the next financial year.

      The Group registered a profit before tax of S$5,132,000 for the nine months ended 31 December 2002 as a result of stronger revenue contributions from its key operations as well as the absence of losses from the divested business units. The profit included an exceptional gain of S$2,799,000 arising from the sale of the Marine Repair Services division.

    9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results


      No variance noted.

    10. A commentary at the date of the announcement of the 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 Turbocharger & Fuel Injection division will commence its planned expansion and integration of the fuel injection business into its other branches in 4Q2003. This, together with a full quarter contribution from the newly acquired business of Turbo Torque, is likely to enhance the earnings of the division in the 4th quarter. The adverse impact of the on-going drought in various parts of Australia may, however, dampen any significant potential growth arising therefrom.

      While contribution from the Oilfield division is likely to remain healthy, performance of the division remains susceptible to any negative effects resulting from the impending threat of war in the Middle East as well as the mounting competition which is unlikely to abate within the short term.

      The 4th quarter of the financial year will also see the Subsea Robotics division gradually taking off from the winter months of its North Sea operations. Its existing fleet of 6 ROVs will also be boosted by the addition of two mid-range Swift ROV systems early in the next financial year.

      Looking ahead, barring unforeseen circumstances, the Group is expected to post a comparable profit in the 4th quarter.

    11. Dividend


      (a) Current Financial Period Reported On

      Any dividend declared for the current financial period reported on? None
      (b) Corresponding Period of the Immediately Preceding Financial Year

      Any dividend declared for the corresponding period of the immediately preceding financial year? None

      (c) Date payable

      Not applicable


      (d) Books closure date

      Not applicable

    12. If no dividend has been declared/recommended, a statement to that effect


      An interim dividend of 4% less tax has been declared on 30 October 2002 for the current financial year. However, no dividend has been declared or recommended for this quarter reported on.


PART II - ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT
(This part is not applicable to Q1, Q2, Q3 or Half Year Results)


       

    13. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuer's most recently audited annual financial statements, with comparative information for the immediately preceding year


      <Place tabular results and/or notes here>

    14. In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments




       

    15. A breakdown of sales


      <Refer to Para 15 of Appendix 7.2 for the required details. Place tabular results and/or notes here>

    16. A breakdown of the total annual dividend (in dollar value) for the issuer's latest full year and its previous full year


      Total Annual Dividend (Refer to Para 16 of Appendix 7.2 for the required details)

      Latest Full Year ()
      Previous Full Year ()
      Ordinary
      Preference
      0
      0
      Total:

      BY ORDER OF THE BOARD

      Fong Choon Seng
      Company Secretary
      27/01/2003