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Investor Relations - News

First Quarter Financial Statement And Dividend Announcement

BackJul 30, 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		%
	3 months to 30.06.03	3 months to 30.06.02	Change

Revenue	12,017	10,270	17

Other income (Note A)	12	21	(43)

	12,029	10,291	17

Cost of sales (Note B)	(7,649)	(6,412)	19

	4,380	3,879	13

Staff costs	(2,103)	(1,815)	16

Other operating expenses (Note C, D)	(1,285)	(2,024)	(37)

Profit from operating activities	992	40	2380

Interest on borrowings (Note E)	(247)	(104)	138

Gain on disposition of discontinuing operation	-	3,484	N/M

Profit from operations before taxation	745	3,420	(78)

Taxation (Note F)	(240)	(148)	62

Net profit from operations	505	3,272	(85)

Minority interests	58	4	1350

Net profit attributable to shareholders	563	3,276	(83)

N/M: not meaningful

Note A -	Other income comprises:-
		Group
		S$'000		%
		3 months to 30.06.03	3 months to 30.06.02	Change
	Interest income	10	8	25
	Other income	2	13	(85)
		12	21	(43)


Note B -	Costs of sales include:-
		Group
		S$'000		%
		3 months to 30.06.03	3 months to 30.06.02	Change

	Depreciation of property, plant and equipment	699	333	110


Note C -	Other operating expenses include:-
		Group
		S$'000		%
		3 months to 30.06.03	3 months to 30.06.02	Change

	Depreciation of property, plant and equipment	225	197	14
	Loss on sale of property, plant & equipment, net	-	50	N/M
	Gain on exchange, net	(643)	(83)	675
	Allowance for doubtful debts and bad debts written off	134	96	40
	Allowance for stock obsolescence and stocks written off	29	25	16
	Amortisation of goodwill	31	-	N/M
	Exceptional items (Note D)	-	685	N/M



Note D -	Exceptional items comprise:-
		Group
		S$'000		%
		3 months to 30.06.03	3 months to 30.06.02	Change

	Provision for diminution in value of investment	-	685	N/M


Note E -	Interest on borrowings comprises:-
		Group
		S$'000		%
		3 months to 30.06.03	3 months to 30.06.02	Change

	Interest on bank loans and overdrafts	241	100	141
	Interest on finance leases	3	4	(25)
	Interest on loan from minority shareholder fo a subsidiary	3	-	N/M
		247	104	138


Note F -	Amount of any adjustment for under or overprovision of tax in respect of prior years:-
		Group
		S$'000		%
		3 months to 30.06.03	3 months to 30.06.02	Change

	Underprovision/(overprovision) in respect of previous years:
	- current taxation	-	29	N/M
	- deferred taxation	(55)	-	N/M
		(55)	29	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		Company
	30.06.03	31.03.03	30.06.03	31.03.03
	S$'000	S$'000	S$'000	S$'000

Share Capital	19,839	19,800	19,839	19,800
Reserves	11,425	11,490	11,619	12,641
Shareholders' funds	31,264	31,290	31,458	32,441
Minority interests	912	970	-	-
	32,176	32,260	31,458	32,441

Represented by:
Non-current assets
Goodwill	2,360	2,163	-	-
Property, plant and equipment, net	24,675	24,238	2,218	2,307
Subsidiary companies	-	-	22,551	22,208
Associated company	4,187	-	-	-
Investments	-	2,813	-	-
Other receivables	295	316	67	73
Deferred tax assets	331	297	-	-
	31,848	29,827	24,836	24,588

Current assets
Inventories and work-in-progress	5,726	5,668	-	-
Receivables	16,483	14,495	729	673
Fixed deposits	6,203	7,705	6,200	7,702
Cash at bank and in hand	3,117	2,980	1,262	435
	31,529	30,848	8,191	8,810

Current liabilties
Payables: amounts falling due within one year	(19,345)	(17,925)	(1,404)	(773)
	(19,345)	(17,925)	(1,404)	(773)

Net current assets	12,184	12,923	6,787	8,037

Non-current liabilities
Payables: amounts falling due after one year	(11,561)	(10,121)	-	-
Deferred tax liability	(295)	(369)	(165)	(184)
	(11,856)	(10,490)	(165)	(184)

Net assets	32,176	32,260	31,458	32,441

Associated company in FY2004 relates to a 28.19% investment in RCR Tomlinson Ltd ("RCR"). Prior to the additional interest acquired in 1QFY2004, the Group held a 19.99% equity stake in RCR, and had classified the investment in RCR under "Investments".

Decrease in net current assets is mainly due to the following:
- Increase in bank overdrafts [as explained under section 1(b)(ii)];
- Dividend payable in respect of FY2003;
and offset by higher receivables.

Non-current liabilities increased due to rescheduling of term loans [as explained under section 1(b)(ii)]

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

Amount repayable in one year or less, or on demand

As at 30/06/2003

As at 31/03/2003

Secured	Unsecured	Secured	Unsecured

S$'000 5,975	S$'000 20	S$'000 6,205	S$'000 -

Amount repayable after one year

As at 30/06/2003

As at 31/03/2003

Secured	Unsecured	Secured	Unsecured

S$'000 11,561	S$'000 -	S$'000 10,121	S$'000 -

Details of any collateral

(i) Total bank borrowings of S$7,955,000 granted to a subsidiary company are secured by the following:-

- simple deposit of title deed over the subsidiary company's property at Raynham St. Salisbury, Queensland, Australia;
- legal assignment of the sale proceeds of the aforementioned property to the bank;
- legal charge over the subsidiary company's quoted investment;
- corporate guarantee from the Company; and
- fixed and floating charge over the assets of the subsidiary company.

(ii) Total bank borrowings of S$7,045,000 granted to a second subsidiary company are secured by the following:-

- floating charge over the assets;
- corporate guarantee from its subsidiary company and the Company;
- personal guarantee from a minority shareholder of the subsidiary company; and
- subordinate loan agreements from the Company and a minority shareholder of the subsidiary company.

(iii) Total bank borrowings of S$2,484,000 granted to a third subsidiary company are secured by the following:-

- fixed charge on an equipment purchased under the loan facility agreement;
- corporate guarantee provided by the Company; and
- subordinate loan agreement from the Company.

Note: Included in the Group's secured borrowings is S$52,000 of finance lease payables.

Group's Borrowings:

The Group's aggregate borrowings increased as at 30 June 2003 mainly as a result of higher bank overdrafts and translation of Australian-dollar loans at higher exchange rate.

Current portion of Group's borrowings were reduced, however, due to rescheduling of loan repayment pertaining to a subsidiary company.

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 30.06.03	3 months to 30.06.02
Cash flows from operating activities:
Profit from operations before taxation	745	3,420

Add/(Less):
Depreciation of property, plant and equipment	924	530
Investment and interest income	(10)	(8)
Interest expense	247	104
Amortisation of goodwill	31	-
Profit on sale of business assets	-	(3,484)
Provision for diminution in value of investment	-	685
Loss on sale of property, plant & equipment, net	-	50

Operating income before reinvestment in working capital	1,937	1,297

(Increase)/Decrease in receivables	(1,989)	700
Increase in inventories and work-in-progress	(58)	(591)
Increase in payables	524	1,177
Currency re-alignment	(262)	58

Cash generated from operations	152	2,641
Investment and interest income received	10	8
Interest expense paid	(247)	(104)
Income taxes paid	(171)	(119)

Net cash (used in)/provided by operating activities	(256)	2,426

Cash flows from investing activities:
Purchase of property, plant and equipment	(609)	(2,739)
Acquisition of associated company	(1,079)	-
Acquisition of other investment	-	(2,704)
Loans repaid by/(to) staff, net	22	(135)
Proceeds from sale of business assets	-	7,798

Net cash (used in)/provided by investing activities	(1,666)	2,220

Cash flows from financing activities:
Proceeds/(Repayment) of bank overdrafts, secured	702	(369)
Repayment of finance leases	(24)	(23)
Proceeds from bank loans, secured	180	2,559
Repayment of bank loans, secured	(368)	(1,618)
Proceeds from issue of shares	47	-

Net cash provided by financing activities	537	549

Net change in cash and cash equivalents	(1,385)	5,195
Cash and cash equivalents at beginning of financial year	10,685	7,881

Cash and cash equivalent at end of financial year	9,300	13,076

Note: Cash and cash equivalents consist of fixed deposits, cash at bank and in hand less unsecured bank overdrafts.

The net cash used in operating activities during 1QFY2004 is mainly attributable to the less favourable movement in working capital.

In investing activities, cash movements for 1QFY2004 was less favourable than 1QFY2003 mainly due to substantial proceeds from sale of business assets of Marine Repair Services business in 1QFY2003. There was also lower investment in property, plant and equipment in 1QFY2004.

Net cash provided by financing activities was comparable between 1QFY2004 and 1QFY2003.

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 April 2002	19,800	1,944	568	5,622	27,934
Exchange difference on translation of overseas subsidiary companies	-	-	68	-	68
Net profit attributable to shareholders	-	-	-	3,276	3,276

Balance as at 30 June 2002	19,800	1,944	636	8,898	31,278

Balance as at 1 April 2003	19,800	1,944	701	8,845	31,290
Exchange difference on translation of overseas subsidiary companies	-	-	292	-	292
Issue of shares	39	8	-	-	47
Net profit attributable to shareholders	-	-	-	563	563
Dividends paid in respect of previous financial year, less tax	-	-	-	(928)	(928)

Balance as at 30 June 2003	19,839	1,952	993	8,480	31,264

Company	Share Capital	Share Premium	Retained Earnings	Share Capital & Reserves
	S$'000	S$'000	S$'000	S$'000

Balance as at 1 April 2002	19,800	1,944	13,653	35,397
Net profit attributable to shareholders	-	-	485	485

Balance as at 30 June 2002	19,800	1,944	14,138	35,882

Balance as at 1 April 2003	19,800	1,944	10,697	32,441
Issue of shares	39	8	-	47
Net loss attributable to shareholders	-	-	(102)	(102)
Dividends paid in respect of the previous financial year, less tax	-	-	(928)	(928)
Balance as at 30 June 2003	19,839	1,952	9,667	31,458

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

During the current quarter, the Company issued and allotted 155,000 ordinary shares of S$0.25 each upon the exercise of options granted under the Metalock Executives' Share Option Scheme. This scheme was replaced by the MTQ Corporation Executives' Share Option Scheme 2003 in April 2003. Options granted under the previous scheme shall, however, continue to be exercisable in accordance with the terms of the previous scheme.

	As at 30.06.03 ('000)	As at 30.06.02 ('000)
Number of shares that may be issued upon exercising all outstanding options	1,105	1,510

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 by the Company's auditors.

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

With effect from 1 January 2003, the Group has to comply with Financial Reporting Standards ("FRS") of Singapore which replaced the Singapore Statements of Accounting Standards ("SAS") adopted by the Group before the FRS came into effect. There are no material differences arising from the compliance with FRS.

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 30.06.03 (cents)	3 months ended 30.06.02 (cents)
Earnings per ordinary share:-
- Based on weighted average number of ordinary shares on issue (Note A)	0.71	4.14
- On a fully diluted basis (Note B)	0.71	4.13

Note A: 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 79.25m (June 2002: 79.20m) during the period under review.

Note B: 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 79.56m (June 2002: 79.30m) 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
	30.06.03 (cents)	31.03.03 (cents)	30.06.03 (cents)	31.03.03 (cents)

Net asset value per ordinary share based on issued share capital	39.40	39.51	39.64	40.96

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

1QFY2004 vs 1QFY2003

TURNOVER:

Group turnover for 1QFY2004 was S$12,017,000, an increase of 17% over 1QFY2003. The increase was attributable to turnover growth across all business divisions - Oilfield Engineering, Engine Systems and Subsea Robotics.

With the support of its enhanced engineering capacity, the Oilfield Engineering division was able to secure higher turnover from a buoyant oil and gas industry. The Engine Systems division also enjoyed contributions from the fuel injection and turbocharger businesses of RM Diesel Pty Ltd and Turbo Torque Pty Ltd which were acquired in August and September 2002 respectively. Subsea Robotics division also saw an increase in turnover with additional contribution coming mainly from the Asian fleet in 1QFY2004.

The overall improvement was, however, moderated by the absence of revenue contributions from the Marine Repair Services division which was divested in May 2002.

PROFITABILITY:

Despite a stronger turnover in 1QFY2004, the Group posted a profit before tax ("PBT") of S$745,000 in 1QFY2004, which was 78% lower than that achieved in 1QFY2003. The better PBT in 1QFY2003 was mainly attributed to a one-time net exceptional gain of S$2,799,000 which arose from the disposition of the Marine Repair Services division offset by a provision for diminution in value of an investment. Excluding such exceptional gain, the Group's PBT for 1QFY2004 would have been a 20% improvement above that of 1QFY2003 instead.

The improvement was achieved mainly from strong exchange gains in Australian Dollars and Sterling Pounds as well as the absence of losses sustained by Marine Repair Services. Contributions from the Oilfield Engineering and Engine Systems divisions also remained strong. In particular, 1QFY2004 PBT included contributions from the fuel injection (RM Diesel) and turbocharger (Turbo Torque) businesses acquire after 1QFY2003.

Despite a larger fleet of remotely operated vehicles in 1QFY2004, performance of the Subsea Robotics division remained below expectations in view of the weak North Sea market where customers are becoming increasingly cost sensitive. In entering the Asian market, gross margins have been sacrificed, thus affecting the division's bottom line.

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

Going forward, the Oilfield Engineering division will maintain its efforts to increase its service range and build closer alliances with the OEMs. Apart from working towards increasing marketplace activities, the Engine Systems division will also explore various complementary services to expand its earnings base without a corresponding increase in overheads. It has also commenced the incorporation of an operating arm in Surabaya, Indonesia, which is expected to be operational in 3QFY2004. Meanwhile, the Subsea Robotics division will continue to focus on developing the Asian market.

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

No dividend has been declared in respect of 1QFY2004 (1QFY2003: Nil).

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

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

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
30/07/2003