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Deconsolidation of liquidated units yields Q4 profit for EMS Energy

EMS ENERGY was back in the black in the fourth quarter over the deconsolidation of its Koastal Industries Pte Ltd arm, according to unaudited financial statements out on Tuesday.

It reported a net profit of S$39.37 million for the three months to Dec 31, 2017 - reversing the net loss of S$115.8 million in the same period the year before.

But fourth-quarter revenue was a negative S$428,000, which the company said "was mainly due to reclassification of scrap sale of S$1 million to other income". It had seen a turnover of S$9.33 million previously.

Much of the turnaround in EMS Energy's performance came on the S$64.61 million gain that it chalked up on the deconsolidation of its subsidiaries.

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EMS Energy has deconsolidated the accounts of Koastal Industries and its subsidiaries, as that unit was placed under creditors' voluntary liquidation in October 2017.

That move has helped to improve its working capital position to negative S$82.8 million, from S$126 million before.

Net liabilities were pared from S$112.4 million to S$71.7 million, as "considerable" Koastal Industries liabilities were eliminated.

EMS Energy prefaced its results with a cautionary note that "there are high degrees of uncertainties" over the implications and impact of an ongoing scheme of arrangement on its results announcement.

A scheme creditor has contested the scheme of arrangement, which put the brakes on the Singapore High Court delivering its judgement on whether or not the move can go ahead.

Still, the board said that it believed the group can operate as a going concern because the group's financial position "will be substantially improved with the debt-to-equity conversion" should the scheme of arrangement go through.

The company is exploring fund-raising exercises to strengthen its cash position, the board added, and shareholders will be updated "as and when there are any material developments on the aforementioned".

EMS Energy's full-year earnings stood at S$35.5 million, against losses of S$120.12 million the previous year.

Meanwhile, revenue dropped by 77 per cent to S$6.7 million on lower marine offshore project billings and lower business in Vietnam, as well as the deconsolidation of a water treatment entity in the Koastal Industries group.

Earnings per share was 7.91 Singapore cents for 2017, against a loss per share of 26.77 Singapore cents in 2016.

Net asset value was negative 15.98 Singapore cents a share, compared with negative 25.04 Singapore cents previously.

No dividend was declared for either year.

"Shareholders are cautioned against placing undue reliance on the unaudited results announcement for FY2017," the company warned.

"Shareholders should also consult their stockbroker, bank manager, solicitor or other professional adviser if they have any doubt about the actions that they should take."

EMS Energy has been suspended from trading since September 2016.