Technics Sinks Into The Red

technics oil and gas Technics Oil & Gas Limited (SGX: 5CQ), or Technics for short, released its fourth-quarter and full-year results yesterday. Founded in 1990, Tehnics is a leading full-service integrator of compression systems and process modules that are integrated to form the production and storage facilities for oil and gas exploration and production.

Operation Highlights

For the full year that ended 30 September, Technics recorded a 73% plunge in revenue from S$149.7m to S$40.9 m on a year-on-year basis. Correspondingly, net profit slumped from S$23.2m to $10m.

This is mainly attributable to the spin-off of Norr Offshore Group and a significant drop in the business coming from its subsidiaries. Other sources of income also declined considerably with interest income falling 94% against last year and the unrealised profit in foreign exchange (under “other credits”) was down 69%.

This loss was mitigated by the sharp decrease in overall expenses. Marketing and distribution costs were down from S$1.9m to S$0.9 million. On the other hand, administrative expenses, a major part of the expenses, fell 39% from S$31.6m to S$19.2m.

Financial Position

Property, plant & equipment increased by S$3.2 million to S$43.2 million from S$39.9m as at 30 September 2012. Trade and other payables decreased 41% to S$15.9m from S$27m in line with the decrease in project costs.

Under its cash consolidated statement, its cash and cash equivalents decreased by S$5.5m to S$2.5m as at 30 September 2013. $20.445 million in cash is pledged for bank facilities, resulting in a $25.986 million cash position on the balance sheet.

With accumulated losses amounting to S$8 million for the parent company and S$1.7m for its non-controlling interests, no dividends have been declared. Net Asset Value per Unit also went down by 0.83 cents from S$0.74 in the second quarter to S$0.73 in the third quarter, while the gearing ratio increased to 0.96 as at 30 September 2013 as compared to 0.86 as at 30 September 2012.

Disappointed results weigh on stock price

With the consecutive issuance of profit warnings, dampened investor sentiment led to a fall in its stock price by more than 35% over a one year period. In comparison, the Strait Times Index (SGX: ^STI), which saw a 4.4% gain in the same period.

On a positive note, customers of Technics, the oil and gas majors and leading FPSO operators, are maintaining a longer term perspectives on their operation requirements that will not be affected by the fluctuation of oil prices. Therefore, it is unlikely that there will be any changes to the delivery of existing contracts.

Rotary Engineering Ltd (SGX: R07), another player in the integrated engineering services, faced similar problems two years ago. However, the company has since emerged from the ashes as its share price soared 76% after implementing tough cost-cutting measures.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.