Hints of Ezra Holdings’ Future from Its Latest Third Quarter Results

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Ezra Holdings (SGX: 5DN) is one of the leading offshore services providers for the oil & gas industry in this region. More specifically, the company provides offshore support, construction, fabrication, and other deep-water subsea services to upstream oil and gas players.

The company had announced its third quarter results just this morning.

At first glance, it might seem that the company had experienced a drop in profitability for the first nine months of the financial year ending 31 August 2014 with its profit decreasing by 19% year-on-year from US$50.5 million to US$41.1 million.

However, last year’s profit had been boosted by one-off gains from the company’s sale of some fixed assets and other investments which totalled US$94 million. If the non-recurring components were excluded, Ezra actually reversed its fortunes: A loss of US$43.5 million a year ago had become a net profit of US$25.0 million. Part of the reason for the reversal was due to the company’s gross profit increasing dramatically (a 73% year-on-year jump from US$94.4 million to US$163.6 million).

The main division that contributed to most of the company’s growth was the Subsea Services division. For the nine months ended 31 May 2014, the division enjoyed a US$200.6 million increase in revenue over the previous year on the back of a rise in both the value and number of projects undertaken. Unfortunately, Ezra’s overall top-line growth was slightly offset by lower revenue from the Offshore Support Services division this year; the division had to return two leased-in vessels to its owner in the second quarter of the financial year. All told, Ezra ended the nine month period with total revenue of US$1.04 billion, some 24% higher than a year ago.

Possible spinoff

On 10 July 2014, the group announced that it is proposing to consolidate its Offshore Support Services division into its 46%-owned associate EOC Ltd. If the consolidation moves ahead, the associate company would become the largest offshore support services company in Asia by asset size. After that, EOC, which is listed in Norway, might consider a secondary listing in Singapore. If all these are successful, the balance sheet of Ezra  might improve (its net debt to equity ratio is now 1.14, which is high) and thus allow the company focus more on growing its Subsea Services business.

Ezra Holdings’ proposed consolidation is still up for shareholders’ approval so nothing’s fixed in stone yet. But for now, things seem to be going great for Ezra.

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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 Stanley Lim doesn’t own shares in any companies mentioned.