Ezra released their 1H FY 2009 results on April 8, 2009. Below is an analysis of their results as well as a discussion of their prospects. Since this analysis is long (for a reason to be explained in a later section), I shall split it into two parts. Part 1 shall deal with the numbers-heavy portion which includes the Profit and Loss Statement, Balance Sheet and Cash Flow Statement (supported by attached spreadsheets). Part 2 talks more on the qualitative aspects for Ezra, prospects and catalysts for growth in the near future and also comments on other aspects of the Company which I feel are worth mentioning. Be sure to check back in due course for Part 2 of the analysis.
Profit and Loss Analysis
As can be seen from the table above, Ezra’s sales mix has seen quite a change from 1H FY 2008 as it has added a new Energy Services Division. This has contributed US$46.1 million in sales for 1H FY 2009, providing a strong boost to total revenues which have increased 87% year-on-year. However, due to the change in sales mix with more revenues skewed towards Energy Services for 1H FY 2009 (26% compared to 1H FY 2008 4%), as well as the indicative gross margins of just 13% for Energy Services Division, this has dragged down the entire gross margin for the Group from 38% in 1H FY 2008 to just 29% for 1H FY 2009. Moving forward, the Group is prepared to offer an integrated services model to buoy profits by offering a one-stop solution service for customers, thereby hopefully improving on gross margins across all its divisions.
Financial expenses (i.e. interest expenses) increased 71% for 2Q 2009 compared to 2Q 2008 due to the increase in drawdown of bank loans and bills payable in order to fund capital expenditure for fixed assets. Though no vessel was reported to be delivered in 2Q 2009 (the last reported delivery was Lewek Plover in 1Q 2009, specifically November 2008), I believe that the Group needs to draw down on their credit facilities in order to pay equipment suppliers and the vessel builders on progressive payments. These fixed assets are then recognized on a progressive basis through capitalization in the Balance Sheet. Administrative Expenses as a percentage of sales dropped from 28.5% for FY 2008 to 8.5% for 1H FY 2009, mainly due to the absence of a one-off provision for staff made in FY 2008. Read more...