For the year under review, the Group recorded a net profit before income tax of S$1.7 million on the back of S$41.1 million revenue. This was lower compared to S$9.1 million and S$52.7 million, respectively, due mainly to the completion of projects in FY2009 for a major customer and the lower revenue contribution from our Thailand subsidiary in FY2010 as the Group consciously focused its resources in Thailand to build the two bunker vessels for chartering out to third parties. The Group incurred expenses of S$1.3 million in respect of its listing on the Singapore Exchange Catalist Board which raised gross proceeds of S$5.1 million from the issue of 21.2 million shares at S$0.24 each.

In FY2010, gross profit margin (“GPM”) declined to 25.1% from 28.3% in FY2009 due mainly to the completion of contracts which yielded lower margins as a result of competitive pricing. Due to lower revenue and lower gross profit margins, the Group’s gross profit for FY2010 decreased by S$4.6 million or 30.9% to S$10.3 million, from S$14.9 million in FY2009.

Aside from lower revenue and IPO expenses affecting the bottom-line, other operating income decreased by S$0.3 million due mainly to lower reimbursement of expenses from foreign workers. Administrative expenses increased by S$0.9 million due to higher professional fees, staff costs and bonuses, advertisement and printing costs. Other operating expenses also increased by S$1.6 million due to higher depreciation expenses, bonuses and staff costs resulting from the increase of foreign worker levy rates that took effect in July 2010.

The Group’s earnings per share (“EPS”) for FY2010 (based on weighted average of 130.2 million shares) was 1.21 SG cents. Net asset value per share as at 31 December 2010 was 20.47 SG cents. As at 31 December 2010, the Group’s total net asset increased by S$3.5 million to S$31.8 million from S$28.3 million as at end of FY2009. The increase was largely due to the higher work-in-progress of S$5.5 million as most projects were still ongoing. These include the first direct order secured from an international offshore engineering and construction contractor and vessel owner – Subsea 7 S.A.– to engineer, construct and deliver an offshore barge (completed in April 2011) .

Additionally, the total net asset included an increase in property, plant and equipment of S$1.9 million due mainly to the S$2.7 million increase in construction-in-progress, partly offset against depreciation for the year. This construction-inprogress includes the cost of construction of the two maiden bareboat bunker vessels which was secured on 11 August 2010, a month after the public listing in July 2010.

As at 31 December 2010, cash and cash equivalents stood at S$7.8 million, an increase of S$0.7 million compared to a year earlier from S$7.1 million. The increase resulted from net cash generated from operating activities of S$2.2 million, net cash provided from financing activities of S$1.5 million, and offset by net cash used in investing activities of S$3.0 million.

Net cash used in investing activities includes S$0.1 million cash inflow for the 100% acquisition on 15 October 2010 of the registered share capital in Dalian ES Marine & Offshore Engineering Co., Ltd. (“Dalian ES”) – a company incorporated in Dalian, PRC.

The Group announced a final dividend 0.336 SG cents per share for FY2010, in addition to the interim dividend of 2.33 SG cents paid in May 2010 prior to the IPO.

Repair Segment

The Group’s main business driver in FY2010 was the repair segment which contributed 53.9% or S$22.1 million of total revenue, higher from S$21.8 million in FY2009. Repair revenue has been consistent due to the longstanding relationship with prominent local shipyard operators.

Repair contributed S$4.5 million gross profit at 20.4% gross profit margin which is slightly lower in percentage points of 4.4 from S$4.7 million FY2009.

New Building and Conversion Segment

Previously, the Group’s main business driver was the new building and conversion which contributed S$30.9 million or 58.6% of the Group revenue in FY2009 was down to S$11.9 million or 46.1% in FY2010 as the Group focused on building the two bunker vessels for its chartering business to commence on financial year 2012 (“FY2012”).

This segment contributed a gross profit of S$5.8 million with gross profit margin of 30.5%, 43.2 percentage points lower from S$10.2 million in FY2009.

Singapore

Singapore being the domicile of ES Group, contributed 86.3% or S$35.5 million of the Group’s revenue in FY2010 which increased by S$0.6 million from S$34.9 million in FY2009 due to having consistent orders from being a first priority subcontractor of Sembawang Shipyard
Pte Ltd.

Major projects completed in FY2010 include the conversion project of Dynamic Producer with an approximate contract value of S$10.5 million which was awarded by Sembawang Shipyard Pte Ltd. This project was clinched in FY2009 and was completed before the Group’s listing in July 2010.

Other projects include major repair of trench/ pipelay vessel of S$1.9 million, repair of container
vessel damaged by collision of S$1.2 million, conversion to car carrier to passenger vessel of
S$1.2 million, and S$1.0-million major repair of heavy lift crane vessel.

Thailand

ES Offshore and Marine Engineering (Thailand) Co., Ltd, a 50%-subsidiary of the company operates a 70,000 square meters shipyard in Thapsakae in Prachupkirikhan Province in southeastern Thailand.

Revenue contributions from Thailand fell by 68.2% to S$5.6 million in FY2010 from S$17.8 million in FY2009 as the Group focused its resources in Thailand to build two bunker vessels for its own chartering business, for which revenue is expected to kick in from FY2012. The Group utilised 30% of its resources (capacity) in Thailand to construct two vessels of 3,400 dead weight tonnes (“dwt”) each. Work commenced in the second half of FY2010 and delivery to ES Shipping Pte. Ltd. is due in FY2012.

These charter agreements which were signed on 11 August 2010 mark a major milestone of ES Group’s foray into vessel owning and chartering to provide a relatively stable stream of recurring revenue that will complement the core ship building and repair activities.

In FY2010, the revenue contributed includes the construction of a new build 4,500 dwt deck cargo vessel for Tongbao (Singapore) Shipping Pte. Ltd. amounting to S$4.2 million which was delivered on 30 September 2010 and confirmed on 26 November 2010 to set-sail in 2011. This marks the first successful delivery of an ocean-going multi-purpose carrier by our Thailand subsidiary and underscores the Group’s capabilities in delivering complicated engineering and construction solutions for the offshore and marine industry.

China

The Group’s recently acquired PRC subsidiary is a cost centre for engineering and procurement services and did not contribute revenue in FY2010. However, Dalian ES Marine & Offshore Engineering Co., Ltd. contributed to cost efficiencies of the Group through the VAT refund from import and export of materials which improved the Group’s price competitiveness and savings.

During the year under review the following interested person transactions were executed: Dalian ES Marine & Offshore Engineering Co., Ltd. was engaged to design the two bunker vessels at a total contract value of USD177,500. It also sold to ES Offshore Engineering Pte. Ltd. ship plates worth a total contract value of USD580,300 at cost price and bulb flats worth USD92,980 at cost price.