Kuala Lumpur, 18 March 2022
Summary of FY22 Preliminary Financial Results
- Revenue of RM4.1 billion
- Operating loss of RM2.2 billion
- Provision for impairment of RM5.6 billion
- LATAMI of RM8.9 billion
- Current orderbook of Group subsidiaries valued at RM6.6 billion
Sapura Energy Berhad (“Sapura Energy” or “the Group”) today announced its unaudited preliminary full year results for the financial year ended 31 January 2022 (“FY2022”), posting a loss after taxation and minority interests (“LATAMI”) of RM8.9 billion. The Group recorded an operating loss of RM2.2 billion on the back of RM4.1 billion revenue.
Following a review of its contract performance, businesses and assets, the Group recognised a hefty financial loss, including significant impairment charges.
The Group recognised a RM3.3 billion provision for impairment on goodwill on consolidation and a RM2.3 billion provision for impairment on property, plant and equipment in FY 2022.
The Group’s FY 2022 revenue of RM4.1 billion was 22.8 percent lower than the RM5.3 billion recorded in financial year 2021 (‘FY 2021”) primarily due to lower contributions from the Engineering & Construction (“E&C”) segment.
Sapura Energy Group Chief Executive Datuk Anuar Taib described FY 2022 as one of the most challenging years in the Group’s history, as it faced an unprecedented liquidity crunch.
“Our current financial constraint is a culmination of many factors, including contracts accepted on onerous terms and operational issues exacerbated by COVID-19 pandemic. These have resulted in significant losses in many projects, impacting our financial position. Almost all of the project losses were from legacy contracts.” said Datuk Anuar.
“The Group’s liquidity challenges were also due to an unsustainable debt level and high overdue payables to our vendors, and these challenges became more acute with our working capital facilities suspended since October 2021,” Datuk Anuar remarked.
Resolving the past to rebuild the future
Sapura Energy has taken decisive actions to resolve its liquidity challenges and regain a stable platform for its business.
The Group has embarked on a series of negotiations with clients on legacy contracts for amicable solutions to recover or limit losses. “We have had long discussions with clients on ways to moderate our losses, while ensuring project delivery. When a workable compromise is not possible, we may have to make difficult decisions,” Datuk Anuar explained. In the fourth quarter of FY 2022, Sapura Energy terminated the monopile installation contract at the Yunlin wind-farm in Taiwan, following extensive negotiations with its clients.
To address its unsustainable debt and settle outstanding claims to vendors, Sapura Energy successfully applied for and was granted two Orders by the High Court of Malaya, which allows it to begin a court-sanctioned debt restructuring exercise with creditors. The Orders, which include a Restraining Order, will help create a stable platform for the Group to negotiate with creditors while its operations can continue. Sapura Energy is already in talks with lenders to restructure its long-term debt and will begin scheme of arrangement briefings with its vendors, soon.
“We acknowledge that our current difficult situation has impacted our vendors. The proposed scheme of arrangement, which require vendors’ support, when approved, will enable the Group to carry out a court-sanctioned framework for firm and committed payment to our vendors,” said Datuk Anuar. “The framework also ensures we can continue our operations and pay vendors in an orderly manner that is sustainable to our business. The Group will endeavour to find a fair and equitable solution to all stakeholders.”
The Group is also seeking sources of new funds to finance its business plan as it restructures its business and streamlines its operations.
The implementation of its strategic divestment plan, aligned to Sapura Energy’s future business direction, is currently underway. “Businesses and assets that are not core to our future business direction will be divested to reduce our debt,” Datuk Anuar explained.
As part of its Reset plans, Sapura Energy has reviewed its business direction and enhanced its risk management framework for the bidding of future contracts.
“We will be selective in our bids to focus on preferred regions, namely Asia Pacific and the Atlantic, where we can be competitive,” said Datuk Anuar. “We will be shifting the balance of our project portfolio in the short to medium term towards transportation and installation; and anchor our construction activities at the Lumut fabrication yard.”
Sapura Energy is also improving its project delivery with enhanced project management discipline, underpinned by stronger contract and cost management to protect margins.
“Our new Enterprise Risk Management Framework, with appropriate risk appetites across our value chain, will be a key enabler to sustained performance,” he added.
Resilience in FY 2023
In its announcement to Bursa Malaysia, Sapura Energy’s Board of Directors expressed its aim to overcome the financial and operational challenges in Financial Year 2023 (“FY 2023”), with the support of stakeholders. “Sapura Energy is determined to continue playing a contributory role in the energy sector amidst the current global uncertainties, by bringing its people and assets to unlock values together with, and for, our business partners,” the Board stated.
Despite the enormous challenges, Sapura Energy continues to work together with clients, vendors and partners to execute projects in its order book, which currently stands at RM6.6 billion for the Group’s subsidiaries.
In FY 2022 Sapura Energy was executing close to 60 projects, of which 63 percent of the revenue were from legacy contracts. In FY 2023 revenue from secured projects attributable to legacy contracts will be reduced to about 25 percent.
With an average of nine rigs expected to be in operation in FY 2023 compared to an average of seven in FY 2022, its Drilling segment will continue to generate stable cash flow under better market conditions.
Meanwhile, its Exploration and Production segment, operated through its associate company SapuraOMV, is expected to improve performance on better gas prices in the current financial year. SapuraOMV will continue providing stable gas supply to Malaysia LNG, from Blocks SK408 and SK310, while its Jerun development project on SK408 is progressing safely, on time and on budget. The strategic partnership is self-funding in FY 2023.
Cautionary note: “Sapura Energy”, “the group” and “the company” are used for convenience where references are made to Sapura Energy Berhad in general. Similarly, words like “we”, “us” and “our” are used to refer to Sapura Energy Berhad in general or to those who work for the company and its subsidiaries, where relevant. This press release may contain forward-looking statements. All statements other than statements of historical facts included in this press release, including, without limitation, those regarding our financial position, financial estimates, business strategies, prospects, plans and objectives for future operations, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future. Such forward-looking statements reflect our current view with respect to future events and are not a guarantee of future performance. Forward-looking statements can be identified by the use of forward-looking terminology such as the words “may”, “will”, “would”, “could”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “aim”, “plan”, “forecast” or similar expressions and include all statements that are not historical facts.