2015/2016 ANNUAL REPORT
5
Dear Shareholders,
STATE OF THE MARKET
The current global ship-owning sector is in a dismal
state of disarray.
An oversupply of vessels is affecting every segment
of the shipping industry. Even the traditionally stable
Ro-Ro* vessels are experiencing excess tonnage,
albeit not on the same scale as other segments like
container and bulk carriers. Consequently, many
operators are resorting to super slow steaming* to
reduce fuel costs and to calibrate tonnage utilisation.
Amid the widespread laying up of vessels, pre-
mature scrapping and delayed delivery of new
vessels, shipowners are mired in bankruptcy,
losses and reduced profitability.
About 22% of our profits are derived from agency/
logistics, and our earnings are facing
intense
pressure from shipowners who are either suffering
losses or reduced margins from freight declines.
FINANCIAL PERFORMANCE
Against these headwinds, SSC is pleased to report
a good set of financial results of US$9.6 million for
the financial year just ended. This represents a 7.8%
increase over the previous financial year.
Our ship-owning segment enjoyed higher revenue
and profitability as we accounted for the full year’s
earnings of three of our vessels, including the new
m.v. Taurus Leader. This is despite the Group having
to accede to a straight-line revenue accounting
policy for our long-term charter contracts which
resulted in a deferred recognition of actual earnings
crystallised under the charter terms.
In the past and up to the 3Q FY2016 results
announcements, the Group had consistently recorded
its ship-owning revenue based on actual daily charter
income in accordance with the terms of the charter
hire agreements. KPMG (led by a new audit partner
following a five-year mandatory rotation) informed
management in May this year that we should apply
straight-line recognition of the Group’s income
as it was their view that the relevant benefit is the
availability of the vessel for use by the charterer
CHAIRMAN’S MESSAGE
and this remains unchanged over the charter
hire period. As such, it was their view that the
conventional straight-line approach should be applied
to spread the income evenly over the charter period,
notwithstanding that such recognition approach may
not be representative of commercial realities.
Accordingly, the Group has restated the previous
year’s accounts. Had the Group continued with its
previous revenue recognition approach, net profit
for FY2016 and FY2015 would have been US$13.8
million and US$9.3 million respectively.
OUTLOOK
Our policy of opting for a homogeneous fleet of
specialised Ro-Ro* vessels locked into long-term
charters with blue chip shipping majors has put our
Group in good stead.
This policy, supported by prudent management of
our loan exposures and reliable technical shipping
skills, will ensure and strengthen our tenacity and
ability to weather the turbulence affecting the
global shipping industry.
Indeed we are hopeful that the current downturn
will provide opportunities for our financially sound
Group to judiciously acquire some distressed
assets, thus allowing us to expand our fleet and
grow our business.
Going forward, Management and Directors will
remain vigilant and disciplined as we steer the
Group through choppy waters. We remain mindful of
creating value for all stakeholders while strengthening
the foundation upon which we build our business.
APPRECIATION
As Chairman, it now behooves me to thank all our
dedicated staff for their hard work, both on land
and at sea, and the wise counsel of all our board
members. Last but not least, all the Principals and
shareholders who continue to keep faith with us.
C. K. Ow
Executive Chairman
*See Glossary
