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the entering into new contracts with potential customers. Based on information available to our Directors, they
are not aware of any circumstances that would lead them to believe that any customers with significant orders
are likely to default
For ship repair and conversion and other shipping services, generally the billings are issued upon
completion and delivery of the project/service. We normally grant credit terms to our ship repair customers of
30 days.
For ship chartering, our customers are required to provide one month’s payment in advance and a deposit
equivalent to one month’s payment. Customers have 30 days to make payment after they are invoiced.
On a case-by-case basis, our Directors may vary the credit terms based on commercial considerations
such as the size and duration of the project, the customer’s creditworthiness and the strength of our
relationship with the customers.
In relation to the executed contracts that we have entered into with our customers, we have the benefits
of the contractual rights under the contracts and the non-refundable deposits paid by the customers. This is in
accordance with prevailing industry practice for the market segment that we cater for.
Barring occurrence of any unforeseen circumstances, our Directors consider our credit policies to be
appropriate and in line with the industry practice for the particular market segment that we cater for.
In 2008, we entered into agreements with one of our customers for the construction and sale of small
AHTS vessels. Since this customer did not make the payment of the down payments for these vessels within
the time stipulated in the agreements, we have cancelled the construction contracts for these vessels and we
intend to sell these vessels to other buyers. We have other contracts for vessel construction which remain in
effect with the same customer. The amount at risk in relation to these contracts entered into with that customer
amounts to S$48.3 million, which constitutes approximately 5.2% of our order book as at 8 August 2008.
While we have received the corresponding down payments for these vessels, there is no assurance that this
customer will be able to complete its contractual payment obligations to us according to the terms of the
construction contracts. In the event that the customer is unable to complete its contractual payment obligations,
resulting in a cancellation of the construction contract, we could sell these vessels to other buyers where
opportunity arises, or alternatively, retain them for our own chartering business, depending on whichever
option is commercially and economically feasible, based on their commercial merits in the best interest of our
Shareholders. To the best of our Directors’ knowledge and based on information available to them, our
Directors are not aware of any circumstances that will lead them to believe that this customer will not be able
to fulfil its obligations.
We do not have a policy of making provision for any general debts. However, we will provide for specific
debts if we consider its collection to be doubtful. We had written off bad debts of S$0.3 million, S$0.4 million
and S$1.3 million for FY2005, FY2006 and FY2007, respectively. We recovered S$0.1 million for the five
months ended 31 May 2008. We did not experience a material impact on our financial performance arising
from payment delays or defaults by our customers in FY2005, FY2006, FY2007 and the five months ended
31 May 2008.
Our trade receivables’ turnover for each of FY2005, FY2006, FY2007 and the five months ended 31 May
2008, was as follows:
FY2005 FY2006 FY2007
Five Months
Ended
31 May 2008
Trade receivables turnover days (1) .................. 136 11 30 13
Note:
(1) In respect of FY2005, FY2006 and FY2007, trade receivables turnover days are computed based on the
formula (Trade receivables turnover days = trade receivables / revenues � 365 days). In respect of the five
months ended 31 May 2008, trade receivables turnover days are computed based on the formula (Trade
receivables turnover days = trade receivables/revenue � 152 days).
Our trade receivables turnover days fell from 136 days in FY2005 to 11 days in FY2006 primarily due to
a substantial amount billed in December 2005 and not collected as at 31 December 2005. This amount related
to the final installment, consisting of 90% of the contract value, due on a shipbuilding contract for a vessel
delivered in January 2006. We billed this amount in December 2005 and at the same time recorded it as a
trade receivable. This trade receivable amount was settled in January 2006. This was in relation to one of the
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