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(ii) put in place adequate procedures which must be reviewed and approved by our Audit
Committee; and
(iii) our Audit Committee will monitor the implementation of the policy, including reviewing the
instruments, processes and practices in accordance with the policy approved by our Board.
Credit Risk
Our Customers
For our sales to customers in respect of our shipbuilding business, we generally require a down payment
of 20.0% of the contract value within 10 days of signing the memorandum of sale agreement. We provide a
refund guarantee for the down-payment paid to us. A further 10.0% of the contract value may be required to
be paid as progress payment upon keel laying. The remainder of the contract price is typically paid after trial
and commissioning and before delivery of the vessel. As a policy, we only commence negotiations with
customers of good repute. Before signing the sales contract with our customers, we screen the financial
standing of our customers and deal with customers of sound financial standing. In addition, prior to the release
of the vessels from the shipyard, we would collect the full amount billed in relation to shipbuilding projects
and the majority of the amount billed in relation to ship repair and conversion projects. In the past three
financial years ended 31 December 2007 and the five months ended 31 May 2008, there has not been any
material bad debts recorded.
For ship repair and conversion and other shipping services, the billings are generally issued upon
completion and delivery of the project or provision of the service. We normally grant credit terms of 30 days
to our ship repair and conversion customers.
For ship chartering, our customers are required to provide one month payment in advance and one month
deposit 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.
To the best of their knowledge and based on currently available information, our Directors are not aware
of any information that may lead them to believe that any of the customers may not be able to meet their
contractual payment obligations in a timely manner or that they may default on any obligations.
We do not have a policy of making provisions 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. For the five months ended
31 May 2008, we recovered S$0.1 million in debts written off. We did not experience any significant impact
on our financial performance arising from payment delays and/or default by our customers in FY2005,
FY2006, FY2007 and for the five months ended 31 May 2008.
Our average debtors’ turnover in days for FY2005, FY2006, FY2007 and for the five months ended
31 May 2008 were 136 days, 11 days, 30 days and 13 days respectively. See “Our Business — Credit
Management”. In the event our customers face cash flow problems, it may impair their ability to settle
promptly trade debts due to us or we may not even be able to collect any amounts due to us from them. This
may have an adverse impact on our financial performance and financial position. See “Risk Factors — Risks
Relating to Our Business and Operations — We are exposed to default by our customers and/or payment
delays” and “Risk Factors — Risks Relating to Our Business and Operations — Our shipbuilding business is
dependent on a few major customers”.
Our Suppliers
We are exposed to the credit risk of our suppliers arising from the non-performance of subcontractors for
which we have made prepayments to and from the non-delivery of equipment by our suppliers for which we
have made downpayments. We have not experienced significant losses arising from non-performance of our
suppliers. See “Our Business — Our Major Suppliers”.
Interest Rate Risk
Our profitability is affected by changes in interest rates and the amount of our floating rate debt. As at
the Latest Practicable Date, all our interest bearing liabilities are based on floating interest rates and they
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