Dear Shareholders

The prolonged oil price crisis, which underpinned the decline in the oil and gas sector, continued to face strong headwinds with low oil prices and production surpluses. Consequently,the related offshore and marine industry continued to be adversely impacted by the slowdown of capital expenditure from the oil and gas sector and the resultant weaker demand for new builds.
Going forward, oil prices may continue to be at low levels. While there appears to be recent signs of recovery, the industry consensus is for the situation to continue to be volatile and for the upturn to be gradual. Accordingly, the industry, and likewise the Group, may continue to face a complicated and difficult operating environment.

An incredibly challenging year

2016 was indeed a very challenging year for the Group. The key takeaways we observed are:

  • This has been a long harsh “winter” and it will probably continue for a while before recovery sets in.
  • Our business is too industry-centric and dependent on exogenous factors.
  • Liquidity and cash is the order of the day.

There are limited available actions we can take to address the industry landscape, and we are certainly not in any position to create demand. On top of closing out every qualified opportunity we engaged in and venturing into onshore platforms, we can only rightsize our operations, conserve resources and ride out this storm.

Prioritizing our cost

The restructuring of the business has not been achieved without sacrifice. Shareholders have seen their dividends suspended, and many valued members of the team have been made redundant, while those who remain have seen their responsibilities and workload increase. On behalf of the entire Board, I would like to thank all of them for their sacrifices, resourcefulness and resilience during a very tough year for Viking.

Preparing for the future

We reduced our people resources but not our skill competency. We controlled travel and marketing activities without alienating our customers or forgoing our markets. We simplified our infrastructure without compromising on controls and support. We cut costs but not our commitment to quality and deliverables. The changes we have made, while painful, were absolutely necessary in this environment. We hope to be able to ride out this difficult period and yet lay the foundations for Viking to benefit from the recovery when it occurs.

Going amphibious

This crisis certainly forced a rethink of our industry dependence. We have been comfortable in the offshore and marine sector and this crisis has motivated us to venture beyond to the onshore segment anchoring along our technology, solution and capability. This is by no means an abandonment of our traditional customers but an enlargement of our customer base and a reduction of our dependence on a single industry sector. While we may be new to this segment and there are many hurdles to clear, the initial results have been encouraging and there are plenty of opportunities to capitalise on in this area.

Maintaining liquidity

Investor confidence in the sector has been shaken, the cost of capital has increased substantially, and access to financing – both debt and equity – has been severely curbed. The Group, apart from actively engaging the banks concerned in seeking continued support of extended credit capacity, is working diligently to procure new avenues of financing resources and financial assistance programs. We appreciate our bankers’ proportionate measures to help the business during these trying times and our bondholders’ continued belief in our capacity.

Looking forward

We cannot be certain when the tough times will be over nor can we determine when the industry will turn the corner, but we are confident that Viking will overcome these challenges and emerge much stronger. We have positioned ourselves for the future and to ride the upturn when it comes.

Andy Lim

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