Posted by: donmihaihai | January 1, 2012

Lets goes technical.

EZRA Holdings Limited, a company that I seldom talk about recently but with their latest annual report 2011, it is interesting to write about their receivables again.

Time line.
Annual Report 2008

- Energy Service segment was created and grossed US$29 million.
– Receivables at 87 million. About 118 days outstanding.
– Receivables past due 180 days = 7.5 million with 6.3 being impaired.

Annual Report 2009

- Energy Service segment renamed as Deepwater Subsea Services and grossed 46 million
– Receivables at 183 million. About 203 days outstanding.
– Receivables past due 180 days = 84 million with 2.7 being impaired.
– No additional impairment required but additional credit risk assessment being disclosed as Deepwater Subsea services had receivables of 75 million and 29 million outstanding as at balance sheet date.
– What was also disclosed was ” Included in the Group’s trade receivables of more than 120 days is a balance amounting to US$75,077,000 (2008: US$29,534,000), where the Group has the right to a permit held by the debtor to explore drilling activities in the territorial waters of New Zealand. The proceeds arising from realisation of this permit is expected to be in excess of the balance receivable.”

Annual Report 2010

- Deepwater Subsea Services grossed 21 million
– Receivables at 206 million. About 212 days.
– Receivables past due 180 days = 85 million with 4.5 million being impaired.
– Additional credit risk assessment being disclosed as Deepwater Subsea services had receivables of 88 million outstanding as at balance sheet date. Receivables due from New Zealand amount to 75 million for 2009 and 2010
– As at B/S date, Ezra collected 8 million out of 96 million of gross revenues from subsea services since 2008 which was 3 years.
– Included in the Group’s trade receivables of more than 365 days is a balance amounting to US$75,097,000 (2009: US$75,077,000), where the Group has the right to a permit held by the debtor to explore drilling activities in the territorial waters of New Zealand. The proceeds arising from realisation of this permit is expected to be in excess of the balance receivable. Accordingly, the balance has not impaired.

Annual report 2011

- Subsea Services grossed 180 million.
– Receivables at 302 million. About 197 days outstanding.
– Receivables past due 180 days = 95 million with 5.7 million being impaired.
– No additional impairment required but additional credit risk assessment being disclosed as Subsea Services had receivables of 170 million outstanding at balance sheet date. Receivables from New Zealand amount to 75 million.
– Included in the Group’s trade receivables of more than 365 days is a balance amounting to US$75,097,000 (2010: US$75,097,000), where the Group has the right to a permit held by the debtor to explore drilling activities in the territorial waters of New Zealand.
– In October 2011, the Group entered into a settlement agreement with the debtor in respect of the outstanding receivable to settle the amount in not more than five years. This amount is secured by rights and interests to the receivables of the debtor including participatory interests and guarantees. This includes an undertaking that the debtor has obtained from a private funding source to meet its repayment obligations.
– As at B/S date, Ezra collected 106 million of gross revenues from subsea services since 2008 which was 4 years.

Outstanding days of receivables at each B/S date were worse than rough gauge of Ezra receivables as these excluded revenues grossed from associates and joint venture. Ezra trade with these related parties as well and those were not small amount.

Other than that, annual reports of Ezra for last few years were also a bit special as they were disclosing more which is reasonable if not auditor was not doing the minimum requirement of their job.

But looking at information available, the party in New Zealand is clearing in default or without any mean of repaying. That goes against FRS in assessing the ability in repayment and whether to impair or not. By in agreement with Ezra that impairment is not required due to Ezra right in getting permit mean playing right at the line between right and wrong.

Which company policy allow the company to enter into settle agreement after more than 3 years of outstanding and give debtor another 5 years for them to find a way out?

Of course unless the company is in the same boat.

That 75 million is not small sum. It is 187% and 99% of FY2011 and FY2010 NPAT respectively.

Lastly, lets just say is it reasonable to expect more cockroaches in the cabinet when one is found.

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Responses

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    Harry


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