Annual Reports and Related Documents::

MTQ Corporation Limited

ANNUAL REPORT 2020 /2021

VISION

To be the leader in the fields that we operate.

MISSION

Provide our customers service quality, our employees job satisfaction and our shareholders return on their investment at a level which meets and surpasses their expectations.

CORE VALUES

be Sincere in all our intentions be Transparent in all that we do be Alert to the needs of others be Responsible in delivering

CONTENTS

01 Corporate Profile / Our Services / Milestones

02 Message from the Chairman and Group CEO

04 Board of Directors

04 Senior Management

05 Group Structure

06 Five-Years Financial Profile

08 Financial Review

1. Financial and Corporate Calendar
2. Corporate Information

1. Directory of Principal Offices
2. Financial Report

CORPORATE PROFILE

MTQ Corporation Limited ("MTQ" or the "Group") specialises in engineering solutions for oilfield equipment, including repair, manufacture and rental operations, supply of oilfield equipment and tools, engineering services with a focus in topside services, as well as pipe support and pipe suspension products. Well-known for its broad experience for over 50 years and commitment to service quality, the Group is the authorised working partner for some of the world's largest OEM in drilling equipment and is accredited to carry out manufacturing and repair works in accordance to American Petroleum Institute Standards.

OUR SERVICES

With the combined engineering capabilities of our accredited facilities at MTQ Engineering, Bahrain, Pemac, Binder Group and In-Line Valve, we are able to offer complete manufacturing, repair and refurbishment services to the oil and gas industry. Our services include:

• Supply of oilfield equipment
• Equipment component manufacturing
• Remanufacturing of most drilling tools
• Oilfield equipment design and engineering services
• Equipment recertification and rig inspections
• General oilfield fabrication and welding
• Design and manufacturing of pipe support products
• Design, engineering, assembly and testing of flow control valves

Some of the products that we represent for sale and rental are:

• All forms of drilling spools, adaptors and related pressure control drilling equipment
• Heat exchanger mud coolers
• Shale shakers
• Drilling handling tools and spares handling tools
• BOP pressure test units and torque tools
• Valves, including safety and drilling diverter valves
• Mud pumps
• Drillpipe protectors
• Safety equipment
• Pipeline products

Our key certifications include:

• API Q1, 5CT, 6A, 7K, 8C, 16A, 16C, 7-1
• ISO 9001:2015
• ISO 14001:2015
• AS/NZS 4801:2001
• ISO 45001:2018

MILESTONES

2019 Disposal of the property, rights and assets and entire business of Neptune Marine Services Limited in Australia

2018 Acquisition of Mid-Continent Equipment

Group's	business	of	supplying
and	distributing	oilfield	equipment
and	spares and	incorporation of

Mid-Continent Distribution Pte Ltd

2017 Acquisition of In-Line Valve, which is headquartered in United Kingdom and focused in the flow control valves for the upstream oil and gas industry

2016 Divestment of turbochargers and fuel injection businesses in Australia with the disposal of MTQ Engine Systems (Aust) Pty Ltd

2014 Expanded into design and manufacturing of proprietary and custom-built pipe support and pipe suspension through acquisition of Binder Group which has production facility in Indonesia

2012 Acquisition of Neptune Marine Services Limited located in Perth, which provides engineering services with a focus of subsea and topside services and has operational presence in the UK and Asia

2011 Acquisition of Premier Group located in Singapore, which repairs and manufactures oilfield equipment as well as supplies oilfield equipment and tools manufactured by some leading global brands

2009 Incorporated MTQ Oilfield Services W.L.L. in Bahrain to provide services to the oil and gas industry in Bahrain and Gulf states

2003 Metalock (Singapore) Limited (originally known as Metalock (Singapore) Pte Ltd) renamed to MTQ Corporation Limited and expanded into fuel injection business in Australia

2002 Divestment of marine related businesses

1999 Listed on SGX Mainboard and expanded into sales and repair of turbochargers business in Australia

1988 Listed on SGX SESDAQ

1969 Metalock (Singapore) Pte Ltd was incorporated as private limited company in Singapore and subsequently embarked on oilfield engineering, fabrication and equipment rental businesses

1959 Commenced operations in Singapore as Metalock (Far East) Ltd to set up a branch specialising in repairs of marine equipment

ANNUAL REPORT 2020/2021

01

MESSAGE FROM THE CHAIRMAN AND GROUP CEO

Dear Shareholders,

Overview

COVID-19 is the defining theme for this past financial year. We approached April 2020 on the back of a profitable prior year and an improved outlook. However, April 2020 started with "lockdowns" in Singapore and elsewhere and with crude oil prices plummeting to around US$20. Energy demand dropped in line with the pandemic restrictions, especially in aviation. At an operating level, we have been subjected to the whole range of challenges, from reduced manning, dormitory woes and customer delays. However, as vaccinations started and oil prices recover to current levels of around US$70, we are now poised to benefit from global recovery as long as COVID-19 recedes.

We recorded revenues of S$49.1 million for the financial year ended 31 March 2021 ("FY2021"), a significant reduction from S$74.3 million attained for the previous year. Notwithstanding this decline, we managed to record an operating profit before tax of S$1.4 million with the support of government relief measures of S$3.4 million. However, the capital investment side of the industry has been affected and we decided to make S$9.2 million provisions against intangible assets, inventories and other receivables in the parts of our business more exposed to such capital investments. This led to an overall loss of S$7.6 million for the year.

Drilling activity reached its bottom levels in October 2020 and has edged up since then, especially in the United States ("US"). Both the Middle East and Asia Pacific rig count fell through much of the year and should see some improvement moving ahead at current oil prices. Projects, which were planned but shelved last year, have also started to return. As the world looks to emerge from COVID-19, the challenge is what sort of demand we recover to in the medium term.

The tendering outlook facing asset owner customers remains a challenging one but the drilling outlook is improving. Hopefully, the combination of yet another period of zero new builds and more scrapping will keep pushing towards a younger and more modern fleet, improving its overall utilisation and providing more opportunities for repair and maintenance operators like us.

COVID-19 introduced a pause in the recovery which we had seen from late 2018. We continue to focus on our work as an outsourcing partner of various Original Equipment Makers ("OEM") in the regions we operate in. We remain optimistic that several of those drilling and exploration projects on the drawing board will resurface and drive growth in the medium term.

With the new US administration and a renewed global emphasis on climate change, the emphasis on renewable energy will definitely accelerate. We will also renew our efforts to look at new sectors of growth outside of fossil fuels. Shareholders will note that we have diversified

into other areas like automotive distribution and subsea services in the past, but there is no assurance that new areas of growth will be successful. We remain focused on our customers and our employees, and to work positively towards delivering better services in better markets.

Business Review

Summary

This past year has been one of coping with disruptions.

Within the Oilfield Engineering division, our Asian businesses recorded reductions of about 49% to about S$21.1 million on the back of project delays and a slowdown in new orders, primarily due to COVID-19 restrictions on drilling operations within the region. While our engineering services were classified as essential businesses, workforce disruptions meant operating activities contracted significantly.

In the Middle East and elsewhere, our businesses only recorded a lower reduction of some 15% to S$28.0 million for the year. The Bahrain activities were healthy throughout and we only started to see a reduction in the 4th quarter of FY2021. While the COVID-19 virus did affect many in that part of the world, business disruptions have been lesser in 2020 thus supporting a lower decline in revenue.

We successfully refinanced our revolving bank debts prior to March 2020 and have continued to focus on improving our balance sheet. We have a net cash position of S$7.8 million and have minimal committed borrowings to repay in the next 12 months.

Oilfield Engineering - Improving Outlook

The Oilfield Engineering business comprises our engineering facilities in Pandan Loop and Loyang Way in Singapore, our facility in Bahrain, the Binder Group with a manufacturing facility in Jakarta, Indonesia and the UK based In-Line Valve Company Limited. With the exception of Binder Group which focuses on downstream plant and power stations, the rest of our business is primarily focused on supporting drilling and exploration in upstream and production activity.

As we enter our second decade of our operations in Bahrain, our business there continues to work at being the facility of choice for OEM and drilling contractor, with our key strengths being quality, reliability and competitive. Our OEM customer base continues to provide a stable baseload of maintenance work. We also continue work with regional drilling contractors to continue to expand our product offering. We recorded another profitable year in Bahrain despite the disruptions and are focused on increasing orders from traditional and new sources within the region. A major area for the year ahead is regional expansion of customers.

02	MTQ CORPORATION LIMITED

MESSAGE FROM THE CHAIRMAN AND GROUP CEO

In Singapore, the increase in rig deployment within Southeast Asia did not materialise as a result of COVID-19. More recently, projects that were scheduled to start in Myanmar are now obviously on hold. Activity in the local shipyards has remained muted. Our trading and agency businesses were much weaker this year. We anticipate some international projects will intensify procurement in the year ahead, notably in Middle East, South America and Australia.

Elsewhere in MTQ, we are still in the process of unwinding the activities of our previously listed subsidiary Blossomvale Holdings Ltd ("BLV", previously named Neptune Marine Services Limited). BLV made several distributions of its excess cash and assets, including the shares in MMA Offshore in specie, to all its shareholders including MTQ which continues to own 87.1% in BLV. The next stage in the unwinding process involves winding up a series of dormant subsidiaries of BLV in multiple jurisdictions and that process continues. It is the intention that all remaining available cash will be distributed to the shareholders of BLV at that point.

People and Safety

The overriding issue we have faced this year is coping with the COVID-19 virus. Both our main facilities at Bahrain and Singapore have encountered disruptions as workers in dormitories were unable to be safely deployed. Several of our employees also contracted COVID-19 though we have had no fatalities. Our Bahrain work force has been unable to visit customers in Saudi Arabia for long stretches this year. Our Malaysian-based colleagues were first "locked down" in Malaysia. Then several had to face the prospect of being away from families for prolonged stretches and live in rented accommodation in Singapore. It has been mentally draining dealing with the ebbs and flows of a pandemic. Despite vaccinations, increasingly the reality for our work places that many of the virus prevention practices are likely to remain moving ahead.

The overall employees in the Group dipped slightly this past year in line with natural attrition. Our challenge particularly in Singapore and Bahrain is that we continue to rely on foreign-sourced workers to helm workshop positions in machining, welding and fitting. It has been difficult to recruit for replacements in the current years. Finding experienced staff in our industry is always a challenge and we continue to invest in training and retention of all staff.

The Group continues to focus on improving its safety performance. One silver lining has been an improved safety performance in line with lower workshop activity. While total number of accidents and accident frequency rate remains relatively low, areas of improvement continue to be identified. Reinforcing the safety mindset at work is a constant effort and safety education and training remains important, especially as we hope activity picks up.

The total staff strength for the Group is about 694, broken down by geographical segments as follows:

Country	Headcount as at	Headcount as at
31 March 2021	31 March 2020
Singapore	179	197
Bahrain	166	167
Australia and UK	21	21
Indonesia (JV)	328	351
	694	736

Our Thanks

We would like to thank the support of all the people who work for MTQ Group. We are also delighted to be able to get the support of our lending banks, DBS and UOB. Government financial support in the countries the Group operates in has also enabled us to support payroll costs in period of reduced business activity.

We also want to thank all shareholders who have supported the Group through recent years. The Board is pleased to recommend a one-tier tax exempt final dividend of 0.5 Singapore cents per share, subject to shareholders' approval at the forthcoming Annual General Meeting. This will bring the total full-year dividend to 1.0 Singapore cents per share, an increase from FY20's. Our success this year in achieving an operating profit and improving our financial position gives us confidence in recommending this.

KUAH KOK KIM

Chairman

KUAH BOON WEE

Group Chief Executive Officer

ANNUAL REPORT 2020/2021

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