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Q: In FY2014, Group revenue was about US$356 million and we had trade receivables of US$318 million. In FY2014, overdue trade receivables increased to about US$176 million (55% of receivables) when it was only 28% for FY2013. Why are receivables so high?
Group CEO Michael See.Photo: Company
Mr See: Our accounts receivables of US$318 million is a big number, but the true trade receivables is about US$92 million.
US$67 million of the US$318 million is inter-company debt with associates within the Group.
Without reference to a specific case, here is how we account for inter-company debt using an example of the sale of a boat for US$90 million (at cost on arms-length basis) to our joint venture company.
US$67 million of the US$318 million is inter-company debt with associates within the Group.
Without reference to a specific case, here is how we account for inter-company debt using an example of the sale of a boat for US$90 million (at cost on arms-length basis) to our joint venture company.
We take a bank loan of US$60 million and the balance US$30 million is treated as receivables (instead of equity) until our associate company makes a profit and returns us the money.
Every month, the associate company pays us using the charter hire fees that it receives.
Another US$80 million of the US$318 million was deposited with leasing companies for sales and leaseback. We did that to improve the cashflow on our balance sheet.
The deposit required by these leasing companies had increased from about 15% to as high as 25%.
The remaining receivables arise from joint ventures that we are unwinding. We will be collecting some of these receivables this year.
The remaining receivables arise from joint ventures that we are unwinding. We will be collecting some of these receivables this year.
