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Joint Message by Independent Chairman & Chief Executive Officer
Extracted from Annual Report 2017

Dear Shareholders,

In line with the decision of Sin Heng Heavy Machinery Limited (the "Company") and its subsidiaries (the "Group") to change its financial year end from 30 June to 31 December, the set of financial statements in this annual report has correspondingly been changed to cover a period of 18 months from 1 July 2016 to 31 December 2017 ("18M FY2017")

In our announcement to the Stock Exchange on 28 February, we did a comparison of the results of 18M FY2017 and 18M FY2016. In this Annual Report, please note the financial statements for FY2016 refer to the 12-months period ended June 2016.

Over the last two years, the construction sector and the marine sector were less than buoyant. According to the Building and Construction Authority ("BCA"), the preliminary estimate for the local construction demand for 2017 was $24.5 billion, a figure lower than the forecasted amount by BCA previously. Although oil price has recovered somewhat, the marine sector still remains weak. Notwithstanding these challenges, the Group managed to achieve a marginal profit for 18M FY2017.

Financial Performance

Revenue for 18M FY2017 dipped 6.1% from that of 18M FY2016 to S$141.6 million mainly due to lower revenue from our Trading segment. On a positive note, revenue from Equipment Rental business inched out an improvement of 4.7% to S$67.5 million. Revenue from Trading business retreated 14.2% to S$74.1 million largely due to sales of smaller tonnage equipment for 18M FY2017.

Notwithstanding the lower total revenue, our gross profit for both segments improved. Although revenue of Trading segment was lower, the gross profit improved 14.3% mainly due to better product mix. With gross profit of Equipment Rental business also improving, the Group's gross profit increased by 10.2% to S$26.1 million.

Following the loss in FY2016, we undertook cost reduction initiatives. Administrative expenses decreased by S$1.56 million or 7.4%. Other operating expenses also decreased S$2.13 million or 46.3% mainly due to unrealised fair value differences on foreign currency contracts and absence of one-time recognition of loss on disposal of an associate company in 18M FY2016.

As a result of the above factors, the Group turned around with a marginal profit attributable to shareholders of about S$0.44 million for 18M FY2017.

Our financial position remains robust, amidst these challenging times. Inventories of S$31.9 million as at 30 June 2016 had decreased to S$4.4 million. Current liabilities had also been reduced from S$66.2 million to S$36.5 million.

We are not proposing any final dividends, but shareholders should have received the interim dividends of S$0.015 per share we paid out on 27 September 2017 shortly after we announced our 12M FY2017 results in August 2017.

Corporate Update

In compliance with Guideline 2.1 of the Code of Corporate Governance 2012 where independent directors should make up at least one-third of the Board, there have been some changes to the Board composition in 2017. In November 2017, Mr Tan Ah Lye relinquished his role as the Executive Chairman but remained as the Chief Executive Officer and a Board member. We thank Mr Tan for his invaluable contributions as the Company's founder, and as Chairman from 31 October 2012.

Mr Renny Yeo Ah Kiang, an Independent Director of the Company, was appointed as the Independent Chairman on 14 November 2017. The composition of the Board has been reconstituted and was duly announced in November 2017.

Outlook

As we step into 2018, we are seeing positive signs in both the construction and marine sectors. BCA projects the total construction demand for 2018 to be between S$26.0 billion and S$31.0 billion, up from the S$24.5 billion of 2017. Oil price has also recovered and has maintained mostly around US$60 per barrel.

The recent renewed activity of the en bloc sales may contribute to the growth in demand for the construction of new projects. In addition, public infrastructure projects such as the proposed Thomson-East Coast MRT line and the North-South Expressway may generate demand for the construction industry.

With our reputation as a leading provider of lifting products and services, we are cautiously optimistic that we may be able to capitalise on opportunities arising from these developments.

In Appreciation

We thank our Board members, our principals, customers, business associates and our dedicated staff for their commitment preseverance and invaluable contributions to the Group.


Renny Yeo Ah Kiang

Independent Chairman

Mr Tan Ah Lye

Executive Director & CEO
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