Sin Heng Heavy Machinery Limited

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Operations Review
Extracted from Annual Report 2017

The Group changed its financial year end from 30 June to 31 December. As a result, the financial year under review, i.e. ended 31 December 2017, stretches 18 months from 1 July 2016 to 31 December 2017; whereas the previous financial year ended 30 June 2016 (“FY2016”) has the normal 12 months.

For the purpose to compare between financial years in a fair manner, the same corresponding 18 months were used, i.e. 1 July 2016 to 31 December 2017 (“18M FY2017”) versus 1 July 2015 to 31 December 2016 (“18M FY2016”). These set of financial statements showing this comparison were announced on 28 February 2018.

FINANCIAL PERFORMANCE

The Group registered a total revenue of S$141.6 million for 18M FY2017, 6.1% lower than that for 18M FY2016, mainly due to lower revenue from its Trading business segment. Revenue from Equipment Rental business segment was 4.7% higher at S$67.5 million for 18M FY2017 mainly due to the increase in the average fleet size rented out. However, revenue from Trading business segment decreased 14.2% to S$74.1 million as a result of sales of smaller tonnage equipment for 18M FY2017.

In line with better revenue of Equipment Rental business segment, gross profit of this segment rose 8.3% to S$17.5 million for 18M FY2017. Although revenue of Trading business for 18M FY2017 declined, gross profit of this segment rose 14.3% to S$8.6 million, mainly due to more favourable product mix.

The Group's cost reduction initiatives were successful which resulted in a decrease in administrative expenses of 7.4% to S$19.5 million.

Other operating expenses decreased 46.3% to S$2.5 million mainly due to unrealised fair value differences on foreign currency contracts and absence of one-time recognition of loss on disposal on an associate company.

As a result of the above factors, the Group returned with a profit attributable to shareholders of S$0.44 million for 18M FY2017 compared to a loss of S$2.9 million for 18M FY2016.

FINANCIAL POSITION

Current Assets

As at 31 December 2017, the Group's current assets was S$59.0 million or 30.6% of total assets. The Group's current assets, comprised mostly of cash and cash equivalents, trade receivables and inventories, decreased by S$34.2 million from that of 30 June 2016 mainly due to the decrease in inventories, trade receivables and cash and cash equivalents.

Non-current Assets

As at 31 December 2017, the Group's non-current assets stood at S$133.9 million or 69.4% of total assets. The Group's non-current assets, comprised mostly of fixed assets and investments, increased by S$4.7 million mainly due to the increase in rental fleet.

Current Liabilities

As at 31 December 2017, the Group's current liabilities was S$36.5 million or 51.1% of total liabilities. The Group's current liabilities, comprised mostly of bills payable, other payables, current portion of bank loans and finance leases, decreased by S$29.7 million mainly due to repayment of bills payable.

Non-current liabilities

As at 31 December 2017, the Group's non-current liabilities amounted to approximately S$34.9 million or 48.9% of total liabilities, and comprised mostly of non-current portion of finance leases and deferred tax.

Working Capital

As at 31 December 2017, the Group's working capital was S$22.6 million as compared to S$27.0 million as at 30 June 2016.

Equity

As at 31 December 2017, the Group's equity was marginally lower at S$121.6 million as compared to S$122.8 million as at 30 June 2016, mainly due to the interim dividend paid for 18M FY2017.

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