Sin Heng Heavy Machinery Limited

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Operations Review
Extracted from Annual Report 2015

MEETING CHALLENGES

The Group faced a challenging environment for FY2015 amid the weakening global economy, volatile currency movements as well as the slump in prices of oil and other commodities.

The Group revenue decreased by 16.6% to S$177.8 million as compared to the previous financial year due to lower trading volume, smaller tonnage equipment sold and marginal decline in the equipment rental business mainly due to competitive rental environment.

Revenue from the trading business in FY2015 had decreased by 20.7% to S$131.2 million while the revenue from the equipment rental business in FY2015 had fallen by a marginal 2.2% to S$46.6 million as compared to FY2014.

Despite the drop in revenue, the Group gross profit in FY2015 ended lower by a marginal 1.7% to S$31.7 million as compared to the S$32.3 million achieved the year before. This can mainly be attributed to the trading business which saw a 8.0% increase to S$16.2 million, which mitigated the 10.2% decline from the equipment rental business to S$15.5 million.

The Group performance for FY2015 was also lifted by higher other operating income which saw an increase of 22.5% to S$4.8 million due to better sales of parts, gain on disposal of property, plant and equipment, gain on divestment of an associate as well as and lower other operating expenses arising from lower foreign currency exchange loss as compared to FY2014. All these helped to mitigate the higher administrative expenses due to increase in depreciation charges and staff related expenses which saw an increase of 21.3% to S$16.5 million.

As a result, the Group net profit after tax for FY2015 decreased to S$12.0 million from S$13.8 million for FY2014.

STRONG FINANCIAL POSITION

The Group financial position remained strong with net assets of S$132.3 million as at 30 June 2015 and a net asset value of 23.06 Singapore cents per share as compared to a net asset value of 22.26 Singapore cents per share as at 30 June 2014.

The Group total non-current assets increased by S$4.9 million from S$120.4 million to S$125.3 million as at 30 June 2015, mainly due to the expansion of the Group rental fleet, which was offset by the divestment of an associate.

The Group total current assets decreased by S$20.4 million from S$122.8 million to S$102.4 million as at 30 June 2015, mainly due to a decrease in cash and bank balances and trade receivables. The repayment of bills payable decreased the cash and bank balances while the lower revenue recorded for the year resulted in lower trade receivables.

As a result, the Group total assets decreased from S$243.2 million to S$227.7 million as at 30 June 2015.

The Group total non-current liabilities decreased by S$1.2 million from S$24.9 million to S$23.7 million as at 30 June 2015, mainly due to repayment of finance leases, which was offset by an increase in bank loans for the expansion of the rental fleet.

Total current liabilities decreased by S$18.8 million from S$90.5 million to S$71.7 million as at 30 June 2015, mainly due to repayment of bills, trade and other payables.

Consequently, the Group total liabilities decreased from S$115.4 million to S$95.4 million as at 30 June 2015.

As at 30 June 2015, the Group registered a positive working capital of S$30.7 million as compared to S$32.3 million as at 30 June 2014.

DIVIDENDS

To show our appreciation for the support and confidence of our shareholders, the Board proposed a final dividend of 0.55 Singapore cents per share, After taking into consideration of the interim dividend of 0.45 Singapore cents per share, the full year dividend will be 1.0 Singapore cent per share.

MOVING FORWARD

It has been a year of slow progress. However, the Group has delivered credible results while strengthening its capacity to tap on growth opportunities in the region. We expect the operating environment to remain challenging and competitive for some time, and we continue to be cautiously optimistic. Nevertheless, we are committed to laying firm foundations to capitalise on any new opportunities that may arise, and thus achieve greater value for all our shareholders.

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