I am delighted to report that the Group had registered a net profit after tax of $4.7M for the financial year ended 30 June 2018 (‘FY18’), as compared to $720K for the prior financial year ended 30 June 2017 (‘FY17’). Even after discounting a net gain of $2.3M from properties (sale of a shop house which yielded a profit of $4.5M less $2.2M net book value of an industrial building writing off as the building has been torn down for re-development), the operations of the Group have still performed better in FY18 than in FY17.
The Group was still facing poor market demand for its steel products in the first half of FY18 due to the doldrums in the marine, shipbuilding, oil and gas sectors caused by the decline in oil prices. Recovery in these sectors in the first half of FY18 was rather slow despite oil prices trending up last year and as a result the rise in demand for the Group’s steel products was not significant then.
There was a quick and robust pick-up in demand for pipes and fittings after Chinese New Year from the oil & gas sector. As such, turnover improved in the second half of FY18. However, the better operational performance was not contributed evenly by the major product groups of the Group. In particular, demand for structural steel products was relatively stagnant during the period. It had remained so because the shipbuilding & construction sectors that consumed mainly structural steel products had not shown healthy improvement.
In the last few years, the Group took various cost cutting measures and adjusted itself to meet the challenges of a depressed market for its products, although at the of this calendar year, it noticed early sporadic signs of recovery in demand from the oil and gas sector. It continued with its efforts to meet customers’ needs by responding timely to their requirements. It would keep close contact with the market to bring in items relevant to current needs of the market.
The property at 6 Kim Chuan Drive has been successfully leased out. Also, to better utilize the Group’s properties, the Group decided to rejuvenate the property located at 38 Genting Lane by re-developing it into a new 8 storey Industrial Building, the construction of which is still in progress.
The Group would be presenting its inaugural sustainability report this year. It would be looking to adopt practices that are suitable to the mainly trading environment the Group operates in. It would also be working with its major suppliers, who are mostly overseas steel mills, to understand sustainability issues affecting the industry which in turn will help the Group to find its own directions in this aspect. For a start, it would like to educate its staff on their roles and responsibilities towards building a sustainable operation and environment. It hopes to inculcate the desire and discipline to reduce waste, be responsible user of vital limited resources and on how to preserve planet Earth for the future generations.
Past Annual General Meetings had always seen lively exchange of views between shareholders and management. We would love to preserve the growing culture of dialogue in a mutually respectful manner as shareholders discuss matters affecting the Group and help management chart a course of actions that takes into account the concerns of various parties. I am privileged to be called to chair the Board of Directors & the Annual General Meeting since last year and would look forward to the co-operations from management & shareholders to enable me to manage these meetings in a productive way.
With continuing unfavourable conditions of weak oil prices, fears of US interest rate hikes, uncertainty surrounding Brexit negotiations, unabated terrorist threats and global political tensions, the new financial year remains a challenging one.
Recovery in the marine, oil & gas sectors will be slow. The Group will need to engage its customers more intensely and find new ways of collaborating with them to open up more opportunities that are beneficial to both parties. We have to tap on each other’s strengths to overcome difficulties and the current market doldrums. Under the new leadership, the Group will strive to take stock of its achievements so far and strategize for new growth impetus. It will have to transform its traditional ways of doing business and inculcate new mindset.
Although the property market has yet turned around, the Group is seeking ways to achieve returns from its portfolio of properties held. It is looking for good quality tenants for its building located at 6 Kim Chuan Drive and had recently sold a shophouse unit at Jalan Besar for a handsome gain over its net book value. More action will be taken on its remaining properties in anticipation of a recovery in market conditions and shareholders will be kept abreast of any new development.
The Directors are pleased to recommend a final tax exempt dividend of 1 cent per share and a special tax exempt dividend of 1 cent per share for FY17 which is subject to shareholders’ approval at the coming AGM. This recommended dividend is higher than the dividend paid in FY16, which was 1.0 cent per share. The Group looks forward to the continual support of its shareholders in the coming year amidst the challenging conditions.
I am grateful to my fellow Directors for their support, valuable inputs and wise counsel and the Management and staff for their loyalty, dedication and contributions to the Group. To our customers, suppliers and business associates, I would like to express our sincere appreciation for their continuing support.
Finally, I would like to specially thank our shareholders for your commitment, continued support and belief in the Group despite the challenges faced by the Group in the last year.
ONG KIAN MINNon-executive Chairman