On behalf of the Board of Directors ("Board") of TEHO International Inc Ltd. ("TEHO" or the "Group"), it is my pleasure to present to you the annual report for the financial year ended 30 June 2016 ("FY2016").
FY2016 continued to be a difficult year due to market uncertainty, volatility in crude oil prices and fears over Brexit. Coupled with tough market conditions prevailing in the Singapore and Cambodian property sector, the Group also experienced downward pressure on its sales and profitability.
Consequently, TEHO ended the financial year with a lower total Group revenue of $57.4 million, a decrease of $4.3 million from $61.7 million for the financial year ended 30 June 2015 ("FY2015"). Our gross profit was $17.9 million in FY2016, representing a slight decrease of 4.3% or $0.8 million from $18.7 million in FY2015.
Our Marine & Offshore business also saw a decline in revenue of $3.3 million to $52.3 million in FY2016 compared to $55.6 million in FY2015. In addition, the Marine and Offshore segment recognised an impairment charge of $2.2 million mainly due to the prolonged weakness in oil prices and its impact on the industry. However, taking into account the $9.7 million in the realised revaluation reserve following our disposal of a leasehold property in Tuas, our Marine and Offshore segment recorded an underlying profit before tax of $11.9 million.
Due to weak market sentiments, our Property Development segment registered a dip in revenue of $0.9 million or 15.0%, from $6.0 million in FY2015 to $5.1 million in FY2016. The decline in revenue was mainly a result of reduced revenue contribution from TIEC Holdings Pte. Ltd. ("TIEC"), a property development company that the Group acquired in 2014. With property cooling measures in Singapore still in place, the private residential property market in Singapore remained subdued during FY2016.
More significantly, the performance of our Property Development segment was affected by an impairment charge of $16.4 million in FY2016, resulting in an overall loss before tax of $22.8 million. In reviewing the condominium sector in Phnom Penh, Cambodia, where The Bay development is based, the Group has decided to put on hold this residential project due to a heightened risk of oversupply of condominiums in Phnom Penh, possibly stretching to 2018. This led to an impairment loss of goodwill attributable to our subsidiary, ECG Property Services Pte. Ltd. Excluding the effects of impairment charges, the Property Development segment would have recorded an underlying loss before tax of $6.4 million.
On an aggregate basis, the Group recorded a full year loss before tax of $23.7 million for FY2016 compared to a loss before tax of $7.5 million for FY2015. However, if we were to consider the underlying profit before tax of $11.9 million for the Marine and Offshore segment, the underlying loss before tax of $6.4 million for the Property Development segment, and the unallocated head office expenses of $0.9 million, the Group achieved underlying profit before tax of $4.6 million.
" We believe our approach of upholding excellence, delivering high reliability and service quality to our customers, and maintaining a strong enterprising spirit will ensure our resilience and lead us towards the next 30 years. "
As current market sentiments continue to be depressed, the Group will continue to focus on improving operational efficiencies across our various business segments. The Group will continue to take proactive measures
to keep costs low, monitor credit risk exposure and maintain an optimal amount of inventory so that we stay operationally lean and fit to ride out the challenges.
Maintaining our core strength in mooring and rigging products, with roots dating back to the post WWII days, remains a key priority. TEHO's Marine and Offshore distribution units in Europe and America are progressing very well. In line with our commitment towards operating excellence and efficiency, the Group has put in place plans to consolidate our Rotterdam operations, currently at two different locations, into a centralised venue. Through the Group's wholly-owned subsidiary TEHO EuROPE B.V., we have acquired a freehold property in Ridderkerk, The Netherlands, for Euro 1.335 million, or approximately S$2.044 million. With a total site area of about 4,034 square meters, the new property allows us to improve on our existing internal infrastructure and facilities to better serve our customers in Europe.
We have also established new stock points in Algeciras, Spain and Panama. With these new stock points, in addition to our existing stock points in Singapore, Rotterdam, Houston, Dubai and Shanghai, we will be able to better serve the needs of our customers.
Another positive development was the signing of the hotel management agreement with Hotel Okura Co., Ltd ("Okura")
in February this year to develop and manage The Okura Prestige Phnom Penh. This significant milestone for TEHO comes after the memorandum of understanding that we signed with Okura in February 2015 to operate a hotel within The Bay development. Envisioned as a luxury hotel catering to business and leisure travelers, I am confident the hotel will become an integral feature of The Bay. As we work to reposition The Bay development to best capture Phnom Penh's potential, we will continue to invest attention and resources into projects that will enable The Bay to gain a creditable foothold into Cambodia's property sector.
This year is also a year of much significance to TEHO as we celebrated our 30th anniversary. From a small local business in 1986 to an international marine and offshore solutions provider, and more recently, a real estate developer, our journey has seen many key turning points.
Through it all, we have been guided by our deep commitment to expertise, dedication, excellence and integrity. We believe our approach of upholding excellence, delivering high reliability and service quality to our customers, and maintaining a strong enterprising spirit will ensure our resilience and lead us towards the next 30 years.
Last but not least, on behalf of the Board, I would like to express my appreciation to the management and all our staff for their dedicated service and commitment. Their perseverance and diligence have been essential in overcoming numerous challenges in the past year.
My valued fellow directors, thank you for your guidance and efforts in steering TEHO forward. And to our shareholders, business associates, suppliers and customers, thank you for your trust and loyal support.
We will continue to invest and to build TEHO's success for the next 30 years.