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 2018 (“FY2018”).
For the Group’s Marine & Offshore Segment, the increase in revenue is mainly contributed by the Group’s mooring and rigging business. We have started seeing activities picking up with the improved sentiments in the offshore industry. We expect improved outlook in the Marine & Offshore Segment and will look out for new business opportunities in this sector.
For the Group’s property business in Singapore, we have successfully sold all the units for the Elite Terrace development project and have received its TOP (temporary occupation permit). We have also acquired a landed residential property for redevelopment in Singapore#. Based on initial plans, the construction for this development is scheduled to be completed in first half of financial year ended 30 June 2020. The Group continues to remain cautious in taking up any development projects in the upcoming financial year and will invest in viable property projects with emphasis on landed properties in Singapore.
Lim See Hoe
Executive Chairman and CEO
2018 FINANCIAL REVIEW
In FY2018, the Group recorded an 11.3% jump in revenue to S$64.7 million from S$58.1 million for the financial year ended 30 June 2017 (“FY2017”), and recorded a gross profit of S$16.2 million, a 21.1% jump from S$13.4 million for FY2017.
Our Marine & Offshore Segment reported a profit of $0.9 million despite revenue declining by S$0.5 million to S$47.5 million for FY2018 from S$48.0 million for FY2017. The decline was mainly due to the decrease in revenue contribution from the Group’s engineering and water treatment businesses which declined by S$2.9 million, as these businesses faced the negative impact of crude oil prices on customers in the Offshore Oil & Gas industry. However, this decline was partially offset by an increase of S$2.4 million in contribution from the Group’s mooring and rigging business.
The Marine & Offshore Segment contributed a gross profit of S$15.9 million to the Group for FY2018, decreasing from S$16.0 million for FY2017. On a positive note, the gross profit margin of this segment for FY2018 increased marginally by 0.1 percentage points to 33.5%.
Revenue contribution from the Property Development Segment increased by S$7.1 million or 70.9%, from S$10.1 million for FY2017 to S$17.2 million for FY2018. This increase was mainly due to the revenue contribution from the sales of the Elite Terrace development project, which was recognised on a percentage-of-completion basis. All remaining units of this project have been sold during the year. The project also received its TOP on 4 June 2018.
The Property Development Segment contributed a gross profit of S$0.3 million to the Group for FY2018 as compared to a gross loss of S$2.7 million for FY2017. The property consultancy and agency business contributed gross profit of S$1.1 million. However, this was offset by a gross loss of S$0.8 million arising from cost overruns of the Elite Terrace development project.
"Throughout the year, the mooring and rigging business has proven to be invaluable in supporting the Group towards recovery and as the major contributor towards the Group’s overall revenue, we look forward to continuing our efforts to bring about growth in this segment as well as our other segment to boost the Group to greater success in the coming years."
ENGINE TOWARDS RECOVERY
Notwithstanding the persistent challenges in the marine and offshore industry, our team has put in considerable effort towards our path of recovery and to remain competitive in the industry. To this end, we are very proud to announce the successful commercialisation for our newly developed Magnaro-Twaron Mooring Ropes, a product of extensive research and development by both Teijin Aramid, a market leader in Aramid fibres, and the Group, which we mentioned in last year’s annual report.
The first order worth approximately US$1 million from Berge Bulk, one of the world’s leading independent dry bulk shipping owners with an outstanding reputation for the reliable, safe and efficient delivery of commodities around the world with a fleet of over 70 vessels equating to 15 million deadweight tonnage, is a testament of the Group’s commitment to providing high quality and innovative products to our customers through the use of technology and extensive research.
The high-performance ropes are designed for higher durability and heat resistance as compared to traditional mooring ropes, so as to overcome the high temperatures on the deck of the vessels plying certain routes. In addition, it also has a relatively high recycle value. This recycleable property of the Group’s new rope product is a great representation of the efforts the Group has put in to design high-quality products to cater to the ever-changing needs of the industry while at the same time, reducing the impact of our products on the environment.
Throughout the year, the mooring and rigging business has proven to be invaluable in supporting the Group towards recovery and as the major contributor towards the Group’s overall revenue, we look forward to continuing our efforts to bring about growth in this segment as well as our other segment to boost the Group to greater success in the coming years.
RIDING WITH THE TIDE
The Group’s engineering and water treatment businesses have seen an improvement in the volume of orders received towards the end of FY2018 which mainly came from diversified sources of customers, such as those in the Resorts industry. However, with hints of recovery in the marine and offshore industry towards the end of FY2018, the Group has seen an increment in customers from the marine and offshore industry requiring these services from the Group.
Moving forward, the Group remains cautiously optimistic on the prospect of the engineering and water treatment businesses in terms of volume of orders which rides upon the recovery of the marine and offshore industry.
EXPLORING FOR FUTURE GROWTH
In FY2018, the Group’s Property Development Segment achieved much progress. We have sold all the remaining units of the Elite Terrace development project. With the amicable settlement between the Group and the two vendors of TIEC Holdings Pte. Ltd., a whollyowned subsidiary of the Group, the Group is now well-placed to explore for new viable property developments preferably in Singapore that fit the Group’s risks and return appetite to bring about greater value for the Group and its shareholders.
The Group has been active in trade related events so as to enhance the marketing efforts in the marine and offshore side in line with the gradual and slow recovery of the sectors. The Group took part in SMM 2018 in Germany and will also have presence in the upcoming OSEA 2018 event in Singapore. Earlier in May this year, TEHO EuROPE also took part at the Maritime Industry 2018 event in the Netherlands. The Group also participated in Sea Japan 2018 and APM 2018 in the earlier part of 2018.
I would like to take this opportunity to thank my fellow Board of Directors for the guidance and counsel throughout the year. On behalf of the Board and Management, I would like to express our gratitude towards our business partners, customers and most importantly, our employees, for their undying efforts and contribution to the Group. I am confident that TEHO is right on track sailing towards greater growth and enhanced value for our shareholders.