Chairman's Statement
Dear Shareholders,
It has been another difficult year where unfortunate natural events slowed our progress. Our results at the beginning of the year showed signs of a gradual recovery. Unfortunately, our path to recovery was washed away together with the lamentable floods and other natural disasters in Australia at the end of 2010. The operating environment also continued to remain unkind with competition heating up in regional markets.
Taking all these in stride, our Group still managed to prevail with a respectable 18% increase in revenue from S$495.4 million in the full year ended March 31, 2010 ("FY2010") to S$584.2 million in the full year ended March 31, 2011 ("FY2011"). Three of our four core business segments – Distribution1, Crane Rental and Tower Crane Rental – registered double-digit revenue growth in FY2011 despite the challenging conditions. Our General Equipment Rental did not fare too badly either, with a marginal 3% revenue drop in FY2011 due to a weaker showing in the first half of FY2011.
Tower Crane Rental continued to be the best revenue growth achiever out of all business divisions. Revenue surged 70% from S$33.7 million in FY2010 to S$57.2 million in FY2011, on the back of an expanded fleet size from 567 units in FY2010 to 684 units in FY2011.
Performance from our Distribution division was a pleasant surprise with revenue up 22% from S$224.1 million in FY2010 to S$272.4 million in FY2011. Our Singapore arm did us proud, recording better sales to diverse customers from various industries, which bumped up this division's overall results.
Crane Rental continued with its stable contribution to our Group's overall performance, supported by higher sales from Australia and Hong Kong. Revenue increased 12% from S$165.4 million in FY2010 to S$184.9 million in FY2011. We expect both countries to continue with the healthy performance given the strong pipeline of projects there, and we anticipate other regional markets such as Singapore, Malaysia and Indonesia to provide the extra boost for better growth.
The General Equipment Rental division had a weak start to the year but this was countered by a relatively strong turnaround in the second half of FY2011, owing to increased demand from existing branches and addition of new branches in Australia. Overall, this division recorded a marginal 3% drop in revenue from S$72.2 million in FY2010 to S$69.7 million in FY2011.
In line with revenue growth, gross profit improved by 9% from S$190.9 million in FY2010 to S$208.5 million in FY2011. However, the margins were eroded by keen competition from an influx of overseas players to regional markets as well as higher staff cost as we continue to grow our operations region wide. As such, gross profit margin dropped by 2.8 percentage points from 38.5% in FY2010 to 35.7% in FY2011.
Our Group's associated companies displayed improved operational performances compared to the prior year, but the overall result was impacted by a S$6.9 million impairment provision for our investment in an associated company. Nonetheless, our share of associates' profits was up by 31% to S$1.3 million in FY2011. Share of losses from our joint ventures also narrowed from S$3.0 million in FY2010 to just S$0.6 million in FY2011.
Impacted by higher expenses relating to staff cost and the Australia flood, our net profit attributable to shareholders fell by 33% from S$38.6 million in FY2010 to S$26.0 million in FY2011. Had the year been spared from one-off goodwill impairments and net losses from the Australia flood, we would have turned in net profit of S$38.3 million, comparable to the previous year's performance.
The past fiscal year had a series of corporate developments targeted at operations streamlining and Group expansion through asset and company acquisitions. Net gearing thus increased from 0.44 times to 0.75 times as at end March 2011. Nonetheless, cash position remained healthy at S$61.8 million and shareholders' equity continued to grow to S$518.9 million, as at March 31, 2011. Net asset value per share and net tangible asset per share also improved to 91 Singapore cents and 82 Singapore cents respectively, as at March 31, 2011.
Our Focal Points
Hopes were high for improved results from our Australian subsidiary, Tutt Bryant Group Limited ("TBG") for FY2011, in view of the commencement of some major projects that were previously delayed in FY2010 and the continual addition of new projects. This was one compelling factor behind our decision to take TBG private. In July 2010, our Group announced its intentions to acquire the remaining 30% interest in TBG that it did not already owned, for a cash offer of A$0.92 per ordinary share. The total consideration to acquire all outstanding shares was approximately A$39 million, funded from our Group's internal resources and bank facilities. With its low trading liquidity on the Australian Securities Exchange ("ASX"), our Group felt that the advantages of operations and cost-management efficiency with the full control of TBG would outweigh the retention of TBG's listing on ASX. With the blessings of the supportive TBG shareholders, the acquisition was completed in October 2010, followed by the delisting of TBG from ASX and now, TBG is officially a wholly-owned subsidiary of our Group. With the exciting prospects in the Australian market, we are indeed glad to be able to fully leverage on TBG's established presence in the industry for both parties' benefit.
The unprecedented floods that occurred in December 2010 were truly an unforeseen backlash on our consolidated efforts to continue growing TBG's operations in Australia post-delisting. We were thankful for our capable management team in Australia, who sprung into action immediately and worked relentlessly to control damage to properties and equipment. Fortunately, the damage cost was substantially covered by insurance and the affected Rocklea branch in Brisbane, Queensland, has completed repair works and operations are back at the original premise. With the disaster behind us, we are now zoomed in on the anticipated business opportunities that would be available with the reconstruction and rebuilding of roads and infrastructure. As such, resources in Australia have been ramped up to get TBG prepared for an expected increase in activity, which would hopefully benefit our Crane Rental and General Equipment Rental divisions.
In February this year, we announced that the exgeneral manager of one of our Chinese subsidiary, Jiangsu Zhenghe Tathong Equipment Rental Co., Ltd ("Jiangsu Zhenghe"), has been detained for investigations by the authorities in Jintan County, Jiangsu Province, in relation to his mishandling of funds of Jiangsu Zhenghe. It was indeed unfortunate that this incident occurred despite our established internal control procedures governing all our joint ventures in China. Official investigations are still ongoing but our Group has commenced a review of internal control procedures to identify and improve on any possible area of weakness. In line with our commitment to corporate transparency, we endeavour to update our shareholders through SGX-NET announcements on this issue as soon as possible.
We remain positive about China's promising prospects. The government is still committed to transport and infrastructure development, evidenced by its budget allocation under the 12th Five Year Plan. Nuclear and renewable energy are also featured strongly in the projects pipeline as the nation continues to work on efficiency and low carbon generation. This bodes well for our Chinese subsidiary, China Nuclear Huaxing TatHong Machinery Construction Co., Ltd, which has fortified its position in the nuclear power generation construction industry in China.
At home, we continue to look out for valuable acquisitions to complement existing operations. FY2011 witnessed two strategic acquisitions that would further widen our market presence in the region. In November 2010, we acquired a 70% interest in Hup Hin Transport Co Pte Ltd ("Hup Hin"), a heavy transport service solution provider incorporating planning, haulage and lifting services for all types of loads across various industries in Singapore. Total consideration, funded entirely from internal funds, was S$7.7 million. Hup Hin brings to our Group, a diversified and versatile fleet including some 200 units of transportation equipment such as lorry cranes, rough terrain and all-terrain cranes, prime mover and trailers. Its commendable fleet size provides us with an opportunity to expand our current services, enabling us to deliver a more comprehensive solution to our customers in the heavy lifting, marine transport, crawler and mobile crane rental segments. With this partnership, Tat Hong and Hup Hin will be able to benefit from each other's strengths and capabilities to broaden our Group's customer base across the region.
More recently, our associate company THL Foundation Equipment Pte Ltd ("THL") completed the acquisition of a 70% stake in Ice Far East Pte Ltd ("Ice Far East"), a trader and rental provider for foundation engineering equipment operating out of Singapore and Malaysia to serve customers in Southeast Asia, Hong Kong and India. What attracted us to Ice Far East was its network in the Southeast Asian region and its reputation as the leading distributor of specialised foundation engineering equipment such as vibro-hammers and hydraulic piling hammers. These two factors tie in with THL's drive to provide a one-stop shop for foundation engineering equipment as well as expand its geographic presence to a wider customer base in Malaysia, Hong Kong and India.
In the region, we are geared up for positive prospects out of Malaysia, Indonesia, Vietnam and Hong Kong, judging by the strong pipeline of infrastructure, oil and gas and resources projects available. In line with expansion plans in Vietnam, we acquired the remaining 51% shareholdings in ALCII-Tat Hong Joint Venture Co., Ltd to expand our heavy equipment distribution and crane rental business. Our management team will continue to remain eagled-eyed in seeking new opportunities for the Group to widen its product range and market reach.
Heartfelt Sympathies
In March 2011, we witnessed the heart wrenching earthquake and subsequent tsunami disasters unfold upon the beautiful island of Japan. This is the home of our treasured long-standing Japanese partners, whom we had built a strong personal friendship with, with some even lasting over 30 years. It was imperative to relay our heartfelt sympathies and solidarity with them in thoughts and in action. A token donation of S$300,000 was made to the Singapore Red Cross Society in aid of the Japan disaster relief fund, to help the Japanese tide through the sad period. Recovery efforts are still underway and we sincerely wish our Japanese suppliers and the nation the very best for a speedy recovery.
In Thanks
Our loyal shareholders have been through challenging times and the best of times with us, and we would like to thank you for your continuous support. A final dividend of 0.5 Singapore cent per ordinary and convertible redeemable preference share ("per share") has been proposed, which, adding on to the interim dividend of 1.0 Singapore cent per share, cumulates to a total dividend of 1.5 Singapore cents per share for FY2011. This represents a payout of 33% of our net profit attributable to shareholders.
Tat Hong has come a long way through the support of our business partners and associates, committed management and staff and dedicated directors. We sincerely thank each and every one of you for your contribution and devotion towards a brighter Tat Hong.
Tan Chok Kian
Non-Executive Chairman
Ng San Tiong Roland
Managing Director
