(extracted from Annual Report 2015)

Dear Shareholders,

It has been another challenging year for Tat Hong when global economic growth remained in the doldrums and uncertainties abound. Amidst prevailing challenges, the Group ended FY2015 with an 11% decline in revenue. Group net profit attributable to shareholders tumbled 85% to S$4.9 million, caused by one-off non-cash impairments of S$30.8 million by our wholly-owned Australian subsidiary group - Tutt Bryant Group. Excluding these non-cash impairments, Group net profit would have been S$35.7 million, about the same level as the previous financial year.

Credible Performance Amidst Challenges

During the year under review, the influx of excess equipment from the region and Europe into Singapore coupled with the slowdown in the construction sector resulted in utilisation and pricing pressures for our crane rental operations and reduced demand for our distribution business. The better crane rental performance in Malaysia was insufficient to offset the poorer performance in Singapore. Whilst Hong Kong and Thailand turned in stable performance, trading conditions in Australia remained difficult throughout the year. Our tower crane rental business continued to perform well on the back of firm demand and long-term contracts in the infrastructure, power generation and large commercial building sectors in the People's Republic of China. As a result, Group revenue fell 11% to S$608.6 million.

The fall in revenue coupled with increased provisioning for stock obsolescence as well as crane repositioning costs in Australia led to a 14% decline in gross profit to S$212.1 million. Whilst the Group's other income increased 23% to S$34.5 million, primarily from the disposal of non-core businesses and properties, and foreign exchange gains, the S$30.8 million non-cash impairment charge by Tutt Bryant Group eroded these positives resulting in the Group ending the year with a profit before tax of S$18.4 million and a profit after tax and minority interests (PATMI) of S$4.9 million, 62% and 85% lower than FY2014 respectively.

Right Sizing Our Operations

During the year under review, we trimmed our crawler and mobile crane fleet to 647 units, primarily through the divestment of a subsidiary Hup Hin Transport. The reduction in fleet size is well-timed as it eases fleet utilisation pressure at a time when the construction sector in Singapore is facing a slowdown.

Our tower crane rental business in China added 25 tower cranes to meet demand and at 31 March 2015, has 934 tower cranes in its fleet.

The Group will continue to be prudent in its equipment purchases to ensure we have an optimal fleet size given the uncertainties in many of the markets that we operate in.

Prudent Capital Management

During the year, the Group divested non-core business and assets and in the process monetised S$89.1 million. The Group achieved free cash flow of S$115.1 million in FY2015 from strong cash flows from operations, reduced capital expenditure and better working capital management.

The strong positive cash flow from operations and proceeds from the divestments funded the net repayment of loans and other financial obligations totalling S$63.1 million, deleveraged the balance sheet and reduced net gearing to 0.77 times from 0.87 times a year earlier.

Dividends

The Board is pleased to recommend a final dividend of 1.0 Singapore cent for shareholders' approval at the forthcoming Annual General Meeting to be held on 29 July 2015. If approved by shareholders, total dividend for FY2014 would amount to 1.5 Singapore cents, including 0.5 Singapore cent interim dividend paid out on 9 December 2014.

Moving Forwards

We expect the challenges faced last year to continue into FY2016 as uncertainty continues to beleaguer the world economy. However, we are confident that the Group will be able to navigate the choppy waters and acquit itself. With a strong business franchise across the major markets in Asia and in Australia and our deep experience in the crane rental business, the Group has significant strengths to withstand the turbulence ahead.

Whilst the macro environment is beyond our means to manage, we can however keep our house in order, rid ourselves of inefficiencies and consolidate our strengths to move forward. FY2016 will be the year that we return to fundamentals and by doing so, I believe that we can overcome the difficulties ahead and emerge as a stronger Tat Hong.

Acknowledgements

Our executive director Mr David Ng stepped down from the Board on 23 June 2015 and on behalf of the Board and management, I would like to thank him for his many years of service on the Board of Tat Hong. David will remain in a senior executive role in one of our subsidiaries, Tat Hong HeavyEquipment (Pte.) Ltd.

I wish to thank particularly my fellow colleagues on the Board of Tat Hong for their invaluable advice and counsel in the many years they have been on the board. Equally, my deep appreciation also goes to the staff and management who have pressed on with unflagging dedication and hard work.

To all our stakeholders and shareholders, we record our deep appreciation for their continued support all these years.

A Fond Farewell

It has been a great privilege for me to serve on the Board of Tat Hong since 1997. I have seen the Group grow in the many good years as there were also difficult years. Notwithstanding the swing in fortunes, our company has continued to be the leading crane rental company in Asia-Pacific.

With advancing age, it is time for me to say a fond farewell to one and all as I will not be seeking re-election at the forthcoming AGM.

I have found it tremendously fulfilling serving on the Board of Tat Hong for the past 18 years and I hope that I have, on my part, contributed to the growth of Tat Hong. I would like to thank my fellow colleagues on the Board of Tat Hong as well as the management and staff for all the assistance and co-operation extended to me during my tenure.

Best wishes and good fortune to Tat Hong.

Tan Chok Kian
Non-Executive and Independent Chairman

* 23 June 2015