ANNUAL REPORT YEAR 2016

Dear Shareholders,

2016 had been a tumultuous year fraught with unexpected political and social episodes. The United Kingdom’s unexpected Brexit decision and the results of the U.S presidential election had shrouded the world with clouds of uncertainties. The U.S and most of the developed economies achieved modest economic growth; and even China, one of the world’s key growth engines recorded its slowest growth since 1990. Although the Singapore economy grew by 2% in 2016, the performance across business sectors was uneven.
Operating in a Volatile Market
As a result of the challenging economic environment, AnnAik had to confront weak market demand in an increasingly competitive market in 2016. These circumstances adversely impacted AnnAik’s turnover, causing the turnover to decrease from $53.07 million in 2015 to $48.02 million in 2016. The decrease was partially offset by higher revenue from the Group’s environmental business which secured new projects during the year.
Notwithstanding the market conditions, the Group remains on track to transform our business from a product trader to a solution provider.
Correspondingly, the Group recorded a loss attributed to owners of the Company at $4.57 million for the financial year ended 31 December 2016. The loss was caused mainly by a write down of long-term available-for-sale financial assets for the Group’s China Dalian Sicheng project investment which amounted to $3.47 million.
Excluding this impairment, the Group’s operating loss is $1.10 million due principally to a sharp downward market correction that negatively affected the demand and selling price of steel piping products in both the distribution and manufacturing divisions, offsetting profit contributed by environmental business.
Strengthening Resilience
In anticipation of continued uncertainties in the global economy, the Group had implemented a focused cash flow monitoring mechanism as well as put in place various cost control measures since 2015.In 2016, the Group remained prudent. Apart from writing down the investment in China Dalian Sicheng project, the Group also adopted a proactive approach towards lowering total liabilities of the Group. This led to a repayment in bills payable of $0.83 million, trade payables of $1.02 million, other payables of $2.25 million and bank borrowings of $9.89 million according to payment schedules. During the year, the Group also imposed strict controls in inventories replenishment and tightened collection efforts in receivables. These measures generated positive cash flows for the Group, resulting in an increase in cash and cash equivalents from $5.77 million in 2015 to $6.22 million in 2016.
Embracing New Opportunities
In 2016, the Group’s environmental business continued the momentum from 2015 to contribute positively to
the Group’s performance. The share of profit from an associate and a joint venture in the industrial and newly ventured rural wastewater environmental business increased from $0.864 million in 2015 to $2.49 million in 2016 on the back of higher revenue and gross profit recorded. During the year, the Group also won new projects for our environmental business in Singapore. Significantly, these various developments not only validated the Group’s increasing emphasis in the environmental business during the year, but also hinted at the future potential of the business unit.
Staying on Track
2017 will likely be another challenging year. Although the world economy is expected to continue to grow moderately, the prospect for global trade suffered a major setback when the U.S pulled out of the Trans-Pacific Partnership. Geopolitical tensions and growing trade protectionism sentiments also continue to fuel a wide dispersion of various possible outcomes. Notwithstanding the market conditions, the Group remains on track to transform our business from a product trader to a solution provider. Through this change, we are empowered to capitalise on opportunities present in industries as they shift their focus from oil to gas, and waste to energy, solvents and water recovery.
Notably, our prudent stance towards cash flow management will also enable the Group to take advantage of any arising opportunities present in the local and global markets. Furthermore, in tandem with the strategy mapped out for a “Future Ready Singapore”, the Group looks to expand our presence beyond the shores of Singapore by collaborating closely with various stakeholders, including our existing business partners, relevant government authorities and, most importantly, our customers. Recognising that the readiness of our workforce is also central to the long-term growth and sustainability of AnnAik, the Group will invest in the development of our people to ensure that they are well skilled to meet the challenges ahead.
Dividend
The Board of Directors is pleased to propose a first and final onetier tax-exempt dividend of 0.2 cent per share for the year ended 31 December 2016. The dividend will be paid out to shareholders upon approval at the annual general meeting.
Our Heartfelt Appreciation
In many ways, 2016 was challenging. However, we are deeply grateful to the generous support of our shareholders, customers and business partners. Their continued partnership and trust in AnnAik fortifies our resolve to push through regardless of the difficulties confronting us. I am also humbled to work alongside a dedicated Board and passionate team. They have been instrumental in ensuring our future-readiness. Collectively, we are well positioned to create new opportunities and grow new strengths.

James Ow Chin Seng
Executive Chairman cum CEO

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