ANNUAL REPORT YEAR 2019

Dear Shareholders,
2019 started with a good momentum. However, as the year progressed, downside risks increased and disrupted early signs of stabilisation in the global economy. With China’s investment growth already expected to slow down following earlier financial reforms to curb shadow lending, the declaration of a phase one trade deal between the U.S. and China received guarded response, as trade tensions remain a source of risk with existing tariffs still in place. Similarly in India, economic momentum was subdued by an ongoing credit squeeze. Elsewhere, developments in the Middle East between the U.S. and Iran had also weakened global business confidence.

The COVID-19 (Coronavirus Disease 2019) outbreak emerged unexpectedly and has affected China, Singapore and many countries around the world. Depending on how the pandemic situation evolves and as the rest of the world progressively tighten their border controls, the impact to global supply chains and business confidence could deepen.

Delivering Performance in a Dynamic Year
Despite the challenging macroeconomic environment, AnnAik was able to continually build on our transformation strategy to achieve S$2.15 million profit attributable to owners of the Company for the financial year ended 31 December 2019.

A few notable developments during the year had contributed to the improvement in the Group’s operating results. Amongst which, the successful completion of a strategic step-up acquisition of 20% shareholding in ShuangLin (Huzhou) Wastewater Treatment Co., Ltd., the divestment in LinXing Water Supply Co., Ltd. and improved operating results in the environmental business division.

The environmental division successfully completed expansion projects for ChangXing Angwei Environmental & Ecological Engineering Co., Ltd. and ChangXing Linyi Wastewater Treatment Co., Ltd. whilst continually improving utilisation rates and generating healthy recurrent income. The fulfilment of environmental projects secured earlier under the EPC model for hazardous wastewater business also contributed positively to results of the environmental division and the overall performance of the Group in 2019. It is heartening to note that the environmental division has proven to be growing and is expected to maintain its momentum.

The Group also emerged in a stronger financial position following the successful Rights-cum-Warrants issue. We have also kept to our strategy to be asset-light and have started the process to dispose our property and plant from Shinsei Industry Sdn. Bhd. in Malaysia to adopt a more sustainable business approach in the Group’s manufacturing division, and are committed to maintain the manufacturing business in Malaysia and promote its house brand “SHINSEI” of forged steel flanges in the South East Asia region.

Realising Growth
We have diversified our focus beyond the oil and gas and marine industries to healthcare and high technology infrastructural projects. Equally important, we have also accelerated the search and qualification of new suppliers to build stronger resilience in our supply chains before the onset of the COVID-19 crisis. However, given the uncertain operating environment, the distribution division registered weaker growth. In line with the slower economic growth and compounded by trade barriers and duties imposed in its principal trading markets such as India, Korea and Middle Eastern countries, the Group’s revenue weakened in 2019 with fewer potentially profitable business opportunities in these markets. The Group’s revenue of S$52.30 million for the whole of 2019 was 7.87% lower than S$56.77 million in 2018.

Looking Ahead
2020 will be an unprecedented year weighed down with twin crises, the COVID-19 pandemic and most recently, the collapse in global oil prices. As the COVID-19 situation is still evolving, there is a great degree of uncertainty over the length of the outbreak and how long countries enforce border and movement controls in response to the pandemic. Under such circumstances, the impact on global logistics will likely take some time to correct from the strained supply chains. Nonetheless, the Group is in a strong position to weather these disruptions and have allocated more resources and step-up marketing efforts to garner higher revenue in the manufacturing and distribution divisions.

The environmental division has proven itself as a growth engine for the Group. China remains a huge market with a latent demand for clean water which have not been met adequately amidst its long¬term sustainable development journey. We understand where the opportunities are as well as where the risks lie, and are able to target priority segments with long¬term growth in different parts of China. Meanwhile, we will continue to seed the conditions for growth in Southeast Asia. ASEAN, remains a huge market in its own right and there has been growing momentum and critical emphasis by Southeast Asian governments to pursue clean water initiatives.

Dividend
The Board of Directors is pleased to propose a first and final one-tier tax-exempt dividend of 0.3 cents per share for the year ended 31 December 2019. The dividend will be paid out to shareholders upon approval at the annual general meeting.

In Appreciation
AnnAik had a dynamic year in 2019. We managed to deliver results despite challenging macroeconomic circumstances. This is an achievement that belonged to not only AnnAik, but also to our shareholders, customers and business partners. Their continued support, trust and confidence in us have strengthened our resolve to work harder and do better. Of course, we also recognise that these results would have been impossible without the invaluable contributions from our Board, management and staff. We remain committed to realising our strategic objectives and achieving our profitability goals.

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