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(Extracted from the Annual Report 2016)

Dear Shareholders,

On behalf of the Board, I am pleased to present our Annual Report for the financial year ended 30 June 2016.

The Group has been on a journey of diversification, primarily through mergers and acquisitions, since 2012. This strategy was enacted in response to the challenging conditions in our core steel business. We have sought to acquire businesses that would not only give us additional revenue streams, but would enable synergies as well as cross-selling opportunities between our various business segments. We continued with this strategy in FY2016, as Gee Sheng Machinery & Engineering Pte Ltd ("Gee Sheng") became a fully owned subsidiary in this financial year, having first announced our plans to acquire them in June 2015.

In May 2016 we also announced the proposed acquisition of a group of three companies - Transvictory Holdings Pte.Ltd., Transvictory Winch System Pte. Ltd. and Steadfast Offshore & Marine Pte. Ltd. ("Transvictory"). Transvictory is a manufacturer and supplier of winches, cranes and hydraulic power units based in Singapore, providing solutions for all winching and lifting requirements. Transvictory has a sound business model which translates to order visibility and recurring order flow, due to the regular maintenance and replacement cycle of their products. We recognise the potential of a recovery in their earnings in future, and their established customer networks and relationships could also translate into current and future opportunities for our other subsidiaries.

We also looked to expand our geographical base by tapping into neighbouring Malaysia, with the proposed acquisition of key assets and property there. Unfortunately the acquisitions did not pan out as expected, and due to the poor business outlook there, we had to take the painful but necessary step of ceasing the Malaysian operations.

We have also tightened our belts in response to the lean times we are facing in the steel industry, and this has in fact put us in a good position to carry out our acquisition strategy. As at 30 June 2016 (prior to the completion of the acquisition of Transvictory), the Group had a strong balance sheet with net assets of $64.4 million, and a net gearing level of 15.9%. I am confident that this solid footing will enable us to ride out this turbulent period.

Financial and Business Review

Group revenue decreased by 35.4% compared to FY2015, mainly due to lower contributions from the recycling and trading businesses in Singapore, as well as the cessation of operations in Malaysia in January 2016.

The Group recorded non-operating expenses of $20.2 million in FY2016, compared to $13.6 million in FY2015. The increase was mainly attributable to costs relating to the cessation of operations in Malaysia, impairment of goodwill on acquisition, and assets written off.

The Group incurred a net loss of $16.7 million for FY2016, compared to a net loss of $8.4 million in FY2015. However, there was a net cash inflow from operating activities throughout FY2016, and we had cash and bank balances of $28.3 million as at 30 June 2016.

Outlook

The general outlook for the steel industry remains hampered by a combination of factors - anaemic growth resulting in low global trading activity and decreased manufacturing output, and the absence of demand from oil and gas related industries due to the continued slump in crude oil prices. Singapore has not been spared from the effects of the global slowdown and uncertainty, with the Ministry of Trade and Industry recently revising its 2016 growth forecast downward.

Nonetheless, the acquisitions we have made have broadened our portfolio, and strengthened our value proposition in engineering and manufacturing. In time, we hope to leverage this to gain access to new customers and markets.

Internally, we will continue to keep a close eye on costs and look for other ways to further streamline our business operations. We are also cognisant of the risks of interest rates rising in the foreseeable future, and are looking into various means to mitigate its impact on our finances.

Acknowledgements

Our long-serving independent director, Mr Chan Kok Poh, has expressed his intention not to seek re-election at the forthcoming AGM. We are grateful to Mr Chan for his dedicated service as a member of the Board since 2005, and wish him all the best.

In December 2015 we appointed Mr Ho Kian Teck as the Group's new Chief Operating Officer. Mr Ho's experience in the offshore & marine and manufacturing industries will undoubtedly be useful as he oversees our various business units.

On behalf of my fellow Board members, I would like to express our deepest thanks to our shareholders, customers, suppliers, business partners, management and staff, and all our corporate advisors. We are grateful that you have continued to keep faith with us, and I also thank my fellow directors for their wisdom and counsel. With all your support, we will steer this ship through the obstacles facing us.

Mr. Ang Yu Seng (洪友成),
Executive Chairman and Chief Executive Officer