expanding our reach - teho l teho international · expanding our reach. headquarters in singapore...
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AnnuAl RepoRt 2013
Expandingour reach
Headquarters in Singapore Subsidiaries in Rotterdam (The Netherlands), North Carolina (USA) and Shanghai (China)
Overseas logistics points in Houston (USA) and Sharjah (UAE).
North Carolina, USA
Rotterdam (The Netherlands)
Houston, USA
Singapore
Sharjah, UAE Shanghai, China
This annual report has been prepared by the Company and its contents have been reviewed by the Company’s Sponsor, Canaccord Genuity Singapore Pte. Ltd. for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”). Canaccord Genuity Singapore Pte. Ltd. has not independently verified the contents of this annual report.
This annual report has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this annual report, including the correctness of any of the statements or opinions made, or reports contained in this annual report. The contact person for the Sponsor is Mr. Alex Tan, Chief Excecutive Officer, Canaccord Genuity Singapore Pte. Ltd., at 77 Robinson Road #21-02 Singapore 068896, telephone (65) 6854-6160.
Corporate Information 2
Chairman’s Statement 3
Board of Directors 5
Contents
Group Management Structure 7
executive officers 8
Key Staff 10
Corporate profile 12
Financial Highlights 14
Business Review 15
Financial Contents 17
Board of DirectorsMr Lim See Hoe Chairman & Chief Executive OfficerMs Lim Siew Cheng Executive Director& Chief Operating OfficerMr Kwah Thiam Hock Lead Independent DirectorMr Terrance Tan Kong Hwa Independent DirectorMr Khoo Ming Hon*Independent Director
Audit CommitteeMr Kwah Thiam Hock ChairmanMr Terrance Tan Kong HwaMr Khoo Ming Hon*
Remuneration CommitteeMr Khoo Ming Hon*ChairmanMr Kwah Thiam HockMr Terrance Tan Kong Hwa
nominating CommitteeMr Terrance Tan Kong HwaChairmanMr Khoo Ming Hon*Mr Kwah Thiam Hock
Company SecretariesMs Wee Woon Hong, LLB (Hons)Mr Phua Sian Chin, FCPA (Singapore)
Share Registrarand Share transfer officeBoardroom Corporate & Advisory Services Pte Ltd50 Raffles Place#32-01 Singapore Land TowerSingapore 048623
SponsorCanaccord Genuity Singapore Pte. Ltd.77 Robinson Road#21-02Singapore 068896
AuditorsRSM Chio Lim LLP8 Wilkie Road#03-08 Wilkie EdgeSingapore 228095Partner-in-charge: Ms See Ling Ling, HelenEffective from the reportingyear ended 30 June 2013
Registered office and principal place of Business1 Commonwealth Lane #09-23One Commonwealth, Singapore 149544Tel : (65) 6744 8777Fax : (65) 6744 8788Email : [email protected] : www.teho.com.sg
CoRpoRAte InFoRMAtIon
* Mr Khoo Ming Hon will be retiring as a Director at the forthcoming AGM and will not be seeking re-election.
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Dear Shareholders,
On behalf of the Board of Directors, it is my pleasure to present to you the annual report for TEHO Group for the financial year ended 30 June 2013 (“FY2013”).
A looK BACK At FY2013During our FY2013, the marine industry continued to face challenging conditions, with the slow-down for new builds like containerships and dry bulk carriers as a result of the low freight and chartering rates, carrying through from FY2012. The offshore industry however, remained buoyant as exploration & production activities continued to grow, albeit increased competition. Despite the contrasting fortunes of the industries that the Group is in, I am pleased to report that the Group still managed to record an improvement in both its top-line and bottom-line.
The Group’s revenue improved 15.0% year-on-year (“y-o-y”) to $43.0 million in FY2013, breaking the $40 million mark for the first time, contributed mainly by the Group’s offshore oil & gas segment, while our marine and other industries segment recorded a marginal dip due to the challenging conditions.
The increase in the Group’s Offshore Oil & Gas segment was largely due to the contribution from TEHO Engineering. In line with the increase in revenue, the Group’s gross profit increased by a very healthy 25.4% y-o-y to $13.9 million in FY2013 while the Group’s gross profit margin also increased, from 29.8% in FY2012 to 32.5% in FY2013 due to the higher gross profit margin commanded by the growing offshore oil and gas segment.
The Group’s total operating expenses increased by 27.3% to S$10.1 million in FY2013, as a result of higher revenue, the completion of the TEHO Engineering acquisition and an overall growth in operations.
Despite the increase in operating expenses, the Group’s net profit grew by 6.3% in FY2013 to S$2.4 million, representing a steady year of growth, providing us with a solid platform going into FY2014.
A wARM welCoMe to tHe GRoupIn FY2012, TEHO made its first acquisition, TEHO Engineering Pte Ltd, in an effort to better manage its business cycle and to further diversify into the highly resilient and robust offshore oil and gas sector.
In April 2013, TEHO made its next move to enhance its presence in the offshore oil & gas market by acquiring the entire issued and paid-up capital of Seanly Technical Singapore Pte Ltd, now known as TEHO Water & Envirotec Pte Ltd (“TEHO Water”), for up to S$2.5 million, to be paid in stages through shares and cash.
TEHO Water, a company incorporated in Singapore since May 2008, specialises in the trading of reverse osmosis desalination products and other water related equipment for use in ships and other marine vessels. It also owns a 49% shareholding in STS Seanly Marine Sdn Bhd, a company incorporated in Malaysia, which specialises in providing marine and engineering services while also trading in related marine and engineering hardware and accessories. The acquisition of TEHO Water will diversify the Group’s range of products and services and allow for further cross-selling to an enlarged base of customers.
We are excited about the synergies and prospects that TEHO Water will bring to the Group. We look forward to striving together to bring further success to the Group.
CHAIRMAn’S StAteMent
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outlooK & StRAteGIeSAs mentioned in the announcement of our FY2013 results, the Group expects the outlook to remain challenging with the prevailing uncertainties over the European Union’s financial crisis, the weak economic recovery in the USA and a slowdown in the major emerging markets including India and China. Amidst this environment, we expect the marine, oil and gas industries to continue to grow, albeit at a slower pace.
Despite our reservations, recent news have shown signs that the marine industry may be bottoming out and is looking likely to be on the mend in the near future, with industry data indicating that the recent revival in shipbuilding orders will continue to remain healthy . We will continue to monitor the situation and ensure that the Group is ready to capitalize when the marine industry recovers.
For the offshore oil & gas industry, the outlook seems more positive and we expect that we would be able to continue to grow our capabilities and make further inroads into the industry.
As always, the Group will continue to review and evaluate our business strategies to ensure that we stay relevant and competitive in this challenging market and economic environment.
SHARInG tHe FRuItS oF ouR SuCCeSSIn FY2013, besides breaking through the S$40 million revenue mark for the first time, the Group also declared its first ever interim dividend of 0.4 cent per share during the reporting of the Group’s HY2013 results. Based on the Group’s overall performance in FY2013, the Board has also proposed a final dividend of 0.6 cent per share, bringing the total dividend for the financial year to 1.0 cent per share, equivalent to a
dividend payout of approximately 49%. At the Group’s current share price of $0.1642 , the total dividend (including the proposed full year dividend) of 1.0 cent per share would translate to a dividend yield of 6.1% for FY2013.
Compared to the dividend of 0.8 cent per share paid out for FY2012, the total dividend of 1.0 cent per share for FY2013 is 25% higher and the Group is pleased to be able to continue sharing the fruits of its good performance with its valued shareholders.
AppReCIAtIonOn behalf of the Board of Directors, I would like to take this opportunity to put on record my sincerest gratitude to the management and staff of the Group, for their dedication and diligence. To my fellow directors, thank you for providing counsel to the Group and strengthening its foundations on new paths for progress.
I would also like to extend my heartfelt appreciation to the Group’s valued shareholders, business associates, bankers, suppliers and customers for their unwavering support and the continued confidence that they have shown to the Group.
I look forward to meeting all our shareholders at the forthcoming Annual General Meeting!
lIM See HoeExecutive Chairman and CEO
2 Closing share price of TEHO on 4th October 2013 - Source - Bloomberg
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lIM SIew CHenG is our Executive Director and COO and is currently responsible for our Group’s sales administration, operations and strategic planning. She joined TEHO in 1986 as a Director where she was in charge of operations and has extensive experience in managing the operations of supplying rigging and mooring equipment and services. Prior to joining TEHO, she was working as a Sales Executive in Teck Hoe & Company (Private) Limited, where she was in charge of sales and general administration duties from 1978 to 1985. Lim Siew Cheng attained a GCE Advanced Level certification in 1975.
lIM See Hoe is our Executive Chairman and CEO and is currently responsible for the overall corporate and strategic development, business direction, expansion plan and management of our Group. He joined TEHO in 1994 as a Marketing Manager where he was in charge of our Group’s sales and marketing functions. In 2000, he became TEHO’s Managing Director and was responsible for TEHO’s entire operations. Prior to joining TEHO, he worked as a Senior Parts Executive with Mitsubishi Caterpillar Forklift Asia Pte Ltd, Singapore, a company dealing in forklift business, from 1993 to 1994 where he was responsible for marketing activities and management of customer’s relationship in relation to the products sold by the company. Lim See Hoe graduated with a Bachelor of Engineering (Mechanical) degree from the Nanyang Technological University, Singapore in 1993. He also obtained a Master of Business in International Marketing from the Curtin University of Technology, Australia in 2003.
BoARD oF DIReCtoRS
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KwAH tHIAM HoCK was appointed to be our Lead Independent Director on 5 May 2009 and is the Chairman of the
Audit Committee. In addition, He serves as an Independent Director of Select Group Limited, Excelpoint Technology
Limited, IFS Capital Ltd. and Wilmar International Limited, companies listed on the Singapore Exchange Securities Trading
Limited. He joined ECICS Holdings Ltd in 1976 as Assistant General Manager and was subsequently promoted to be the
President and CEO in 1994. From 2003 to 2006, he was the CEO and Principal Officer of ECICS Limited, where he was
responsible for its overall performance. Kwah Thiam Hock graduated from the University of Singapore (now known as
National University of Singapore) with a degree in Bachelor of Accountancy in 1973. He is currently a Fellow of both the
CPA Australia and the Association of Chartered Certified Accountants (UK).
teRRAnCe tAn KonG HwA was appointed to be our Independent Director on 5 May 2009 and is the Chairman of the
Nominating Committee. He is currently a Partner/Director of Providence Capital Management Pte. Ltd., a private equity
fund management and consultancy firm that he co-founded in 2007. Mr Tan has more than 20 years of experience in
the banking and financial sector, holding various positions within DBS Bank Group and Standard Chartered Bank in the
commercial banking and private equity / venture capital industries. From 2006 to 2007, he was with Rotol Singapore
Limited as Chief Investment Officer, responsible for merger and acquisition and investment activities. From 2004 to 2006,
he was the chief financial officer of Pacific Healthcare Holdings Ltd. Mr Tan obtained a degree in Bachelor of Science
(Estate Management) (Honours) from National University of Singapore in 1989.
KHoo MInG Hon was appointed to be our Independent Director on 5 May 2009. He is Chairman of the Remuneration
Committee as well as a member of the Audit Committee and Nomination Committee of the Company. Khoo Ming Hon is
currently the Deputy Head of Internal Audit of the RGE Group and has extensive internal auditing experience in Singapore
and overseas. He holds a Bachelor Degree of Accountancy from the Nanyang Technological University and is a member
of the Institute of Singapore Chartered Accountants. Mr Khoo Ming Hon will be retiring as a Director at the forthcoming
AGM and will not be seeking re-election.
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Board of Directors
lim See HoeExecutive Chairman and CEO
Lim Siew Chengexecutive Director
and Coo
Lim See Hengprojects Director
Philip Tan Chiun WeiManaging Director of teHo enGIneeRInG
Lim Siew ChooGeneral Administration
Director
Alvin Chee SiongManaging Director of
teHo wAteR
Soare Siew LianCeo of uSA operations
Jan-Kees NoordhoekManaging Director of
teHo euRope
Phua Sian Chin CFo
GRoup MAnAGeMent StRuCtuRe
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lIM See HenG is our Projects Director and is currently responsible for project work, which normally involves open
tendering of projects and complex tenders such as restricted, competitive or negotiated tendering. Lim See Heng
joined TEHO in 1986 as the Managing Director where he was responsible for sales, operations, tenders and business
development. He relinquished his post as a Managing Director in 2000 to concentrate on his current portfolio. Prior
to joining TEHO, he was the Managing Director of Teck Hoe & Company (Private) Limited from 1978 to 1985. He
attained a GCE Advanced Level certification in 1973.
lIM SIew CHoo is our General Administration Director and is currently responsible for day-to-day operations,
statutory matters, recruitment and staff welfare of our Group. She joined TEHO in 1987 as a Manager responsible
for general administration. In 2004, she was tasked to be responsible for our financial and management reporting
and its treasury operations, internal audit, developing corporate strategy, negotiating with financial institutions for
facilities and financial budgeting. Lim Siew Choo graduated with a Bachelor degree in Management from Nagasaki
Institute of Applied Science, Japan in 1987.
exeCutIve oFFICeRS
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pHuA SIAn CHIn is our CFO. He joined our Group in August 2008 and is responsible for the management of
our Group’s corporate finance, compliance and financial reporting matters. He is also an Independent Director of
Oxley Holdings Ltd and the Lead Independent Director of Jason Holdings Ltd. Prior to joining our Group, he was,
for over 8 years, the CFO of a holding company listed on the Hong Kong Stock Exchange. For over 10 years, he
had worked as regional financial controller for multi-national corporations in the Asia-Pacific region. He was also
the group financial head for property development groups in Singapore and Indonesia for over 6 years. Phua Sian
Chin graduated with a Bachelor of Accountancy degree from the University of Singapore (now known as National
University of Singapore) in 1975. He is currently a Fellow of the Institute of Singapore Chartered Accountants, a
Fellow of the CPA Australia, a Fellow of the Association of Chartered Certified Accountants (UK) and a registered
member of the Singapore Institute of Directors.
SoARe SIew lIAn is our CEO of USA Operations. She joined TEHO in August 2008 and is currently responsible
for liaising and servicing our existing customers and securing new customers in the western hemisphere, market
research; and outsourcing and purchasing of products for our Group. Prior to joining TEHO, she operated her own
business through TEHO (USA), LLC, a company incorporated in USA to facilitate our supply of products in North
America from 2005 to July 2008. From 2001 to 2005, she worked as Forecast Manager with Sara Lee Corporation’s
apparel division (now known as Hanesbrands Inc.), where she was tasked to integrate new businesses into existing
forecasting and planning systems, and to provide sales forecast and analysis. From 1991 to 1995, she worked as
Special Projects Manager at Catalina Lighting, Inc., a manufacturer and distributor of lighting products in Florida,
USA, where she was responsible for new product development. She was subsequently promoted to Inventory
Manager in 1995, to oversee inventory replenishment and purchasing. Soare Siew Lian graduated with a degree in
Bachelor of Business Administration from the National University of Singapore in 1981 and obtained a Master of
International Management degree from the American Graduate School of International Management (now known
as Thunderbird School of Global Management), USA in 1984.
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teHo RopeS
AntHonY tAn, our Group Business Development Manager,
joined the Group in December 1998. Anthony is responsible
for identifying business opportunities and strengthening
relationships with the customers of the Group and leads
the Group’s business development teams. Before joining the
Group, he was a sales executive for institutional chemicals and
industrial chemicals.
CHuA lAY MuI is our Operations Manager in the Group.
She joined the Group in 1986 and plays a significant role in
managing the sales operations team which provides a critical
supporting role to the Business Development team.
JAMIe CHoo, our Business Development Manager of the
marine industry, joined the Group in 2002. She monitors the
market intelligence within the industry and leads the business
development team in aligning to organizational goals and
objectives. Jamie completed her Bachelor in Business Studies
(Hons) from Loughborough University (UK) in 2010.
pHuA CHenG Boon, our Financial Controller, is responsible
for the operational finance and accounting functions of the
Group. Cheng Boon began his career in public accounting
firms with over 10 years of experience where he was also
involved in clients’ IPO and RTO exercises on the Singapore and
Malaysia stock exchanges. He is a Fellow of the Association of
Chartered Certified Accountants and member of the Institute
of Singapore Chartered Accountants. He joined the Group in
December 2010.
tAn wee lee, JASon is our Quality and Technical Manager.
After graduating with a Bachelor in Engineering (Mechanical)
(Hons) from Nanyang Technological University in 2004, he
joined the Group in June of the same year. He is responsible
for driving quality assurance programmes to deliver efficient
and quality products. Besides leading a team of technical and
product specialists to provide design solutions across a broad
spectrum of applications, he is also crucial in initiating internal
quality process improvements.
KeY StAFF
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teHo oFFSHoRe
BlonDe GuY pRoSpeR is our Business Development
Manager for the offshore industry. He joined the group in
April 2012. Prior to joining the group, he was the Sales and
Marketing Manager for a leading fibre ropes manufacturer in
Europe where he set up a worldwide network of distributors.
He has gained over a decade of extensive knowledge and
experience in the marketing of ropes and other equipments
to the offshore industry.
teHo enGIneeRInG
pHIlIp tAn CHIun weI is our Managing Director of TEHO
Engineering Pte Ltd. He graduated from the University
of Aberdeen (UK) in 1994 with a degree in Bachelor of
Engineering (Hons). Philip has over 18 years of experience in
the marine and offshore industry. He started as an Electrical
Engineer and took on roles with increasing responsibility
in sales and marketing before being appointed General
Manager and Company Director of Finessco Systems Pte Ltd
in 2006. Finessco Systems was acquired by the Group in May
2012 and renamed as TEHO Engineering Pte Ltd.
teHo wAteR
AlvIn CHee is our Managing Director of TEHO Water
& Envirotec Pte Ltd. He graduated from the Technological
University of Malaysia in 2002 with a degree in Bachelor of
Engineering(Hons) major in Chemical Engineering. Alvin and
his partner founded the STS Reverse Osmosis brand in 2003
and has been developing their own reverse osmosis water
maker for the past 10 years. Today, STS Reverse Osmosis is
one of the prominent brands in Southeast Asia renowned
for its quality and after-sales service. With his inception into
the Group, TEHO’s water related product line will be further
enhanced.
teHo euRope
JAn-KeeS nooRDHoeK, our Managing Director of TEHO
EuROPE B.V., has been in the rope business for more than 18
years. He rose from Product Manager to Commercial Director
at Lankhorst Ropes Offshore Division, and most lately,
served as a Managing Director of Oliveira Holland. Actively
involved in Eurocord and subsequently OCIMF, Jan-Kees has
harnessed a wealth of knowledge in all aspects of synthetic
rope production, marketing and application, especially of the
newer high performance rope.
teHo SHAnGHAI
AntHonY toK is our Manager of TEHO (Shanghai) Co.,
Ltd, responsible for expanding the business in the China
market. Anthony joined the Group in September 2009. He
graduated from National University of Singapore, majoring
in Mechanical Engineering in 2005 and has been based in
Shanghai for four years.
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TEHO International Inc Ltd (“TEHO International”), listed on the Catalist on 4 June 2009, is the ultimate holding company of TEHO Ropes & Supplies Pte Ltd (“TEHO Ropes”), TEHO Offshore Pte Ltd (“TEHO Offshore”), TEHO Engineering Pte Ltd (“TEHO Engineering”), TEHO International (USA), LLC (“TEHO USA”), TEHO (Shanghai) Co., Ltd (“TEHO Shanghai”), TEHO EuROPE B.V. (“TEHO EuROPE”) and TEHO Water & Envirotec Pte Ltd (“TEHO Water”) (collectively the “TEHO Group”).
Headquartered in Singapore, TEHO Group has a marketing, sales and distribution network that covers mainly Asia, Europe and North America. In addition to Singapore, other logistics points are also being established in Sharjah and Houston to service customers at the other major shipping hubs.
Our expansion in both geographical coverage and, product and service range enables us to better serve and provide our customers with complete solutions in rigging, mooring, safety, water treatment solutions and engineering.
For the coming years, TEHO Group will continuously look into expanding our presence geographically and broadening our product portfolio to provide prompt service worldwide, and become a quality one-stop-shop for our customers. Sharing the global concern over climate change and environmental degradation, TEHO will seek out environmentally friendly products and take bolder steps towards becoming green ourselves.
HIStoRY In BRIeFTEHO Group started its business in 1986 with an initial management experience dated back to the post WWII period, and rooted in the trading of used marine equipment. Guided by the founding philosophy of “Integrity in Business towards
All” and steered by a forward-looking leadership, TEHO Group has grown steadily over the years. A growing loyal customer-base, valuable long-term partners and a dedicated team all help to propel TEHO Group to become one of the leading regional suppliers in the rigging and mooring industry.
We are ISO9001:2008 certified for quality management and BizSAFE 3 certified. We are also consistently rank as one of the Singapore’s Top SME500/SME1000.
teHo RopeS & SupplIeS pte ltDTEHO Ropes, incorporated in 1986, became a wholly owned subsidiary of TEHO International after a restructuring exercise in May 2009. Specialising in supplying of wire ropes and fibre ropes for mooring, towing and other general usages, TEHO Ropes is renowned in the industry for having the most comprehensive inventory list. This enables quick turnaround of orders at competitive prices.
To provide a more complete solution to industrial users, we offer other products and services, including:• Grade8andGrade10liftingchainandaccessories• Syntheticslingsandlashingsystems• Connectors and fittings such as clamp, shackle, turnbuckle,
masterlink, hammerlok, hook and block• OtherriggingkitssuchasWirelockcoldsocketingcompound,
wire rope lubricant, and rope and cable protectors• Servicessuchastensiletesting,fabricationofsling,mechanical
and hand splicing for end termination, and rope analysis and optimisation
teHo oFFSHoRe pte ltDTEHO Offshore was incorporated as a wholly owned subsidiary in April 2012 to facilitate our sales and marketing activities into the
CoRpoRAtepRoFIle
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Water Maker and other water treatment systems, servicing the marine and offshore O&G industries. Years of product knowledge and market experience, as well as state-of-the-art technology, have facilitated us in the designing and custom building our equipment that meet customers’ exacting needs. Our STS Reverse Osmosis Water Maker has built up a good track record and holds a strong position in the market.
teHo euRope B.v.Incorporated in November 2012 as a wholly owned subsidiary, TEHO EuROPE, started its operation in January 2013. TEHO EuROPE is headed by two industry veterans, Jan-Kees Noordhoek, Managing Director, and Cees de Vries, Business Development Manager, with specialization in synthetic fibre rope and steel wire rope for marine and offshore applications. Both office and warehouse of TEHO EuROPE are located in Rotterdam, servicing the local market and also geared towards servicing other Northern European ports such as Hamburg, Bremen and Antwerp. In keeping with the corporate emphasis on quality and quick turnaround, TEHO EuROPE has an expansive inventory and in-house rigging and testing capabilities.
teHo InteRnAtIonAl (uSA) llCTEHO USA was incorporated in 2008, headed by Soare Siew Lian who is the CEO. TEHO USA covers sales and marketing for the Americas, mainly to the marine industry, and also distributes the company’s products from Houston. TEHO USA also supports the Group via sourcing and logistics activities in the Western Hemisphere for customers.
teHo (SHAnGHAI) Co., ltD (卓源贸易（上海）有限公司)TEHO Group’s presence in China started off as a representative office in Shanghai. In January 2012, TEHO Shanghai was incorporated to facilitate the sales and marketing activities for TEHO Group’s products and services in China.
Offshore Oil & Gas and Renewable Energy industries. With our product knowledge and Guy Blondé’s vast experience, we are now better positioned to tap into the opportunities in these industries. TEHO Offshore offers equipment and technical solutions in mooring, lifting and installation, with an important focus on safety. Our product range comprises chain, buoy, wire rope, fibre rope, sling and fittings for general offshore applications as well as specialized products targeted at very specific projects out in the sea.
teHo enGIneeRInG pte ltDTEHO Engineering, was 100% acquired by TEHO International in May 2012 and is headed by Philip Tan, Managing Director. TEHO Engineering’s specialty is in electrical and mechanical equipment with products such as fire dampers, shut off dampers, louvers, calorifier, space heaters and heat tracing cables, supplying to the Marine and Offshore Oil & Gas industries. We have been awarded the exclusive distributorship in Asia or Southeast Asia for some of the leading brands for the above products. In FY2013, we have also acquired new product agencies for HVAC ducting system, electric duct heaters, heat exchangers, trash compactors, blast & fire resistant doors, dish washing and food waste systems. Being in the industry for over 15 years, TEHO Engineering has acquired a strong customer base and developed close partnership with some of the leading manufacturers in their respective markets. This strategic acquisition further complements TEHO Group’s vast product range and will synergistically cater to an expanded customer base to fulfil the different needs for Marine and Offshore Oil & Gas applications.
teHo wAteR & envIRoteC pte ltDTEHO Water, formally known as Seanly Technical Singapore Pte Ltd, was first established in 1997. TEHO Water acquired its new name when it was acquired by TEHO International Inc Ltd in April 2013. Headed by Alvin Chee, Managing Director, TEHO Water specialises in design and manucfacture of its STS Reverse Osmosis
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FY2011 FY2012 FY2013
Revenue
By Industrial Segments Marine ($'000) 25,143 27,920 27,428 Offshore Oil & Gas ($'000) 1,557 2,683 9,339 Others ($'000) 6,710 6,763 6,204 Total ($'000) 33,410 37,366 42,971
By Geographical AreasSingapore ($'000) 27,196 29,433 33,435 Rest of Asia ($'000) 4,521 5,451 5,164 Rest of the world ($'000) 1,693 2,482 4,372 Total ($'000) 33,410 37,366 42,971
operating Results
Gross Profit ($'000) 9,268 11,129 13,947 EBITDA ($'000) 3,863 4,235 4,881 Profit Before Tax ($'000) 2,616 2,910 2,742 Profit After Tax ($'000) 2,204 2,239 2,381 Gross Profit Margin (%) 27.7 29.8 32.5 Return on Sales (%) 6.6 6.0 5.5 Return on Assets (%) 5.5 4.8 4.9 Return on Equity (%) 8.7 8.2 8.3 Earnings Per Ordinary Share (cents) 2.0 2.0 2.1 Gross Dividends Per Share (cents) 0.8 0.8 1.0
Financial position
Total Assets ($'000) 40,130 46,843 48,907 Total Liabilities ($'000) 14,722 19,497 20,178 Shareholders' Equity ($'000) 25,408 27,346 28,729 NTA Per Ordinary Share (cents) 22.7 23.6 24.3
FInAnCIAlHIGHlIGHtS
-‐
20,000
40,000
60,000
FY2011 FY2012 FY2013
Revenue ($'000)
Marine ($'000) Offshore Oil & Gas ($'000) Others ($'000)
-‐
5,000
10,000
15,000
FY2011 FY2012 FY2013
Gross Profit ($'000)
Gross Profit ($'000)
-‐
2,000
4,000
6,000
FY2011 FY2012 FY2013
EBITDA ($'000)
EBITDA ($'000)
-‐
20,000
40,000
60,000
FY2011 FY2012 FY2013
Revenue ($'000)
Marine ($'000) Offshore Oil & Gas ($'000) Others ($'000)
-‐
5,000
10,000
15,000
FY2011 FY2012 FY2013
Gross Profit ($'000)
Gross Profit ($'000)
-‐
2,000
4,000
6,000
FY2011 FY2012 FY2013
EBITDA ($'000)
EBITDA ($'000)
21.0
22.0
23.0
24.0
25.0
FY2011 FY2012 FY2013
NTA Per Ordinary Share (cents)
NTA Per Ordinary Share (cents)
-‐
0.5
1.0
FY2011 FY2012 FY2013
Gross Dividends Per Share (cents)
Gross Dividends Per Share (cents)
-‐
20,000
40,000
60,000
FY2011 FY2012 FY2013
Revenue ($'000)
Marine ($'000) Offshore Oil & Gas ($'000) Others ($'000)
-‐
5,000
10,000
15,000
FY2011 FY2012 FY2013
Gross Profit ($'000)
Gross Profit ($'000)
-‐
2,000
4,000
6,000
FY2011 FY2012 FY2013
EBITDA ($'000)
EBITDA ($'000)
21.0
22.0
23.0
24.0
25.0
FY2011 FY2012 FY2013
NTA Per Ordinary Share (cents)
NTA Per Ordinary Share (cents)
-‐
0.5
1.0
FY2011 FY2012 FY2013
Gross Dividends Per Share (cents)
Gross Dividends Per Share (cents)
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GRoup peRFoRMAnCeThe Group’s revenue for financial year ended 30 June 2013 (“FY2013”) was $43.0 million, a year-on-year increase of $5.6 million or 15.0%. Revenue contribution from the offshore oil and gas segment increased by $6.6 million or 248.1%, largely due to the contribution by TEHO Engineering Pte Ltd (“TEHO Engineering”) since the completion of its acquisition by the Group in May 2012. The subsidiary has already delivered several major contracts for the Group. Revenue from the marine and other industries segments decreased by $0.5 million each. On a geographical basis, revenue from Singapore increased by $4.0 million or 13.6%, due to the contribution of TEHO Engineering. Revenue derived from the rest of the world increased by $1.9 million or 76.1% due to an increase in revenue from overseas subsidiaries, particularly in Europe and USA, as well as an increase in overseas business derived from Singapore.
The Group performed well in FY2013 despite continued volatility in global markets. The overall gross profit in FY2013 increased by 25.4% to $13.9 million. The offshore oil and gas segment’s gross profit showed the biggest increase mainly due to the contribution from TEHO Engineering, the subsidiary company which the Group acquired in the previous financial year. The gross profit from others segment decreased by $0.5 million or 17.6% due to a decrease in revenue from customers in the construction industry as they did not have major projects in the current year. The Group’s gross profit margin increased by 2.7 percentage points from 29.8% to 32.5% due to a higher gross profit margin contributed by TEHO Engineering.
Income from other credits decreased by 64.5% from $0.3 million
in FY2012 to $0.1 million in FY2013 as a result of there having been no major disposals of plant and equipment in FY2013.
Other items of expense increased by 31.9%, from $8.6 million in FY2012 to $11.3 million in FY2013 due mainly to increases in administrative expenses, other operating expenses and other charges.
Distribution costs increased by $0.3 million due mainly to an increase in outward freight and handling charges of $0.1 million and an increase in travelling expenses of $0.2 million. The increase in travelling expenses was due to travel to the Group’s newly incorporated subsidiary in Europe, commissioning of overseas projects and an increased participation in trade exhibitions.
Administrative expenses increased by $1.3 million due mainly to the increased headcount, salaries and related expenses of $1.1 million as a result of consolidation of TEHO Engineering after its acquisition by the Group. The increase was also due to an increase in insurance coverage expenses of $0.1 million and professional fees incurred in the acquisition and incorporation of new subsidiaries of $0.1 million.
Other operating expenses increased by $0.5 million as a result of an increase of $0.2 million in staff welfare, benefits and training expenses, and a balance of the $0.3 million due to higher depreciation, upkeep of properties and equipment, land rent and property tax, and rental of office. Depreciation increased by 21.8% due to the purchase of $0.4 million of new plant and equipment during the financial year.
BuSIneSS RevIew
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There was no significant fluctuation in finance costs.
Other charges increased by $0.6 million due mainly to amortisation of intangibles resulting from the acquisition of the acquired subsidiaries in the current and previous years.
Profit before tax decreased by $0.2 million despite the increase in gross profit of $2.8 million. This was due to an increase in other items of expense of $2.7 million and a decrease in other items of income of $0.3 million, as discussed above.
The effective tax rate of 13.2% for FY2013 was lower compared to the effective tax rate of 23.1% for FY2012 due to a higher capital allowance and a higher enhanced deduction claimed for FY2013.
FInAnCIAl poSItIon
In FY2013, the Group acquired $0.4 million of new plant and equipment and incurred a depreciation charge of $0.9 million. The acquisition of TEHO Water & Envirotec Pte. Ltd. (“TEHO Water”) (formerly known as Seanly Technical Singapore Pte. Ltd.) led to an increase of $0.8 million to property, plant and equipment. The increase in intangible assets of $0.9 million was due to the acquisition of TEHO Water.
The increase in current assets of $0.8 million was mainly attributable to an increase in inventories of $0.2 million as a result of higher sales orders and an increase in trade and other receivables of $2.8 million. The increase in trade and other receivables’ turnover days from 83 days to 96 days was due to several major deliveries made in May and June 2013 which were still outstanding as at the financial year end. The increase was partially offset by a decrease in cash and cash equivalents of $2.0 million and other assets of $0.2 million.
The increase of non-current liabilities of $0.3 million was due to the increase of $0.7 million in other payables arising from the balance payable for the acquisition of TEHO Water. The increase was partly offset by the decrease in other financial liabilities of $0.2 million and finance leases of $0.2 million.
Current liabilities increased by $0.3 million due mainly to an increase of $1.8 million in other financial liabilities as a result of an additional short-term loan obtained for the acquisition of the new subsidiary and set up of another new subsidiary, TEHO EuROPE B.V., in the Netherlands and the financial liabilities within the acquired subsidiary which were assumed by the Group. The increase was partially offset by decreases in income tax payables of $0.2 million and in trade and other payables of $1.3 million.
The increase of $1.4 million in equity attributable to owners of the parent was due to profit after tax of $2.4 million for FY2013 and increase in share capital of $0.4 million. These increases were partly offset by total dividend payments of $1.4 million.
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Report of Corporate Governance 18
Directors’ Report 28
Statement by Directors 30
Independent Auditors’ Report 31
Consolidated Statement of Profit or Loss and Other Comprehensive Income 32
Statements of Financial Position 32
Statements of Changes in Equity 33
Financial ContentsConsolidated Statement of Cash Flows 34
Notes to the Financial Statements 34
Shareholdings Statistics 75
Notice of Annual General Meeting 77
PROXY FORM
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The Board of Directors (“the Board”) of Teho International Inc Ltd. is committed to maintaining a high standard of corporate governance within the Company and its subsidiaries (the “Group”) to ensure greater transparency and to protect the interests of the Company’s shareholders.
The Company has put in place various policies and practices that will safeguard the interests of shareholders and enhance shareholders’ value as part of its effort to maintain high standards of corporate governance. This report outlines the main corporate governance practices and procedures adopted by the Company with specific reference to the Code of Corporate Governance 2005 (“the Code”). The Company will be reporting on its corporate governance processes and activities with specific reference to the revised Code of Corporate Governance 2012 in its next annual reports relating to the financial year 2014 commencing on 1 July 2013.
Statement of Compliance
The Board confirms that for the financial year ended 30 June 2013 (“FY2013”), the Company has generally adhered to the principles and guidelines as set out in the Code save as otherwise explained below.
BOARD MATTERS
The Board’s Conduct of its Affairs
Principle 1: Every company should be headed by an effective board to lead and control the company.
The Board currently comprises two executive directors and three independent directors, who have the right core competencies and diversity of experience to enable them, in their collective wisdom, to contribute effectively. The independent directors make up more than half of the Board and there is a strong independent element on the Board.
The Board is entrusted with the responsibility for the overall management of the business and corporate affairs of the Group. Matters which specifically require the Board’s decision or approval are those involving:
• corporate strategy and business plans;• investment and divestment proposals;• funding decisions of the Group;
• nominations of directors for appointment to the Board and appointment of key personnel;
• announcement of half-year and full-year results, the annual report and accounts;
• material acquisitions and disposal of assets;• all matters of strategic importance; and• corporate governance
To assist the Board in the execution of the Board’s responsibilities, certain functions of the Board have been delegated to the following committees:
• Audit Committee (“the AC”); • Nominating Committee (“the NC”); and• Remuneration Committee (“the RC”).
Each of these committees is being chaired by an independent director and operates within clearly defined terms of reference and functional procedures which are reviewed on a regular basis. These committees will provide further safeguards to prevent an uneven concentration of power, authority and decision-making in a single individual.
To get a better understanding of the Group’s business, the Company adopts a policy whereby directors are encouraged to request for further explanations, briefings or informal discussion on the Company’s operations or business with the executive directors and the management.
The Board meets regularly with ad-hoc Board-Management meetings which are convened when they are important and deemed necessary. In between Board meetings, other important matters are also being circulated and put for the Board’s approval by way of circulating resolutions in writing. The Company’s Articles of Association provide for meetings of directors to be held by means of telephone conference or other methods of simultaneous communication by electronic or other means.
REPORT OF CORPORATE GOVERNANCE
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Frequency of Board and committee meetings held and attended by each member for FY2013 are disclosed below:
Types of MeetingsNamesof directors Board
Audit Committee
Nominating Committee
Remuneration Committee
Total held for FY2013 5 2 1 1
Mr Lim See Hoe 5 2* 1* 1*
Ms Lim Siew Cheng 5 2* 1* 1*
Mr Kwah Thiam Hock 5 2 1 1
Mr Terrance Tan Kong Hwa 5 2 1 1
Mr Khoo Ming Hon 5 2 1 1
* By invitation
All directors are expected, in the course of carrying out their duties, to act in good faith to provide insights and objectively take decisions in the interest of the Company.
Newly appointed directors will be given briefings by management on its business activities and strategic direction. There are also orientation program to familiarise them with the role and responsibilities of a director of a listed Company in Singapore.
All Directors are encouraged to keep themselves updated on changes to the financial, legal and regulatory requirements, framework and the business environment through reading relevant literature and attending appropriate seminars and courses conducted by bodies such as Singapore Exchange Securities Trading Limited and Singapore Institute of Directors.
Board Composition and Balance
Principle 2: There should be a strong and independent element in the board, which is able to exercise objective judgement on corporate affairs independently, in particular, from management. No individual or small group of individuals should be allowed to dominate the board’s decision making.
The Board currently comprises the following directors:
Executive DirectorsMr Lim See Hoe Executive Chairman and Chief Executive Officer (“CEO”)Ms Lim Siew Cheng Chief Operating Officer (“COO”)
Non-Executive DirectorsMr Kwah Thiam Hock Lead Independent Director and Chairman of AC Mr Terrance Tan Kong Hwa Independent Director and Chairman of NCMr Khoo Ming Hon Independent Director and Chairman of RC
The Non-Executive Directors constructively participate in developing and setting proposals on business strategies for the Company and review the performance of the management.
The independence of each independent director is reviewed annually by the NC. The NC adopts the definition in the Code as to what constitutes an independent director in its review to ensure that the Board consists of persons who, together, will provide core competencies necessary to meet the Company’s objectives.
Except for Mr Lim See Hoe and Ms Lim Siew Cheng who are siblings, none of our independent directors are related to each other, nor to the executive directors, and nor to the substantial shareholders. The NC is of the view that Mr Kwah Thiam Hock, Mr Terrance Tan Kong Hwa and Mr Khoo Ming Hon are independent. As more than half of the Board is independent, the NC is satisfied that the Board has a strong independent element to ensure that objective judgment is exercised on corporate affairs.
The Board through the NC has examined its size and composition and is of the view that it is an appropriate size for effective decision-making, taking into account the scope and nature of the operations of the Company. The NC is of the view that no individual or small group of individuals dominates the Board’s decision-making process.
There is adequate relevant competence on the part of the directors, who, as a group, carry specialist backgrounds in accounting, finance, business and management and strategic planning.
REPORT OF CORPORATE GOVERNANCE
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Chairman and Executive Director
Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.
There is a clear division of responsibilities between the chairman who is also the CEO and the other executive director who is the COO, which ensures there is a balance of power and authority at the top of the Group. Mr Lim See Hoe, who is the Executive Chairman and CEO, leads the Board and is responsible for the overall corporate and strategic development, business direction, expansion plan and management of the Group. Ms Lim Siew Cheng, who is the executive director and COO, is responsible for the Group’s sales administration, operations and strategic planning.
Mr Lim See Hoe in assuming the responsibility of the Chairman of the Board is responsible for scheduling Board meetings as and when required, setting the agenda for the Board meetings and ensuring the quality, quantity and timeliness of the flow of information between the management, the Board and our shareholders so as to enhance working relations among the management, executive and non-executive directors, and, to encourage constructive communication with our shareholders respectively. He is also responsible for ensuring compliance with the Company’s guidelines on corporate governance.
As Mr Lim See Hoe and Ms Lim Siew Cheng are siblings, the Board has appointed Mr Kwah Thiam Hock as the lead independent director to co-ordinate and to lead the independent directors to provide non-executive perspective to avail himself to address any Shareholders’ concerns, to act as a counter-balance in the decision making process and contribute a balanced viewpoint to the Board. Furthermore, the Board is of the view that with the establishment of the three Board committees, there are adequate safeguards in place to prevent an uneven concentration of power, authority and decision-making in a single individual.
Board Membership
Principle 4: There should be a formal and transparent process for the appointment of new directors to the board. As a principle of good corporate governance, all directors should be required to submit themselves for re-nomination and re-election at regular intervals.
The NC comprises entirely of independent directors, namely Mr Terrance Tan Kong Hwa, Mr Kwah Thiam Hock and Mr Khoo Ming Hon. Chairman of the NC is Mr Terrance Tan Kong Hwa. The principal functions of the NC are as follows:
(a) to review and recommend the nomination or re-nomination of the directors having regard to the director’s contribution and performance;
(b) to determine on an annual basis whether or not a director is independent;(c) to assess the performance of the Board and contribution of each director to
the effectiveness of the Board.
Should the need for a new Director arises, the NC will assess suitable candidates for appointment to the Board based on the requisite qualifications, expertise and experience, and recommend the most suitable candidate to the Board for appointment as Director.
The NC is guided by written terms of reference that describe the responsibilities of its members.
Under the Articles of Association of the Company, all directors are required to submit themselves for re-nomination and re-election every three years. Directors who retire are eligible to offer themselves for re-election.
The NC has reviewed and recommended the re-election of Mr Kwah Thiam Hock and Ms Lim Siew Cheng who are retiring under Article 107 of the Articles of Association at the forthcoming Annual General Meeting to be held on 28 October 2013 (the “forthcoming AGM”). The Board has accepted the recommendations and the retiring directors will be offering themselves for re-election.
Mr Khoo Ming Hon has sought retirement as an Independent Director at the conclusion of the forthcoming AGM pursuant to Article 107 of the Company’s Articles of Association due to his work commitments. Upon his cessation as Independent Director of the Company, Mr Khoo will ipso facto cease to be Chairman of the Remuneration Committee and member of the Audit and Nominating Committees respectively. The Company will use its best endeavours to fill the vacancy following the retirement of Mr Khoo as soon as practicable and will make an announcement in due course.
The NC considers that the multiple board representations held presently by some directors do not impede their respective performance in carrying out their duties towards the Company.
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Key information regarding the directors is set out below:
Name of directorDate of First Appointment
Date of Last
Re-election
Present Directorships in Other Listed
Companies
Mr Lim See Hoe 10-06-2008 25-10-2012 Nil
Ms Lim Siew Cheng 15-10-2008 25-11-2011 Nil
Mr Kwah Thiam Hock 05-05-2009 22-10-2010 IFS Capital LimitedECICS LimitedSelect Group LimitedExcelpoint Technology
LimitedWilmar International
Limited
Mr Terrance Tan Kong Hwa 05-05-2009 25-10-2012 Hafary Holdings Limited
Consciencefood Holding Limited
Mr Khoo Ming Hon 05-05-2009 25-10-2012 Nil
The academic and professional qualifications of the members of the Board and the directors’ interests in the shares of the Company are set out under the “Board of Directors” and “Report of the Directors” sections respectively of this Annual Report.
Board Performance
Principle 5: There should be a formal assessment of the effectiveness of the board as a whole and contribution by each director to the effectiveness of the board.
The Board’s performance is linked to the overall performance of the Group. The Board ensures compliance with the applicable laws and the Board members act in good faith, with due diligence and care in the best interest of the Company and its shareholders.
The NC decides on how the Board’s performance is to be evaluated and to propose objective performance criteria, subject to the Board’s approval, which addresses how the directors have enhanced long-term shareholders’ value. The performance evaluation takes into consideration the Board structure, conduct of meetings, corporate strategy and planning, risk management and internal control, the Company’s share price performance, recruitment policy, process for determining remuneration and compensation of directors and key executives, financial reporting and communicating with shareholders.
The Board has also implemented a process to be carried out by the NC for assessing the effectiveness of the Board as a whole and for assessing the contribution by each individual director to the effectiveness of the Board. Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as a director.
Access to Information
Principle 6: In order to fulfil their responsibilities, board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.
The Company recognizes the importance of unlimited and unhindered flow of information for the Board to discharge its duties effectively. The management and the executive directors furnish the Board, and where appropriate, each director regularly with information about the Group as well as the relevant background information or explanatory information relating to the business to be discussed at Board meetings. The directors are also provided with the contact details of the Company’s senior management and company secretaries to facilitate separate and independent access.
The company secretaries and/or the representatives attend Board meetings. Together with members of the Company’s management, the company secretaries are responsible for ensuring that appropriate procedures are followed and that the requirements of the Companies Act, Chapter 50, and the provisions in the Catalist Rules of the SGX-ST are complied with. Directors have separate and independent access to the company secretaries. The appointment and the removal of the company secretaries is a matter for the Board as a whole. Each director has the right to seek independent legal and other professional advice, at the Company’s expense, concerning any aspect of the Group’s operations or undertakings in order to fulfil his duties and responsibilities as director.
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Procedures for Developing Remuneration Policies
Principle 7: There should be a formal and transparent procedure for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
The RC comprises Mr Khoo Ming Hon (Chairman of the RC), Mr Kwah Thiam Hock and Mr Terrance Tan Kong Hwa. All members of the RC including the chairman are independent directors.
The RC has written terms of reference that describe the responsibilities of its members.
The RC was formed to recommend to the Board a framework of remuneration for the directors and key executives, and to determine specific remuneration packages for each executive director. All aspects of remuneration, including but not limited to directors’ fees, salaries, allowances, bonuses and other benefits-in-kind are covered by the RC. Each member of the RC shall abstain from voting on any resolutions in respect of his remuneration package.
The RC has the authority to seek any external professional advice on matters relating to remuneration of directors as and when the need arises.
Level and Mix of Remuneration
Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more for this purpose. A proportion of remuneration, especially those of the CEO and COO, should be linked to performance.
The Company has a remuneration policy for the CEO and COO, which comprises a fixed component and a variable component. The fixed and variable components are in the form of a base salary and a variable bonus respectively, which takes into account the performance of the Company and their performances. The performance-related elements of remuneration are designed to align the executive directors’ interest with those of shareholders and link rewards to corporate and individual performance.
The independent directors do not have service agreements with the Company. They are paid fixed directors’ fees, which are determined by the Board appropriate to the level of their contributions, taking into account factors such as the effort and time spent and the responsibilities of each director. The directors’ fees are subject to approval by the shareholders at each AGM. Except as disclosed, the directors do not receive any other remuneration from the Company.
In setting remuneration packages, the Company also takes into consideration the remuneration packages and employment conditions in comparable positions and within the comparable industry and companies.
Mr Lim See Hoe and Ms Siew Cheng being CEO and COO respectively are remunerated based on their service agreements with the Company. These service agreements are automatically renewed on a year-to-year basis upon expiry on such terms and conditions as the parties may agree. The agreements provided for termination by either party upon giving not less than six months’ notice in writing.
The review of the remuneration of the key executives takes into consideration the performance and contributions of the staff to the Group and gives due regard to the financial and business performance of the Group. The Group seeks to offer a competitive level of remuneration to attract, motivate and retain senior management of the required competency to run the Group successfully.
The Company has put in place a new long-term employee incentive scheme called Teho Performance Share Plan (the “PSP”) that was adopted by the shareholders at the Extraordinary General Meeting held on 25 November 2011. The PSP is administrated by the RC.
The PSP will promote higher performance goals, recognise exceptional achievement and retain talents within the Group. The Company has taken these steps to align itself with and embrace local trends and best practices in employee compensation and retention.
Disclosure on Remuneration
Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration and the procedures for setting remuneration in the company’s annual report.
The executive officers comprise Ms Lim Siew Choo, General Administration Director; Mr Lim See Heng, Projects Director; Ms Soare Siew Lian, CEO of USA Operations; and Mr Phua Sian Chin, Chief Financial Officer. Ms Lim Siew Choo and
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Mr Lim See Heng are substantial shareholders of the Company. Ms Lim Siew Choo, Mr Lim See Heng and Ms Soare Siew Lian are siblings of the CEO and COO who are also the executive directors of the Company.
Key information regarding the executive officers is set out under the “Management Staff” Section of this annual report.
A breakdown, showing the level and mix of each director’s remuneration for FY2013 is as follows:
Remuneration Band & Name of Director Fee# Salary Bonus Benefits Total
$250,000 to below $500,000 % % % % %
Mr Lim See Hoe 2.3 61.0 28.2 8.5 100
Below $250,000 % % % % %
Ms Lim Siew Cheng 4.0 83.0 7.0 6.0 100
Mr Kwah Thiam Hock 100.0 - - - 100
Mr Terrance Tan Kong Hwa 100.0 - - - 100
Mr Khoo Ming Hon 100.0 - - - 100
Note:
# These fees are subject to the approval of the shareholders at the forthcoming AGM.
A breakdown, showing the level and mix of executive officers’ remuneration for FY2013 is as follows:
Remuneration Band & Name of Executive Salary Bonus Benefits Total
Below $250,000 % % % %
Ms Lim Siew Choo 78.6 13.1 8.3 100
Mr Lim See Heng 84.1 - 15.9 100
Ms Soare Siew Lian 81.8 - 18.2 100
Mr Phua Sian Chin 91.1 6.5 2.4 100
Except as disclosed, no employee of the Group was an immediate family member of the directors whose remuneration exceeds $150,000 for FY2013.
The RC has reviewed and approved the remuneration packages of the Directors and key executive officers, having regard to their contributions as well as the financial performance and commercial needs of the Group and has ensured that the Directors and key executive officers are adequately but not excessively remunerated.
Accountability
Principle 10: The board should present a balanced and understandable assessment of the company’s performance, position and prospects.
For the financial performance reporting via the SGXNET to SGX-ST, and the annual report to the shareholders, the Board has a responsibility to present a balanced and understandable assessment of the Group’s performance, financial position and prospects to the public, including interim and other price sensitive public reports and reports to regulators (if required).
The Board ensures that the management maintains a sound system of internal control to safeguard the shareholders’ investment and the Group’s assets.
The management will provide all members of the Board with management accounts of the Group’s performance, with explanatory details on its operations. Board papers are given prior to any Board meeting to facilitate effective discussion and decision-making.
The Board also announces the Group’s half-year results and performance review via the SGXNET for the benefit of its shareholders.
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Audit Committee
Principle 11: The board should establish an audit committee with written terms of reference which clearly sets out its authority and duties.
The AC comprises Mr Kwah Thiam Hock, Mr Terrance Tan Kong Hwa and Mr Khoo Ming Hon. Chairman of the AC is Mr Kwah Thiam Hock.
The AC has written terms of reference clearly setting out its authority and duties.
Two of the members have accounting and related financial management expertise. The Board is of the view that the AC has the necessary experience and expertise required to discharge its duties.
The AC has explicit authority to investigate any matter within its terms of reference, full access to and co-operation by management and full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly.
The AC shall meet periodically to perform the following functions:
(a) to review with the external auditors the audit plan, their evaluation of the system of internal controls, their audit report, their management letter and the management’s response;
(b) to review with the internal auditors the internal audit plan and their evaluation of the adequacy of the internal control and accounting system before submission of the results of such review to the Board for approval prior to the incorporation of such results in the annual report;
(c) to review the financial statements before submission to the Board for approval, focusing in particular, on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, the going concern statement, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements;
(d) to review the internal control and procedures and ensure co-ordination between the external auditors and the management, reviewing the assistance given by the management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of the management where necessary);
(e) to review and discuss with external and internal auditors (if any), any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the Group’s operating results or financial position, and the management’s response;
(f) to review the Group’s key financial risk areas (including but not limited to, the Group’s cash management policies and cash position, collection of debts, hedging policies and transactions, speculative trading policies and positions and off-balance sheet items);
(g) to consider the appointment or re-appointment of the external auditors and matters relating to resignation or dismissal of the auditors;
(h) to review transactions falling within the scope of Chapter 9 of the Catalist Rules;
(i) to review any potential conflicts of interest;
(j) to undertake such other reviews and projects as may be requested by the Board and report to the Board its findings from time to time on matters arising and requiring the attention of the AC; and
(k) generally to undertake such other functions and duties as may be required by statute or the Catalist Rules, and by such amendments made thereto from time to time.
Apart from the above functions, the AC is given the task to commission and review the findings of investigations into matters where there is suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation, which has or is likely to have a material impact on the Company’s operating results or financial position.
The Company engages RSM Chio Lim LLP (“External Auditors”) to audit all significant Singapore incorporated subsidiaries for the purposes of the consolidated financial statements of the Company and its subsidiaries. The AC is of the view that the External Auditors is a suitable auditing firm that meets the Group’s audit obligations, its size and complexity, and having also considered the External Auditors’ professional standing, the reputation of its audit engagement partner and the adequacy of the resources and experience of its supervisory and auditing staff assigned for the audit. The External Auditors is also an auditing firm registered with the Accounting and Corporate Regulatory Authority.
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The Company’s other Singapore incorporated subsidiaries and foreign incorporated subsidiaries are being audited by separate auditing firms, as disclosed in Note 17 to the financial statements in this annual report which have been cleared by the External Auditors. The Board and AC have reviewed and are satisfied that the appointment of different auditors would not compromise the standard and effectiveness of the audit of the Company. Accordingly, Rules 712 and 716 of the Rules of Catalist are complied with.
The AC reviews the scope and results of the audit carried out by the External Auditors and its independence and objectivity. In the AC’s opinion, the External Auditors is suitable for re-appointment and it has accordingly recommended to the Board that the External Auditors be nominated for re-appointment as the auditors of the Company at the forthcoming AGM.
The AC had met with the External Auditors, without the presence of management to review the adequacy of audit arrangements, with emphasis on the scope and quality of their audit, and the independence, objectivity and observations of the auditors.
The AC has implemented a whistle blowing policy for the Group with the objective of providing an avenue for staff, suppliers and customers to raise in confidence concerns about possible improprieties in matters of financial reporting or other matters which they become aware. A copy of the whistle blowing policy has been posted on the Company’s website for the information of our stakeholders.
Internal Controls
Principle 12: The board should ensure that the management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.
The Board is responsible for the overall internal control framework and is fully aware of the need to put in place a system of internal controls within the Group to safeguard shareholders’ interests and the Group’s assets, and to manage risks.
On 22 July 2009 the Board under the AC recommendation selected and appointed Ernst & Young Advisory Pte. Ltd. (“Internal Auditors”) to review, recommend and subsequent rectifications follow-up review on the Company’s internal controls systems, and to expand and enhance on its policies and procedures manual in the following major areas of operations of the group under two (2) phases:
Phase 1:(a) Purchases, payables and payments (including purchase and safeguarding of
fixed assets)(b) Inventory management(c) Financial close reporting
Phase 2:(a) Sales, receivables and collections(b) Treasury and cash management(c) Human resources and payroll
The first full cycle internal controls review and follow-up reviews of the major areas of operations with direct consultations, presentations and reportings made to the AC were completed in March 2012. At the recommendations of the AC, the Internal Auditors continued with its second full cycle internal controls review that spanned over FY2013 and to continue with the third full cycle internal controls review in FY2014.
In addition, the Internal Auditors has also been engaged to conduct a review of the adequacy and effectiveness of the enterprise risk management system and controls of the Group to enable the Board and Management to understand the inherent industry, financial, operational, compliance and information technology risks of the Group.
Since its initial public offer, the risk profile of the Company has not changed significantly as the Company has not made any major or very substantial acquisition of non-core business except for discloseable acquisitions of 2 companies in the same industry sector in May 2012 and 2013 respectively.
In audit of the Company FY2013 accounts, the External Auditors informed the Board that it did not notice any significant deficiency or major lapses in the internal controls that would warrant highlighting to the Management, AC and the Board.
At the recommendation of the AC, the chief financial officer takes on the additional duties of a compliance officer and to coordinate and oversee the works of the Company’s professional service providers.
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Based on the internal controls established and maintained by the Group, and work performed by the appointed Internal and External Auditors, and reviews performed by the management and the Board, the Board with the concurrence of the AC is of the opinion that the internal controls maintained by the Group are adequate in addressing financial, operational and compliance risks of the Group. The Board and the AC notes that all internal control systems contain inherent limitations and no system of internal control can provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human error, fraud or other irregularities.
Internal Audit
Principle 13: The Company should establish an internal audit function that is independent of the activities it audits.
As the size of the operations of the Group does not warrant the Group having an in-house internal audit function, the Group outsourced its internal audit function to the Internal Auditors as mentioned in Principle 12. The Internal Auditors consults and reports directly to the AC and administratively to the Board. During the financial year under review, the Internal Auditors had reviewed key internal controls in the major operational areas of the Company as detailed in the internal audit plan submitted to and approved by the AC as mentioned in Principle 12. Findings and the Internal Auditors’ recommendations on areas of improvement were reported to the AC and for management’s implementation and also were made available to the external auditors for reviews.
The AC reviewed the adequacy of the internal audit function annually and is satisfied that it is adequately resourced and has appropriate standing within the Group to perform their duties effectively.
Communication with Shareholders
Principle 14: Companies should engage in regular, effective and fair communication with shareholders.
The Company is committed to maintaining and improving its level of corporate transparency of financial results and other pertinent information. In line with its continuous disclosure obligations pursuant to the Catalist Rules and the Singapore Companies Act, Cap. 50, it is the Board’s policy to ensure that all shareholders are informed regularly and on a timely basis of every significant development that has an impact on the Group.
The Company does not practise selective disclosure, and it discloses all price-sensitive and material information on a timely basis and to all shareholders. Results and annual reports are announced or issued within the mandatory period (and where this is not possible, relevant extensions of time are sought in accordance with applicable laws, regulations and rules).
Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.
All shareholders of the Company will receive the Company’s annual report and notice of AGM. Shareholders will be given the opportunity and time to voice their views and ask directors or the management questions regarding the Company in the forthcoming AGM.
The Company takes note that there should be separate resolutions at general meetings on each substantially separate issue and to avoid bundling resolutions.
The Chairman of each Board committee is required to be present to address questions at the AGM. External auditors are also present at such meeting to assist the directors to address shareholders’ queries, if necessary.
The Articles of Association of the Company allow any member of the Company, if he/she is unable to attend the meeting, to appoint not more than two proxies to attend and vote on their behalf at the meeting through proxy forms sent in advance.
ADDITIONAL INFORMATION
Dealing in Securities
The Company has devised and adopted policies in line with the requirements of the Catalist Rules on dealings in the Company’s securities.
The Company and its officers are prohibited from dealing in the Company’s shares on short-term considerations or at any time when they are in possession of unpublished price-sensitive information. They are not allowed to deal in the Company’s shares during the period commencing one month before the announcement of the Company’s half year and full year results, and ending on the date of the announcement of the relevant results.
In addition, Directors and key executives are expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period.
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The Company issues half yearly circular to its Directors and officers informing them that they must not deal in the Company’s securities before the release of results and at any time they are in possession of unpublished material price-sensitive information.
Interested Person Transactions
The Company has adopted an internal policy in respect of any transaction with an interested person, which sets out the procedures for review and approval of such transaction.
All interested person transactions will be documented and submitted periodically to the AC for their review to ensure that such transactions are carried out on an arm’s length basis and on normal commercial terms and are not prejudicial to the Company.
Save as disclosed below, the Group confirms that there was no Interested Person Transaction for FY2013 under review with transactions exceeding the total aggregate value of $100,000 or conducted under the shareholders’ mandate pursuant to Rule 920.
The aggregate value of interested person transactions during FY2013 is as follows:
Name of Interested Person
Aggregate value of all interested person
transactions during FY2013 (excluding transactions less than $100,000 and transactions conducted
under shareholders’ mandate pursuant to Rule 920)
Aggregate value of all interested person
transactions conducted under shareholders’
mandate pursuant to Rule 920 (excluding transactions
less than $100,000)FY2013 FY2012 FY2013 FY2012
Asdev Investments Pte. Ltd. for rental of office space (1) $235,584 $235,584 - -
Note:
(1) Pursuant to the Lease Agreement dated 1 August 2010 between Teho Ropes & Supplies Pte. Ltd. and Asdev Investments Pte. Ltd. (where a director of the Company is the sole director and shareholder) for taking a lease in respect of the property located at 1 Commonwealth Lane #09-23/24/25 One Commonwealth, Singapore 149544.
Audit and Non-Audit Fees
During the financial year under review, the aggregate amount of fees paid or payable to the External Auditors of the Company for the audit and non-audit services amounted to $95,000 and $9,200 respectively.
For the purposes of good governance and Rule 1204(6)(b) of the Catalist Rules, the AC has undertaken a review of the fees and expenses payable to the External Auditors for all non-audit services in the financial year. The non-audit services performed by the External Auditors for FY2013 are not services prohibited by the Rules and in the AC’s opinion would not affect the independence of the External Auditors.
Non-Sponsor Fees
With respect to Rule 1204(21) of the Catalist Rules, there was no non-sponsor fee paid to the Sponsor, Canaccord Genuity Singapore Pte. Ltd. for FY2013.
Material Contracts and Loans
Pursuant to Rule 1204(8) of the Catalist Rules, the Company confirms that except as disclosed in the Report of Directors and Financial Statements, there were no other material contracts and loans of the Company and its subsidiaries involving the interests of the CEO or any director or controlling shareholder, either still subsisting at the end of the financial year or if not then subsisting, which were entered into since the end of the previous financial year.
Risk Management
The Company does not have a Risk Management Committee. However, the executive directors and management regularly reviews the Group’s business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. Management reviews significant control policies and procedures and highlights the significant matters to the Board and the AC. Furthermore, the AC had recommended to the Board who had accepted the appointment of the Internal Auditors to conduct a Risk Management Assessment of the Company as mentioned under Principle 12.
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The directors of the company are pleased to present their report together with the audited financial statements of the company and of the group for the reporting year ended 30 June 2013.
1 Directors at Date of Report
The directors of the company in office at the date of this report are:
Lim See Hoe
Lim Siew Cheng
Kwah Thiam Hock
Khoo Ming Hon
Terrance Tan Kong Hwa
2 Arrangements to Enable Directors to Acquire Benefits by Means of the Acquisition of Shares and Debentures
Neither at the end of the reporting year nor at any time during the reporting year did there subsist any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisition of shares or debentures in the company or any other body corporate.
3 Directors’ Interests in Shares and Debentures
The directors of the company holding office at the end of the reporting year had no interests in the share capital of the company and related corporations as recorded in the register of directors’ shareholdings kept by the company under section 164 of the Companies Act, Chapter 50 except as follows:
Name of directors in which interests are held
At beginning of the reporting year
At end of the reporting year
Number of shares of no par value
Company
Lim See Hoe 39,909,659 39,909,659
Lim Siew Cheng 16,500,111 16,500,111
By virtue of section 7 of the Companies Act, Chapter 50, Mr Lim See Hoe is deemed to have an interest in all the related corporations of the company.
The directors’ interests as at 21 July 2013 were the same as those at the end of the reporting year.
4 Contractual Benefits of Directors
Since the beginning of the reporting year, no director of the company has received or become entitled to receive a benefit which is required to be disclosed under section 201(8) of the Companies Act, Chapter 50, by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in the financial statements.
There were certain transactions (shown in the financial statements under related party transactions) with a corporation in which certain directors have an interest.
5 Performance Share Plan
The Company’s performance share plan, TEHO Performance Share Plan (the “PSP”), was approved and adopted by the shareholders at the company’s Extraordinary General Meeting held on 25 November 2011. The PSP is administered by the Remuneration Committee (“RC”) with such discretion, powers and duties as are conferred on it by the Board of Directors.
The PSP contemplates the award of fully-paid shares in the capital of the Company to participants after certain pre-determined benchmarks have been met. The company believes that the PSP will be more effective and rewarding than pure cash bonuses in motivating employees to work towards pre-determined goals of the Company.
The PSP shall continue to be in force at the discretion of the RC, subject to a maximum period of 10 years commencing from its adoption by the shareholders and may continue beyond the stipulated period with the approval of the shareholders by an ordinary resolution in general meeting and of any relevant authorities which may then be required.
DIRECTORS’ REPORT
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Under the rules of the PSP and at the absolute discretion of the RC, confirmed full-time employees of the group who are of the age of 18 years and above, and directors of the group who have contributed or will contribute to the success and the development of the group are eligible to participate in the PSP. However, participation in the PSP by the directors who are also controlling shareholders and their associates are subject to the approval by independent shareholders of the company.
The total number of shares that may be issued or are issuable pursuant to the granting of the awards under the PSP, when added to the aggregate number of shares that are issued or are issuable in respect of such other share-based incentive schemes of the Company (if any), shall not exceed 15% (or such other percentage as may be prescribed or permitted from time to time by the SGX-ST) of the total number of issued ordinary shares of the Company on the day immediately preceding the relevant award date.
There were no awards granted under the PSP by the company or any corporation in the group since its inception and during the reporting year.
There were no shares issued during the reporting year by virtue of the exercise of awards to take up unissued shares of the company or any corporation in the group.
There were no unissued shares under the PSP in the company or any corporation in the group as at the end of the reporting year.
6 Share Options
During the reporting year, no option to take up unissued shares of the company or any corporation in the group was granted.
During the reporting year, there were no shares of the company or any corporation in the group issued by virtue of the exercise of an option to take up unissued shares.
At the end of the reporting year, there were no unissued shares of the company or any corporation in the group under option.
7 Audit Committee
The members of the audit committee at the date of this report are as follows:
Kwah Thiam Hock – Chairman of Audit Committee and Independent Director
Terrance Tan Kong Hwa – Independent DirectorKhoo Ming Hon – Independent Director
The audit committee performs the functions specified by section 201B(5) of the Companies Act., Chapter 50. Among other functions, it performed the following:
• Reviewed with the independent external auditors their audit plan;• Reviewed with the independent external auditors their evaluation
of the company’s internal accounting control, and their report on the financial statements and the assistance given by the company’s officers to them;
• Reviewed with the internal auditors the scope and results of the internal audit procedures;
• Reviewed the financial statements of the group and the company prior to their submission to the directors of the company for adoptions; and
• Reviewed the interested party transactions (as defined in Chapter 9 of the Listing Manual of the SGX).
Other functions performed by the audit committee are described in the report on corporate governance included in the annual report. It also includes an explanation of how independent auditor objectivity and independence is safeguarded where the independent auditors provide non-audit services.
The audit committee has recommended to the board of directors that the independent auditors, RSM Chio Lim LLP, be nominated for re-appointment as independent auditors at the next annual general meeting of the company.
8 Independent Auditors
The independent auditors, RSM Chio Lim LLP, have expressed their willingness to accept re-appointment.
DIRECTORS’ REPORT
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9 Subsequent Developments
There are no significant developments subsequent to the release of the group’s and the company’s preliminary financial statements, as announced on 28 August 2013, which would materially affect the group’s and the company’s operating and financial performance as of the date of this report.
On Behalf of The Directors
Lim See HoeDirector
Lim Siew ChengDirector
25 September 2013
In the opinion of the directors,
(a) the accompanying consolidated statement of profit or loss and other comprehensive income, statements of financial position, statements of changes in equity, consolidated statement of cash flows, and notes thereto are drawn up so as to give a true and fair view of the state of affairs of the company and of the group as at 30 June 2013 and of the results and cash flows of the group and the changes in equity of the company and of the group for the reporting year then ended; and
(b) at the date of this statement there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.
The board of directors approved and authorised these financial statements for issue.
On Behalf of The Directors
Lim See HoeDirector
Lim Siew ChengDirector
25 September 2013
DIRECTORS’ REPORT STATEMENT BY DIRECTORS
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To the Members of TEHO INTERNATIONAL INC LTD. (Registration No: 200811433K)
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of TEHO International Inc Ltd (the “company”) and its subsidiaries (the group), which comprise the consolidated statements of financial position of the group and the statement of financial position of the company as at 30 June 2013, and the consolidated statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows of the group, and statement of changes in equity of the company for the reporting year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair statement of profit or loss and other comprehensive income and statements of financial position and to maintain accountability of assets.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements of the group and the statement of financial position and statement of changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at 30 June 2013 and of the results, changes in equity and cash flows of the group and the changes in equity of the company for the reporting year ended on that date.
Report on Other Legal and Regulatory Requirements
In our opinion, the accounting and other records required by the Act to be kept by the company and by the subsidiaries incorporated in Singapore of which we are the independent auditors have been properly kept in accordance with the provisions of the Act.
RSM Chio Lim LLPPublic Accountants andChartered AccountantsSingapore
25 September 2013
Partner in charge of audit: See Ling Ling, HelenEffective from year ended 30 June 2013
INDEPENDENT AUDITORS’ REPORT
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GroupNotes 2013 2012
$ $
Revenue 5 42,971,401 37,366,455Cost of Sales (29,024,583) (26,237,287)Gross Profit 13,946,818 11,129,168Other Items of IncomeInterest Income 6 1,437 33,039Other Credits 7 122,497 346,009Other Items of ExpenseDistribution Costs (1,105,665) (763,149)Administrative Expenses 9 (6,048,527) (4,776,802)Other Operating Expenses 10 (2,930,576) (2,381,165)Finance Costs 8 (375,390) (359,922)Other Charges 7 (902,479) (322,749)Share of Profit from Equity-Accounted Associate 34,330 5,133Profit Before Tax from Continuing Operations 2,742,445 2,909,562Income Tax Expense 12 (361,875) (670,585)Profit from Continuing Operations, Net of Tax 2,380,570 2,238,977
Other Comprehensive Loss:Items that may be reclassified subsequently to
profit or loss:Exchange Differences on Translating Foreign
Operations, Net of Tax (6,126) (5,926)Other Comprehensive Loss for the Year, Net of Tax (6,126) (5,926)
Total Comprehensive Income 2,374,444 2,233,051
Earnings Per ShareEarnings Per Share Currency Unit Cents CentsBasic 14 2.1 2.0Diluted 14 2.1 2.0
Group CompanyNotes 2013 2012 2013 2012
ASSETS $ $ $ $Non-Current Assets Property, Plant and Equipment 15 6,463,444 6,159,998 – – Intangible Assets 16 5,601,926 4,652,562 – – Investments in Subsidiaries 17 – – 22,918,677 19,885,977Investment in Associates 18 171,748 98,451 42,794 42,794Total Non-Current Assets 12,237,118 10,911,011 22,961,471 19,928,771
Current AssetsInventories 19 20,258,172 20,126,646 – – Trade and Other Receivables 20 11,271,327 8,491,003 2,273,456 1,826,922Other Assets 21 58,598 260,069 7,350 86,492Cash and Cash Equivalents 22 5,081,521 7,054,224 3,398 33,433Total Current Assets 36,669,618 35,931,942 2,284,204 1,946,847Total Assets 48,906,736 46,842,953 25,245,675 21,875,618
EQUITY AND LIABILITIESEquityShare Capital 23 16,476,668 16,080,668 16,476,668 16,080,668Retained Earnings 12,275,862 11,283,585 1,583,378 2,230,204Foreign Currency Translation
Reserve (24,016) (17,890) – – Total Equity 28,728,514 27,346,363 18,060,046 18,310,872
Non-Current LiabilitiesDeferred Tax Liabilities 12 522,653 513,299 – – Other Payables, Non-Current 24 723,000 – 723,000 – Other Financial Liabilities,
Non-Current 25 2,803,471 3,032,046 – – Finance Leases, Non-Current 25 286,066 442,717 – – Total Non-Current Liabilities 4,335,190 3,988,062 723,000 –
Current LiabilitiesIncome Tax Payable 585,857 809,200 – – Trade and Other Payables, Current 26 2,927,226 4,217,182 6,462,629 3,564,746Finance Lease, Current 25 156,652 152,026 – – Other Financial Liabilities, Current 25 12,173,297 10,330,120 – – Total Current Liabilities 15,843,032 15,508,528 6,462,629 3,564,746Total Liabilities 20,178,222 19,496,590 7,185,629 3,564,746Total Equity and Liabilities 48,906,736 46,842,953 25,245,675 21,875,618
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year Ended 30 June 2013
STATEMENTS OF FINANCIAL POSITION As at 30 June 2013
The accompanying notes form an integral part of these financial statements. The accompanying notes form an integral part of these financial statements.
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Foreign
Currency
Total Share Retained Translation
Equity Capital Earnings Reserve
Group $ $ $ $
Current Year:
Opening Balance at 1 July 2012 27,346,363 16,080,668 11,283,585 (17,890)
Movements in Equity:
Total Comprehensive Income for the year 2,374,444 – 2,380,570 (6,126)
Issue of Share Capital (Note 23) 396,000 396,000 – –
Dividends Paid (Note 13) (1,388,293) – (1,388,293) –
Closing Balance at 30 June 2013 28,728,514 16,476,668 12,275,862 (24,016)
Previous Year:
Opening Balance at 1 July 2011 25,407,712 15,480,668 9,939,008 (11,964)
Movements in Equity:
Total Comprehensive Income for the year 2,233,051 – 2,238,977 (5,926)
Issue of Share Capital (Note 23) 600,000 600,000 – –
Dividends Paid (Note 13) (894,400) – (894,400) –
Closing Balance at 30 June 2012 27,346,363 16,080,668 11,283,585 (17,890)
Total Share Retained
Equity Capital Earnings
Company $ $ $
Current Year:
Opening Balance at 1 July 2012 18,310,872 16,080,668 2,230,204
Movements in Equity:
Total Comprehensive Income for the year 741,467 – 741,467
Issue of Share Capital (Note 23) 396,000 396,000 –
Dividends Paid (Note 13) (1,388,293) – (1,388,293)
Closing Balance at 30 June 2013 18,060,046 16,476,668 1,583,378
Previous Year:
Opening Balance at 1 July 2011 17,315,751 15,480,668 1,835,083
Movements in Equity:
Total Comprehensive Income for the year 1,289,521 – 1,289,521
Issue of Share Capital (Note 23) 600,000 600,000 –
Dividends Paid (Note 13) (894,400) – (894,400)
Closing Balance at 30 June 2012 18,310,872 16,080,668 2,230,204
STATEMENTS OF CHANGES IN EqUITY Year Ended 30 June 2013
The accompanying notes form an integral part of these financial statements. The accompanying notes form an integral part of these financial statements.
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Group2013
$2012
$Cash Flows From Operating ActivitiesProfit Before Tax 2,742,445 2,909,562Adjustments for:Share of Profit from Equity-Accounted Associates (34,330) (5,133)Depreciation of Property, Plant and Equipment 912,214 748,971Gain on Disposal of Property, Plant and Equipment (5,314) (210,581)Interest Expense 375,390 359,922Interest Income (1,437) (33,039)Amortisation of Intangible Assets 852,000 216,000Net Effect of Exchange Rate Changes in Consolidating
Foreign Entities (6,153) (5,926)Operating Cash Flows Before Working Capital Changes 4,834,815 3,979,776Decrease/(Increase) in Inventories 336,588 (1,023,413)Increase in Trade and Other Receivables (2,274,229) (764,850)Decrease/(Increase) in Other Assets 209,425 (89,027)(Decrease)/Increase in Trade and Other Payables (1,350,801) 1,091,718Net Cash Flows From Operations 1,755,798 3,194,204Income Taxes Paid (788,340) (597,543)Net Cash Flows From Operating Activities 967,458 2,596,661
Cash Flows From Investing ActivitiesPurchase of Property, Plant and Equipment (Note 22) (459,163) (339,646)Proceeds from Disposal of Property, Plant and Equipment 5,314 210,581Acquisition of Subsidiary (Net of Cash Acquired) (Note 27) (1,604,023) (3,448,532)Interest Received 1,437 33,039Net Cash Flows Used in Investing Activities (2,056,435) (3,544,558)
Cash Flows Used In Financing ActivitiesDividends paid to Equity Shareholders (1,388,293) (894,400)Decrease in Finance Leases (152,025) (37,257)Cash restriction in Use – (25,000)Increase from New Borrowings 3,500,000 7,000,000Decrease in Other Financial Liabilities (2,468,018) (5,817,480)Interest Paid (375,390) (359,922)Net Cash Flows Used in Financing Activities (883,726) (134,059)
Net Decrease in Cash and Cash Equivalents (1,972,703) (1,081,956)Cash and Cash Equivalents, Statement of Cash Flows,
Beginning Balance 7,029,224 8,111,180Cash and Cash Equivalents, Statement of Cash Flows,
Ending Balance (Note 22) 5,056,521 7,029,224
1. General
The company is incorporated in Singapore with limited liability. The financial statements are presented in Singapore dollar and they cover the company (referred to as “parent”) and the subsidiaries.
The board of directors approved and authorised these financial statements for issue on the date of the statement by directors.
The company is an investment holding company. It is listed on the Catalist which is a shares market on Singapore Exchange Securities Trading Ltd.
The principal activities of the subsidiaries are described in the notes to the financial statements below.
The registered office is: 1 Commonwealth Lane, #09-23, One Commonwealth, Singapore 149544. The company is situated in Singapore.
2. Summary of Significant Accounting Policies
Accounting Convention
The financial statements have been prepared in accordance with the Singapore Financial Reporting Standards (“FRS”) and the related Interpretations to FRS (“INT FRS”) as issued by the Singapore Accounting Standards Council and the Companies Act, Chapter 50. The financial statements are prepared on a going concern basis under the historical cost convention except where an FRS requires an alternative treatment (such as fair values) as disclosed where appropriate in these financial statements. Other comprehensive income comprises items of income and expense (including reclassification adjustments) that are not recognised in the income statement, as required or permitted by FRS.Reclassification adjustments are amounts reclassified to profit or loss in the income statement in the current period that were recognised in other comprehensive income in the current or previous periods.
CONSOLIDATED STATEMENT OF CASH FLOWS Year Ended 30 June 2013
NOTES TO THE FINANCIAL STATEMENTS 30 June 2013
The accompanying notes form an integral part of these financial statements.
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2. Summary of Significant Accounting Policies (Continued)
Basis of Presentation
The consolidated financial statements include the financial statements made up to the end of the reporting year of the company and all of its directly and indirectly controlled subsidiaries. The consolidated financial statements are the financial statements of the group presented as those of a single economic entity and are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intragroup balances and transactions, including profit or loss and other comprehensive income items and dividends are eliminated on consolidation. The results of any subsidiary acquired or disposed of during the reporting year are accounted for from the respective dates of acquisition or up to the date of disposal which is the date on which effective control is obtained of the acquired business until that control ceases.
Changes in the group’s ownership interest in a subsidiary that do not result in the loss of control are accounted for within equity as transactions with owners in their capacity as owners. The carrying amounts of the group’s and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. When the group loses control of a subsidiary it derecognises the assets and liabilities and related equity components of the former subsidiary. Any gain or loss is recognised in profit or loss. Any investment retained in the former subsidiary is measured at its fair value at the date when control is lost and is subsequently accounted as available-for-sale financial assets in accordance with FRS 39.
The company’s financial statements have been prepared on the same basis, and as permitted by the Companies Act, Chapter 50, no statement of income is presented for the company.
The equity accounting method is used for associates in the group financial statements.
2. Summary of Significant Accounting Policies (Continued)
Basis of Preparation of the Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. Actual results could differ from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apart from those involving estimations, management has made judgements in the process of applying the entity’s accounting policies. The areas requiring management’s most difficult, subjective or complex judgements, or areas where assumptions and estimates are significant to the financial statements, are disclosed at the end of this footnote, where applicable.
Revenue Recognition
The revenue amount is the fair value of the consideration received or receivable from the gross inflow of economic benefits during the reporting year arising from the course of the activities of the entity and it is shown net of any related sales taxes, estimated returns, discounts and rebates. Revenue from the sale of goods is recognised when significant risks and rewards of ownership are transferred to the buyer, there is neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold, and the amount of revenue and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue from rendering of services that are of short duration is recognised when the services are completed. Interest is recognised using the effective interest method. Dividend from equity instruments is recognised as income when the entity’s right to receive payment is established. Rental revenue is recognised on a time-proportion basis that takes into account the effective yield on the asset on a straight-line basis over the lease term.
NOTES TO THE FINANCIAL STATEMENTS 30 June 2013
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Employee Benefits
Contributions to defined contribution retirement benefit plans are recorded as an expense as they fall due. The entity’s legal or constructive obligation is limited to the amount that it agrees to contribute to an independently administered fund which is the Central Provident Fund in Singapore (a government managed retirement benefit plan). For employee leave entitlement the expected cost of short-term employee benefits in the form of compensated absences is recognised in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences; and in the case of non-accumulating compensated absences, when the absences occur. A liability for bonuses is recognised where the entity is contractually obliged or where there is constructive obligation based on past practice.
Share-Based Compensation
Benefits to employees are provided in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (“equity-settled transactions”). The fair value of the employee services rendered is determined by reference to the fair value of the shares awarded of rights granted, excluding the impact of any non-market vesting conditions. These are fair valued based on the market price of the entity’s shares (or an estimated market price, if the entity’s shares are not publicly traded). This fair value amount is charged to profit or loss over the vesting period of the share-based payment scheme, with the corresponding increase in equity. The value of the charge is adjusted in profit or loss over the remainder of the vesting period to reflect expected and actual quantities vesting, with the corresponding adjustment made in equity. Cancellations of grants of equity instruments during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied) are accounted for as an acceleration of vesting, therefore any amount unrecognised that would otherwise have been charged is recognized immediately in profit or loss
2. Summary of Significant Accounting Policies (Continued)
Income Tax
The income taxes are accounted using the asset and liability method that requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequence of events that have been recognised in the financial statements or tax returns. The measurements of current and deferred tax liabilities and assets are based on provisions of the enacted or substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. Income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferred income taxes are recognised as income or as an expense in profit or loss unless the tax relates to items that are recognised in the same or a different period outside profit or loss. For such items recognised outside profit or loss the current tax and deferred tax are recognised (a) in other comprehensive income if the tax is related to an item recognised in other comprehensive income and (b) directly in equity if the tax is related to an item recognised directly in equity. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same income tax authority. The carrying amount of deferred tax assets is reviewed at each end of the reporting year and is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realised. A deferred tax amount is recognised for all temporary differences, unless the deferred tax amount arises from the initial recognition of an asset or liability in a transaction which (i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). A deferred tax liability or asset is recognised for all taxable temporary differences associated with investments in subsidiaries and associates except where the reporting entity is able to control the timing of the reversal of the taxable temporary difference and it is probable that the taxable temporary difference will not reverse in the foreseeable future or for deductible temporary differences, they will not reverse in the foreseeable future and they cannot be utilised against taxable profits.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Foreign Currency Transactions
The functional currency is the Singapore dollar as it reflects the primary economic environment in which the entity operates. Transactions in foreign currencies are recorded in the functional currency at the rates ruling at the dates of the transactions. At each end of the reporting year, recorded monetary balances and balances measured at fair value that are denominated in non-functional currencies are reported at the rates ruling at the end of the reporting year and fair value dates respectively. All realised and unrealised exchange adjustment gains and losses are dealt with in profit or loss except when recognised in other comprehensive income and if applicable deferred in equity such as for qualifying cash flow hedges. The presentation is in the functional currency.
Translation of Financial Statements of Foreign Entities
Each entity in the group determines the appropriate functional currency as it reflects the primary economic environment in which the relevant reporting entity operates. In translating the financial statements of such an entity for incorporation in the consolidated financial statements in the presentation currency the assets and liabilities denominated in other currencies are translated at end of the reporting year rates of exchange and the income and expense items for each statement presenting profit or loss and other comprehensive income are translated at average rates of exchange for the reporting year. The resulting translation adjustments (if any) are recognised in other comprehensive income and accumulated in a separate component of equity until the disposal of that relevant entity.
Segment Reporting
The group discloses financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing the performance. Generally, financial information is reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.
2. Summary of Significant Accounting Policies (Continued)
Borrowing Costs
All borrowing costs that are interest and other costs incurred in connection with the borrowing of funds. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset that necessarily take a substantial period of time to get ready for their intended use or sale are capitalised as part of the cost of that asset until substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete. Other borrowing costs are recognised as an expense in the period in which they are incurred. The interest expense is calculated using the effective interest rate method.
Property, Plant and Equipment
Depreciation is provided on a straight-line basis to allocate the gross carrying amounts of the assets less their residual values over their estimated useful lives of each part of an item of these assets. The annual rates of depreciation are as follows:
Leasehold buildings – Over the terms of lease that are 17 to 30 yearsPlant and machinery – 5 to 10 yearsMotor vehicles – 5 years
An asset is depreciated when it is available for use until it is derecognised even if during that period the item is idle. Fully depreciated assets still in use are retained in the financial statements.
Property, plant and equipment are carried at cost on initial recognition and after initial recognition at cost less any accumulated depreciation and any accumulated impairment losses. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item and is recognised in profit or loss. The residual value and the useful life of an asset is reviewed at least at each end of the reporting year and, if expectations differ significantly from previous estimates, the changes are accounted for as a change in an accounting estimate, and the depreciation charge for the current and future periods are adjusted.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Property, Plant and Equipment (Continued)
Cost also includes acquisition cost, borrowing cost capitalised and any cost directly attributable to bringing the asset or component to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are recognised as an asset only when it is probable that future economic benefits associated with the item will flow to the entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss when they are incurred.
Business Combinations
A business combination is transaction or other event which requires that the assets acquired and liabilities assumed constitute a business. It is accounted for by applying the acquisition method of accounting. The cost of a business combination includes the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquiree. The acquisition-related costs are expensed in the periods in which the costs are incurred and the services are received except for any costs to issue debt or equity securities are recognised in accordance with FRS 32 and FRS 39. As of the acquisition date, the acquirer recognises, separately from goodwill, the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree measured at acquisition-date fair values as defined in and that meet the conditions for recognition under FRS 103. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. If the acquirer has made a gain from a bargain purchase that gain is recognised in profit or loss. If there is gain on bargain purchase, for the gain on bargain purchase a reassessment is made of the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the cost of the business combination and any excess remaining after this reassessment is recognised immediately in profit or loss.
2. Summary of Significant Accounting Policies (Continued)
Subsidiaries
A subsidiary is an entity including unincorporated and special purpose entity that is controlled by the group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities accompanying a shareholding of more than one half of the voting rights or the ability to appoint or remove the majority of the members of the board of directors or to cast the majority of votes at meetings of the board of directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.
In the company’s own separate financial statements, an investment in a subsidiary is accounted for at cost less any allowance for impairment in value. Impairment loss recognised in profit or loss for a subsidiary is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The net book value of the investment in a subsidiary is not necessarily indicative of the amount that would be realised in a current market.
Goodwill
Goodwill is recognised as of the acquisition date measured as the excess of (a) over (b); (a) being the aggregate of: (i) the consideration transferred which generally requires acquisition-date fair value; (ii) the amount of any non-controlling interest in the acquiree measured in accordance with FRS 103 (measured either at fair value or as the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets); and (iii) in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree; and (b) being the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with this FRS 103.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Goodwill (Continued)
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised. Irrespective of whether there is any indication of impairment, goodwill (and also an intangible asset with an indefinite useful life or an intangible asset not yet available for use) are tested for impairment, at least annually. Goodwill impairment is not reversed in any circumstances.
For the purpose of impairment testing and since the acquisition date of the business combination, goodwill is allocated to each cash-generating unit, or groups of cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree were assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated represent the lowest level within the entity at which the goodwill is monitored for internal management purposes and is not larger than a segment.
2. Summary of Significant Accounting Policies (Continued)
Associates
An associate is an entity including an unincorporated entity in which the reporting entity has a substantial financial interest (usually not less than 20% of the voting power), significant influence and that is neither a subsidiary nor a joint venture of the investor. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. The accounting for investments in an associate is on the equity method. Under equity accounting, the investment in an associate is carried in the statement of financial position at cost plus post-acquisition changes in the share of net assets of the associate, less any impairment in value. The profit or loss reflects the reporting entity’s share of the results of operations of the associate. Losses of an associate in excess of the reporting entity’s interest in the relevant associate are not recognised except to the extent that the reporting entity has an obligation. An investment in an associate includes goodwill on acquisition, which is accounted for in accordance with FRS 103 Business Combinations. However the entire carrying amount of the investment is tested under FRS 36 for impairment, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount, whenever application of the requirements in FRS 39 indicates that the investment may be impaired. Profits and losses resulting from transactions between the reporting entity and an associate are recognised in the financial statements only to the extent of unrelated reporting entity’s interests in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates are changed where necessary to ensure consistency with the policies adopted by the reporting entity. The net book value of the investment in the associate is not necessarily indicative of the amounts that would be realised in a current market exchange. The reporting entity discontinues the use of the equity method from the date that it ceases to have significant influence over the associate and accounts for the investment in accordance with FRS 39 from that date. Any gain or loss is recognised in profit or loss. Any investment retained in the former associate is measured at its fair value at the date that it ceases to be an associate.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Associates (Continued)
In the company’s own separate financial statements, an investment in an associate is accounted for at cost less any allowance for impairment in value. Impairment loss recognised in profit or loss for an associate is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying value and the net book value of an investment in the associate are not necessarily indicative of the amounts that would be realised in a current market exchange.
Intangible Assets
An identifiable non-monetary asset without physical substance is recognised as an intangible asset at acquisition cost if it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the cost of the asset can be measured reliably. After initial recognition, an intangible asset with finite useful life is carried at cost less any accumulated amortisation and any accumulated impairment losses. An intangible asset with an indefinite useful life is not amortised. An intangible asset is regarded as having an indefinite useful life when, based on an analysis of all of the relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the entity.
The amortisable amount of an intangible asset with finite useful life is allocated on a systematic basis over the best estimate of its useful life from the point at which the asset is ready for use. The useful lives are as follows:
Customer relationship - 5 yearsOrderbook - Based on actual orders for reporting years
2012 and 2013
Intangible Assets
Identifiable intangible assets acquired as part of a business combination are initially recognized separately from goodwill if the asset’s fair value can be measured reliably, irrespective of whether the asset had been recognised by the acquire before the business combination. An intangible asset is considered identifiable only if it is separable or if it arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
2. Summary of Significant Accounting Policies (Continued)
Leases
Whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date, that is, whether (a) fulfilment of the arrangement is dependent on the use of a specific asset or assets (the asset); and (b) the arrangement conveys a right to use the asset. Leases are classified as finance leases if substantially all the risks and rewards of ownership are transferred to the lessee. All other leases are classified as operating leases. At the commencement of the lease term, a finance lease is recognised as an asset and as a liability in the statement of financial position at amounts equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The discount rate used in calculating the present value of the minimum lease payments is the interest rate implicit in the lease, if this is practicable to determine, the lessee’s incremental borrowing rate is used. Any initial direct costs of the lessee are added to the amount recognised as an asset. The excess of the lease payments over the recorded lease liability are treated as finance charges which are allocated to each reporting year during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents are charged as expenses in the reporting years in which they are incurred. The assets are depreciated as owned depreciable assets. Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased assets are classified as operating leases. For operating leases, lease payments are recognised as an expense in profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense. Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is representative of the time pattern of the user’s benefit, even if the payments are not on that basis. Initial direct cost incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Impairment of Non-Financial Assets
Irrespective of whether there is any indication of impairment, an annual impairment test is performed at the same time every year on an intangible asset with an indefinite useful life or an intangible asset not yet available for use. The carrying amount of other non-financial assets is reviewed at each end of the reporting year for indications of impairment and where an asset is impaired, it is written down through profit or loss to its estimated recoverable amount. The impairment loss is the excess of the carrying amount over the recoverable amount and is recognised in profit or loss. The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value in use. When the fair value less costs to sell method is used, any available recent market transactions are taken into consideration. When the value in use method is adopted, in assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). At each end of the reporting year non-financial assets other than goodwill with impairment loss recognised in prior periods are assessed for possible reversal of the impairment. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Inventories
Inventories are measured at the lower of cost (first in first out method) and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. A write down on cost is made where the cost is not recoverable or if the selling prices have declined. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.
2. Summary of Significant Accounting Policies (Continued)
Financial Assets
Initial recognition, measurement and derecognition:
A financial asset is recognised on the statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument. The initial recognition of financial assets is at fair value normally represented by the transaction price. The transaction price for financial asset not classified at fair value through profit or loss includes the transaction costs that are directly attributable to the acquisition or issue of the financial asset. Transaction costs incurred on the acquisition or issue of financial assets classified at fair value through profit or loss are expensed immediately. The transactions are recorded at the trade date.
Irrespective of the legal form of the transactions performed, financial assets are derecognised when they pass the “substance over form” based on the derecognition test prescribed by FRS 39 relating to the transfer of risks and rewards of ownership and the transfer of control.
Subsequent measurement:
Subsequent measurement based on the classification of the financial assets in one of the following four categories under FRS 39 is as follows:
1. Financial assets at fair value through profit or loss: Assets are classified in this category when they are incurred principally for the purpose of selling or repurchasing in the near term (trading assets) or are derivatives (except for a derivative that is a designated and effective hedging instrument) or have been classified in this category because the conditions are met to use the “fair value option” and it is used. All changes in fair value relating to assets at fair value through profit or loss are recognised directly in profit or loss. They are classified as non-current assets unless management intends to dispose of the asset within 12 months of the end of the reporting year.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Financial Assets (Continued)
2. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Assets that are for sale immediately or in the near term are not classified in this category. These assets are carried at amortised costs using the effective interest method (except that short-duration receivables with no stated interest rate are normally measured at original invoice amount unless the effect of imputing interest would be significant) minus any reduction (directly or through the use of an allowance account) for impairment or uncollectibility. Impairment charges are provided only when there is objective evidence that an impairment loss has been incurred as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The methodology ensures that an impairment loss is not recognised on the initial recognition of an asset. Losses expected as a result of future events, no matter how likely, are not recognised. For impairment, the carrying amount of the asset is reduced through use of an allowance account. The amount of the loss is recognised in profit or loss. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. Typically the trade and other receivables are classified in this category.
3. Held-to-maturity financial assets: As at end of the reporting year date there were no financial assets classified in this category.
4. Available-for-sale financial assets: As at end of the reporting year date there were no financial assets classified in this category.
2. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
Cash and cash equivalents include bank and cash balances, on demand deposits and any highly liquid debt instruments purchased with an original maturity of three months or less. For the statement of cash flows the item includes cash and cash equivalents less cash subject to restriction and bank overdrafts payable on demand that form an integral part of cash management.
Hedging
The entity is exposed to currency and interest rate risks. The policy is to reduce currency and interest rate exposures through derivatives and other hedging instruments. From time to time, there may be borrowings and foreign exchange arrangements or interest rate swap contracts or similar instruments entered into as hedges against changes in interest rates, cash flows or the fair value of the financial assets and liabilities. These arrangements are not used for trading or speculative purposes. They are carried at fair value. The gain or loss from remeasuring these hedging or other arrangement instruments at fair value are recognised in profit or loss. The derivatives and other hedging instruments used are described below in the notes to the financial statements.
Derivatives
All derivatives are initially recognised and subsequently carried at fair value. Accounting for derivatives engaged in hedging relationships is described in the above section. Certain derivatives are entered into in order to hedge some transactions and all the strict hedging criteria prescribed by FRS 39 are not met. In those cases, even though the transaction has its economic and business rationale, hedge accounting cannot be applied. As a result, changes in the fair value of those derivatives are recognised directly in profit or loss and the hedged item follows normal accounting policies.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Financial Liabilities
Initial recognition, measurement and derecognition:
A financial liability is recognised on the statement of financial position when, and only when, the entity becomes a party to the contractual provisions of the instrument and it is derecognised when the obligation specified in the contract is discharged or cancelled or expires. The initial recognition of financial liability is at fair value normally represented by the transaction price. The transaction price for financial liability not classified at fair value through profit or loss includes the transaction costs that are directly attributable to the acquisition or issue of the financial liability. Transaction costs incurred on the acquisition or issue of financial liability classified at fair value through profit or loss are expensed immediately. The transactions are recorded at the trade date. Financial liabilities including bank and other borrowings are classified as current liabilities unless there is an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting year.
Subsequent measurement:
Subsequent measurement based on the classification of the financial liabilities in one of the following two categories under FRS 39 is as follows:
1. Liabilities at fair value through profit or loss: Liabilities are classified in this category when they are incurred principally for the purpose of selling or repurchasing in the near term (trading liabilities) or are derivatives (except for a derivative that is a designated and effective hedging instrument) or have been classified in this category because the conditions are met to use the “fair value option” and it is used. Financial guarantee contracts if significant are initially recognised at fair value and are subsequently measured at the greater of (a) the amount determined in accordance with FRS 37 and (b) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with FRS 18. All changes in fair value relating to liabilities at fair value through profit or loss are charged to profit or loss as incurred.
2. Summary of Significant Accounting Policies (Continued)
Financial Liabilities (Continued)
2. Other financial liabilities: All liabilities, which have not been classified as in the previous category fall into this residual category. These liabilities are carried at amortised cost using the effective interest method. Trade and other payables and borrowings are usually classified in this category. Items classified within current trade and other payables are not usually re-measured, as the obligation is usually known with a high degree of certainty and settlement is short-term.
Fair Value of Financial Instruments
The carrying values of current financial instruments approximate their fair values due to the short-term maturity of these instruments and the disclosures of fair value are not made when the carrying amount of current financial instruments is a reasonable approximation of the fair value. The fair values of non-current financial instruments may not be disclosed separately unless there are significant differences at the end of the reporting year and in the event the fair values are disclosed in the relevant notes. The fair value of a financial instrument is derived from an active market or by using an acceptable valuation technique. The appropriate quoted market price for an asset held or liability to be issued is usually the current bid price without any deduction for transaction costs that may be incurred on sale or other disposal and, for an asset to be acquired or liability held, the asking price. If there is no market, or the markets available are not active, the fair value is established by using an acceptable valuation technique. The fair value measurements are classified using a fair value hierarchy of 3 levels that reflects the significance of the inputs used in making the measurements, that is, Level 1 for the use of quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 for the use of inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and Level 3 for the use of inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. Where observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. The maximum exposure to credit risk is: the total of the fair value of the financial assets; the maximum amount the entity could have to pay if the guarantee is called on; and the full amount of any payable commitments at the end of the reporting year.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Equity
Equity instruments are contracts that give a residual interest in the net assets of the company. Ordinary shares are classified as equity. Equity instruments are recognised at the amount of proceeds received net of incremental costs directly attributable to the transaction. Dividends on equity are recognised as liabilities when they are declared. Interim dividends are recognised when declared by the directors.
Provisions
A liability or provision is recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are made using best estimates of the amount required in settlement and where the effect of the time value of money is material, the amount recognised is the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. Changes in estimates are reflected in profit or loss in the reporting year they occur.
Government Grants
A government grant is recognised at fair value when there is reasonable assurance that the conditions attaching to it will be complied with and that the grant will be received. A grant in recognition of specific expenses is recognised as income over the periods necessary to match them with the related costs that they are intended to compensate, on a systematic basis. A grant related to depreciable assets is allocated to income over the period in which such assets are used in the project subsidised by the grant. A government grant related to assets, including non-monetary grants at fair value, is presented in the statement of financial position.
2. Summary of Significant Accounting Policies (Continued)
Critical Judgements, Assumptions and Estimation Uncertainties
The critical judgements made in the process of applying the accounting policies that have the most significant effect on the amounts recognised in the financial statements and the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting year, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities currently or within the next reporting year are discussed below. These estimates and assumptions are periodically monitored to ensure they incorporate all relevant information available at the date when financial statements are prepared. However, this does not prevent actual figures differing from estimates.
Allowance for doubtful trade accounts:An allowance is made for doubtful trade accounts for estimated losses resulting from the subsequent inability of the customers to make required payments. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in future periods. Management generally analyses trade receivables and historical bad debts, customer concentrations, and customer creditworthiness when evaluating the adequacy of the allowance for doubtful trade receivables. To the extent that it is feasible impairment and uncollectibility is determined individually for each item. In cases where that process is not feasible, a collective evaluation of impairment is performed. At the end of the reporting year, the trade receivables carrying amount approximates the fair value and the carrying amounts might change materially within the next reporting year but these changes would not arise from assumptions or other sources of estimation uncertainty at the end of the reporting year. The carrying amount is disclosed in the Note on trade and other receivables.
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Notes to the FiNaNcial statemeNts 30 June 2013
2. Summary of Significant Accounting Policies (Continued)
Critical judgements, Assumptions and Estimation Uncertainties (Continued)
Net realisable value of inventories:A review is made periodically on inventory for excess inventory and declines in net realisable value below cost and an allowance is recorded against the inventory balance for any such declines. The review requires management to consider the future demand for the products. In any case the realisable value represents the best estimate of the recoverable amount and is based on the acceptable evidence available at the end of the reporting year and inherently involves estimates regarding the future expected realisable value. The usual considerations for determining the amount of allowance or write-down include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires significant judgement and materially affects the carrying amount of inventories at the end of the reporting year. Possible changes in these estimates could result in revisions to the stated value of the inventories. The carrying amount of inventories at the end of the reporting year was $20,258,172 (2012: $20,126,646).
Estimated Impairment of Goodwill:An assessment is made annually whether goodwill has suffered any impairment loss, based on the recoverable amounts of the cash generating units (“CGU”). The recoverable amounts of the CGUs was determined based on value in use calculations and these calculations require the use of estimates in relation to future cash flows and suitable discount rates as disclosed in Note 16A. Actual outcomes could vary from these estimates as disclosed in Note 16A.
3. Related Party Relationships and Transactions
FRS 24 defines a related party as a person or entity that is related to the reporting entity and it includes (a) A person or a close member of that person’s family if that person: (i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. (b) An entity is related to the reporting entity if any of the following conditions apply: (i) The entity and the reporting entity are members of the same group. (ii) One entity is an associate or joint venture of the other entity. (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
3.1 Related companies:
Related companies in these financial statements include the members of the company’s group of companies. The ultimate controlling party is Lim See Hoe.
There are transactions and arrangements between the reporting entity and members of the group and the effects of these on the basis determined between the parties are reflected in these financial statements. The current intercompany balances are unsecured without fixed repayment terms and interest unless stated otherwise. For any significant non-current balances and significant financial guarantees an interest or charge is charged or imputed unless stated otherwise. The transactions were not significant.
Intragroup transactions and balances that have been eliminated in these consolidated financial statements are not disclosed as related party transactions and balances below.
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Notes to the FiNaNcial statemeNts 30 June 2013
3. Related Party Relationships and Transactions (Continued)
3.2 Other related parties:
There are transactions and arrangements between the reporting entity and related parties and the effects of these on the basis determined between the parties are reflected in these financial statements. The current related party balances are unsecured without fixed repayment terms and interest unless stated otherwise. The current balances are unsecured without fixed repayment terms and interest unless stated otherwise. For any significant non-current balances and significant financial guarantees an interest or charge is charged or imputed unless stated otherwise.
Significant related party transactions:
In addition to the transactions and balances disclosed elsewhere in the notes to the financial statements, this item includes the following:-
Group
2013$
2012$
Rental expenses paid to a related party 235,584 235,584
Rental expenses paid to an entity owned by a director.
3.3 Key management compensation:
Group
2013$
2012$
Salaries and other short-term employee benefits 1,748,108 1,452,673
The above amounts are included under employee benefits expense. Included in the above amounts are the following items:
3. Related Party Relationships and Transactions (Continued)
3.3 Key management compensation: (Continued)
Group2013
$2012
$
Remuneration of directors of the company 630,250 605,578Benefits in kind to directors of the company 29,779 30,122Fees to directors of the company 150,000 150,000
Further information about the remuneration of individual directors is provided in the report on corporate governance.
Key management personnel of the group are directors and those persons having authority and responsibility for planning, directing and controlling the activities of the company, directly or indirectly. The above amounts for key management compensation are for all directors and key management personnel.
3.4 Other receivables and payables to related parties:
The trade transactions and trade receivables and trade payables balances arising from sales and purchases of goods and services are disclosed elsewhere in the notes to the financial statements.
The movements in other receivables and other payables to related parties are as follows:
Company2013
$2012
$Other receivables from subsidiary:Balance at beginning of year 1,818,146 3,924,346Amount paid out/(in) during the year – net 446,534 (2,106,200)Balance at end of year (Note 20) 2,264,680 1,818,146
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Notes to the FiNaNcial statemeNts 30 June 2013
3. Related Party Relationships and Transactions (Continued)
3.4 Other receivables and payables to related parties: (Continued)
Group2013
$2012
$Other payables from subsidiary:Balance at beginning of year 2,930,605 -Amount paid in during the year – net 3,468,015 2,930,605Balance at end of year (Note 26) 6,398,620 2,930,605
3.5 Commitments and Contingencies:
As at 30 June 2013, the company has contingent liabilities of $51,090,000 (2012: $62,090,000) in respect of guarantees issued in connection with banking facilities granted to a subsidiary.
4. Financial Information by Operating Segments
4A. Information about Reportable Segment Profit or Loss, Assets and Liabilities
FRS 108 requires the disclosure of information about operating segments, products and services, the geographical areas, and the major customers. This disclosure standard has no impact on the reported results or financial position of the group.
For management purposes, the group is organised into three major operating divisions – Marine, Offshore Oil & Gas and Others. The group sells rigging and mooring equipment and offshore oil and gas equipment. The three major divisions are determined by the customers’ nature of businesses that may reflect the risks and returns associated with each business segment. It represents the basis on which the management reports the primary segment information. They are managed separately because each business requires different strategies.
4. Financial Information by Operating Segments (Continued)
4A. Information about Reportable Segment Profit or Loss, Assets and Liabilities (Continued)
The segments are as follows:
Marine – customers who are mainly ship chandlers, ship owners, shipyards, port operators and ship management companies.
Offshore Oil & Gas – customers involved in the construction and repair of drilling and offshore platforms.
Others – customers in construction, defence, logistics and other industries including trading.
Inter-segment sales are measured on the basis that the entity actually used to price the transfers. Internal transfer pricing policies of the group are as far as practicable based on market prices. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.
The management reporting system evaluates performances based on a number of factors. However, the primary profitability measurement to evaluate segment’s operating results comprises a major financial indicator: earnings from operations before depreciation, interests and income taxes (called “Recurring EBITDA”).
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Notes to the FiNaNcial statemeNts 30 June 2013
4. Financial Information by Operating Segments (Continued)
4B. Profit or Loss from Continuing Operations and Reconciliations
MarineOffshoreOil & Gas Others Unallocated Group
$ $ $ $ $
Continuing Operations 2013
Revenue by Segment
Total revenue by segment 27,428,114 9,339,224 6,204,063 – 42,971,401
Total revenue 27,428,114 9,339,224 6,204,063 – 42,971,401
Recurring EBITDA 7,826,144 3,929,084 2,191,590 – 13,946,818
Amortisation (30,000) (822,000) – – (852,000)
Finance costs – – – (375,390) (375,390)
Depreciation – – – (912,214) (912,214)
Unallocated items – – – (9,099,099) (9,099,099)
Share of profit from equity-accounted associate – – – 34,330 34,330
Profit before tax from continuing operations 2,742,445
Income tax expense (361,875)
Profit from continuing operations 2,380,570
4. Financial Information by Operating Segments (Continued)
4B. Profit or Loss from Continuing Operations and Reconciliations (Continued)
MarineOffshoreOil & Gas Others Unallocated Group
$ $ $ $ $
Continuing Operations 2012
Revenue by Segment
Total revenue by segment 27,920,314 2,683,569 6,762,572 – 37,366,455
Total revenue 27,920,314 2,683,569 6,762,572 – 37,366,455
Recurring EBITDA 7,627,958 842,099 2,659,111 – 11,129,168
Amortisation – (216,000) – – (216,000)
Finance costs – – – (359,922) (359,922)
Depreciation – – – (748,971) (748,971)
Unallocated items – – – (6,899,846) (6,899,846)
Share of profit from equity-accounted associate – – – 5,133 5,133
Profit before tax from continuing operations 2,909,562
Income tax expense (670,585)
Profit from continuing operations 2,238,977
Unallocated items are mainly distribution, administrative and other operating expenses which cannot be allocated to the operating segments on a reasonable basis.
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Notes to the FiNaNcial statemeNts 30 June 2013
4. Financial Information by Operating Segments (Continued)
4C. Assets and Reconciliations
MarineOffshoreOil & Gas Others Unallocated Group
$ $ $ $ $
2013Total assets for
reportable segments 6,702,301 2,457,005 1,630,321 481,700 11,271,327
Unallocated:Non-current
assets 1,771,364 3,830,562 – 6,635,192 12,237,118Inventories – – – 20,258,172 20,258,172Cash and cash
equivalents – – – 5,081,521 5,081,521Other
unallocated assets – – – 58,598 58,598
Total group assets 8,473,665 6,287,567 1,630,321 32,515,183 48,906,736
2012
Total assets for reportable segments 5,800,794 789,146 1,821,270 79,793 8,491,003
Unallocated:Non-current
assets – 4,652,562 – 6,258,449 10,911,011Inventories – – – 20,126,646 20,126,646Cash and cash
equivalents – – – 7,054,224 7,054,224Other
unallocated assets – – – 260,069 260,069
Total group assets 5,800,794 5,441,708 1,821,270 33,779,181 46,842,953
Certain assets are not allocated to business segments because they are not directly attributable to these segments or cannot be allocated to these segments on a reasonable basis.
4. Financial Information by Operating Segments (Continued)
4D. Liabilities and Reconciliations
MarineOffshoreOil & Gas Others Unallocated Group
$ $ $ $ $
2013
Unallocated:
Deferred and current tax liabilities – – – 1,108,510 1,108,510
Borrowings – – – 15,419,486 15,419,486
Trade and other payables – – – 3,650,226 3,650,226
Total group liabilities – – – 20,178,222 20,178,222
2012
Unallocated:
Deferred and current tax liabilities – – – 1,322,499 1,322,499
Borrowings – – – 13,956,909 13,956,909
Trade and other payables – – – 4,217,182 4,217,182
Total group liabilities – – – 19,496,590 19,496,590
The liabilities are not allocated to business segments because they are not directly attributable to these segments or cannot be allocated to these segments on a reasonable basis.
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Notes to the FiNaNcial statemeNts 30 June 2013
4. Financial Information by Operating Segments (Continued)
4E. Other Material Items and Reconciliations
MarineOffshoreOil & Gas Others Unallocated Group
$ $ $ $ $
Income for non-current assets:
2013 – – – 24,500 24,500
2012 – – – 60,000 60,000
Expenditure for non-current assets:
2013 – – – 459,163 459,163
2012 – – – 971,646 971,646
4F. Geographical Information
The following table provides an analysis of the revenue by geographical market, irrespective of the origin of the goods and services:
Revenue Non-current assets
2013$
2012$
2013$
2012$
Group
Singapore 33,434,663 29,433,198 12,161,167 10,910,188
Rest of Asia 5,163,876 5,450,951 699 823
Rest of the World 4,372,862 2,482,306 75,252 –
Subtotal for all foreign countries 9,536,738 7,933,257 75,951 823
Total continuing operations 42,971,401 37,366,455 12,237,118 10,911,011
4. Financial Information by Operating Segments (Continued)
4F. Geographical Information (Continued)
Revenues are attributed to countries on the basis of the customer’s location. The non-current assets are analysed by the geographical area in which the assets are located. The non-current assets exclude any financial instruments, deferred tax assets, post-employment benefit assets.
4G. Information About Major Customers
Group
2013$
2012$
Top 1 customer 5,781,624 6,720,418
Top 2 customers 9,932,749 7,796,539
Top 3 customers 11,063,913 8,747,671
5. Revenue
Group
2013$
2012$
Sale of goods 42,971,401 37,366,455
6. Interest Income
Group
2013$
2012$
Interest income 1,437 33,039
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Notes to the FiNaNcial statemeNts 30 June 2013
7. Other Credits and (Other Charges)
Group
2013$
2012$
Allowance for impairment on trade receivables – reversal 3,600 6,400
Bad debts written off – trade and other receivables (29,061) (5,105)
Claim compensation (6,253) (11,708)
Job credits – 253
Foreign exchange transaction loss (15,165) (66,134)
Grants received 42,642 56,975
Gain on disposal of property, plant and equipment 5,314 210,581
Amortisation of intangible assets (852,000) (216,000)
Fair value loss on interest rate swap – (5,802)
Others – (18,000)
Rental income 24,500 60,000
Sundry income 46,441 11,800
Net (779,982) 23,260
Group
2013$
2012$
Presented in profit or loss as:
Other Credits 122,497 346,009
Other Charges (902,479) (322,749)
Net (779,982) 23,260
8. Finance Costs
Group
2013$
2012$
Interest expense 375,390 359,922
9. Administrative Expenses
The major components include the following:
Group
2013$
2012$
Directors’ remuneration 1,200,535 1,025,827
Professional fees 395,954 320,973
Staff salaries and bonus 3,157,613 2,413,768
10. Other Operating Expenses
The major components include the following:
Group
2013$
2012$
Depreciation 912,214 748,971
Land rental 266,781 264,974
Rental expense 399,321 292,704
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11. Employee Benefits Expense
Group
2013$
2012$
Employee benefits expense including directors 4,506,832 3,589,595
Contributions to defined contribution plan 359,122 276,901
Total employee benefits expense 4,865,954 3,866,496
Employee benefits expense is charged as administrative expenses.
12. Income Tax
12A. Components of tax expense/ (income) recognised in profit or loss include:
Group
2013$
2012$
Current tax expense:
Current tax expense 475,225 670,557
Under adjustments to current tax in respect of prior periods 34,869 28
Subtotal 510,094 670,585
Deferred tax income:
Deferred tax income (167,466) –
Under adjustments to deferred tax in respect of prior periods 19,247 –
Subtotal (148,219) –
Total income tax expense 361,875 670,585
12. Income Tax (Continued)
12A. Components of tax expense/ (income) recognised in profit or loss include: (Continued)
The income tax in profit or loss varied from the amount of income tax amount determined by applying the Singapore income tax rate of 17.0% (2012: 17.0%) to profit before income tax as a result of the following differences:
Group
2013$
2012$
Profit Before Tax 2,742,445 2,909,562
Less: Share of Profit from Equity-Accounted Associates (34,330) (5,133)
2,708,115 2,904,429
Income tax expense at the above rate 460,379 493,753
Not deductible items 50,580 230,565
Income not subject to tax (5,836) –
Under adjustments to current tax in respect of prior periods 34,869 28
Tax exemptions (51,850) (51,850)
Under adjustments to deferred tax in respect of prior periods 19,247 –
Movements of temporary differences (191,883) –
Effect of different tax rates in different countries 29,528 –
Others 16,841 (1,911)
Total income tax expense 361,875 670,585
There are no income tax consequences of dividends to owners of the group.
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12. Income Tax (Continued)
12B. Deferred tax income recognised in profit or loss include:
Group
2013$
2012$
Excess of book value of intangibles assets over tax values (191,883) –
Excess of tax values over net book value of plant and equipment 43,664 –
Total deferred tax expense recognised in profit or loss (148,219) –
12C. Deferred tax balance in the statement of financial position:
Group
2013$
2012$
Deferred tax liabilities recognised in profit or loss:
Deferred tax liability arising from fair value adjustments in relation to acquisition of subsidiaries 381,140 415,450
Excess of net book value of plant and equipment over tax values 141,513 97,849
Total 522,653 513,299
Presented in the statement of financial position as follows:
Deferred tax liabilities 522,653 513,299
522,653 513,299
It is impracticable to estimate the amount expected to be settled or used within one year.
13. Dividends
Rate per share - cents2013 2012 2013
$2012
$Interim tax exempt
(1-tier) dividend paid 0.4 – 462,764 – Final tax exempt
(1-tier) dividend paid 0.8 0.8 925,529 894,400Total dividends paid in
the year 1.2 0.8 1,388,293 894,400
In respect of the current year, the directors propose that a one-tier tax exempt final dividend of 0.6 cents per share of a total of $709,146 to be paid to shareholders after the annual general meeting. This dividend is subject to approval by shareholders at the next annual general meeting and has not been included as a liability in these financial statements. The proposed dividend for 2013 is payable in respect of all ordinary shares in issue at the reporting date and including the new qualifying shares issued up to the date the dividend becomes payable.
14. Earnings Per Share
The following table illustrates the numerators and denominators used to calculate basic and diluted earnings per share of no par value:
Group2013
$2012
$A. Numerators: earnings attributable to equity:
Continuing operations: attributable to equity holders 2,380,570 2,238,977
B. Denominators: weighted average number of equity shares
Basic 116,107,718 112,448,509
C. Diluted 116,107,718 112,448,509
The weighted average number of equity shares refers to shares in circulation during the period.
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15. Property, Plant and Equipment
Group Leaseholdbuildings
Plant and machinery
Motor vehicles Total
$ $ $ $Cost: At 1 July 2011 8,617,230 2,481,774 522,479 11,621,483Acquisition of subsidiary – 12,025 – 12,025Additions – 875,375 96,271 971,646Disposals – (200,000) – (200,000)At 1 July 2012 8,617,230 3,169,174 618,750 12,405,154Reclassifications – 84,500 (84,500) – Foreign exchange adjustments – 34 – 34Acquisition of subsidiary 723,283 99,723 – 823,006Additions – 459,163 – 459,163Written off (455,000) – – (455,000)Disposals – – (43,401) (43,401)At 30 June 2013 8,885,513 3,812,594 490,849 13,188,956
Accumulated depreciation:At 1 July 2011 3,132,224 2,066,688 488,141 5,687,053Acquisition of subsidiary – 9,132 – 9,132Depreciation for the year 530,143 191,289 27,539 748,971Disposals – (200,000) – (200,000)At 1 July 2012 3,662,367 2,067,109 515,680 6,245,156Reclassifications – 84,500 (84,500) – Foreign exchange adjustments – 7 – 7Acquisition of subsidiary 23,283 43,253 – 66,536Depreciation for the year 533,054 356,043 23,117 912,214Written off (455,000) – – (455,000)Disposals – – (43,401) (43,401)At 30 June 2013 3,763,704 2,550,912 410,896 6,725,512
Net book value:At 1 July 2011 5,485,006 415,086 34,338 5,934,430At 30 June 2012 4,954,863 1,102,065 103,070 6,159,998At 30 June 2013 5,121,809 1,261,682 79,953 6,463,444
The leasehold buildings are pledged as security for banking facilities (Note 25).
The depreciation expense is charged as other operating expenses.
15. Property, Plant and Equipment (Continued)
Fully depreciated plant and equipment still in use has a cost of $2,285,593 (2012: $2,166,453).
16. Intangible Assets
Group
2013$
2012$
Goodwill (Note 16A) 3,359,926 2,515,562
Other intangible assets (Note 16B) 2,242,000 2,137,000
Total 5,601,926 4,652,562
16A. Goodwill
Group
2013$
2012$
Cost:
Balance at beginning of the year 2,515,562 –
Arising from acquisition of subsidiary (Note 27) 844,364 2,515,562
Balance at end of the year 3,359,926 2,515,562
The goodwill arose from acquisitions of subsidiaries (Note 27). The value of the goodwill is determined through a purchase price allocation valuation carried out by an independent professional valuer.
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16. Intangible Assets (Continued)
16A. Goodwill (Continued)
Goodwill is allocated to cash-generating units (“CGU”) for the purpose of impairment testing. This CGU represents the group’s investment in the subsidiaries, TEHO Water & Envirotec Pte Ltd and TEHO Engineering Pte Ltd (see Note 17) and is allocated to the marine segment and offshore oil and gas segment respectively.
The goodwill was tested for impairment at the end of the year. An impairment loss is the amount by which the carrying amount of an asset or a CGU exceeds its recoverable amount. The recoverable amount of an asset or a CGU is the higher of its fair value less costs to sell or its value in use. The recoverable amounts of CGU have been determined based on the value in use method. The value is regarded as the lowest level for fair value measurement as the valuation includes inputs for the asset that are not based on observable market data (unobservable inputs).
In this case no impairment charges were recognised because the carrying amount of the CGU was lower than its recoverable amount.
The value in use was determined by management. The key assumptions for the value in use calculations are those regarding the discount rate, growth rate and expected changes to selling prices and direct costs during the period. Management estimates discount rate using pre-tax rate that reflect current market assessments of the time value of money and the risks specific to the CGU. The growth rate is based on industry growth forecasts. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.
The group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next 3 to 5 years and estimated growth rate of 6 to17% (2012: 6%). The rate used to discount the forecasted cash flows for TEHO Water & Envirotec Pte Ltd and TEHO Engineering Pte Ltd is 11% (2012: 11%).
16. Intangible Assets (Continued)
16B. Other Intangible Assets
Customer Relationship Orderbook Total
Group $ $ $
Fair value:
Additions through acquisition of subsidiary (Note 27) 1,715,000 638,000 2,353,000
At 1 July 2012 1,715,000 638,000 2,353,000
Additions through acquisition of subsidiary (Note 27) 890,000 67,000 957,000
At 30 June 2013 2,605,000 705,000 3,310,000
Accumulated Amortisation and Impairment:
Amortisation for the year 57,000 159,000 216,000
At 1 July 2012 57,000 159,000 216,000
Amortisation for the year 373,000 479,000 852,000
At 30 June 2013 430,000 638,000 1,068,000
Net Book Value:
At 30 June 2012 1,658,000 479,000 2,137,000
At 30 June 2013 2,175,000 67,000 2,242,000
The amortisation expense is charged as other charges in the statement of comprehensive income.
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17. Investments in Subsidiaries
Company
2013$
2012$
Unquoted shares at cost:
Cost at the beginning of the year 19,885,977 13,320,943
Additions 3,032,700 6,565,034
Cost at the end of the year 22,918,677 19,885,977
Net book value of the subsidiaries 28,297,938 24,694,896
Analysis of the above amount denominated in non-functional currency:
Euro Dollar 163,700 –
Chinese Renminbi 165,033 165,033
United States Dollar 539,943 539,943
17. Investments in Subsidiaries (Continued)
The subsidiaries held by the company are listed below:
Name of Subsidiaries, Country of Incorporation, Place of Operations and Principal Activities (and Independent Auditors)
Cost in Booksof Company / Group
Effective Percentageof Equity Held
2013$
2012$
2013%
2012%
Held by the company:TEHO Ropes & Supplies Pte.
Ltd. (a) 12,781,000 12,781,000 100 100SingaporeSupply of rigging and
mooring equipment as well as related services to customers mainly in the marine, offshore oil and gas industries
TEHO International (USA), LLC (b) 539,943 539,943 100 100
United States of AmericaTrading in rigging and
mooring equipment as well as related services to customers mainly in the marine, offshore oil and gas industries
(Smith Leonard PLLC)
TEHO (Shanghai) Co., Ltd. (c) 165,033 165,033 100 100
People’s Republic of ChinaSupply of rigging and
mooring equipment as well as related services to customers mainly in the marine, offshore oil and gas industries
(RSM China Certified Public Accountants, Shanghai Branch)
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17. Investments in Subsidiaries (Continued)
Name of Subsidiaries, Country of Incorporation, Place of Operations and Principal Activities (and Independent Auditors)
Cost in Booksof Company / Group
Effective Percentageof Equity Held
2013$
2012$
2013%
2012%
TEHO Offshore Pte. Ltd. (b)(d) 1 1 100 100
Singapore Dormant(AccAssurance LLP)
TEHO Engineering Pte. Ltd. (a) 6,400,000 6,400,000 100 100
Singapore Supply of offshore oil and
gas equipment to offshore oil and gas industries
TEHO EuROPE B.V. (b) 163,700 – 100 –Netherlands (Incorporated on 16
November 2012)Supply of rigging and
mooring equipment as well as related services to customers mainly in the marine, offshore oil and gas industries
(RDR Accountants & Advisuers)
TEHO Water & Envirotec Pte. Ltd. (b) 2,869,000 – 100 –
(Acquired on 30 April 2013)Supply of marine and
engineering services and trading in related marine and engineering hard ware and accessories
(AccAssurance LLP)
17. Investments in Subsidiaries (Continued)
(a) Audited by RSM Chio Lim LLP, Singapore.
(b) Other independent auditors. Audited or reviewed by firms of accountants other than member firms of RSM International of which RSM Chio Lim LLP in Singapore is a member. The name is indicated above.
(c) Audited by member firm of RSM International of which RSM Chio Lim LLP in Singapore is a member.
(d) Cost of investment is less than $1,000.
As is required by Rule 716 of the Listing Manual of the Singapore Exchange Securities Trading Limited the audit committee and the board of directors of the company have satisfied themselves that the appointment of the different auditors of its subsidiaries would not compromise the standard and effectiveness of the audit of the group.
18. Investment in Associates
Group Company
2013$
2012$
2013$
2012$
Unquoted equity shares, at cost 81,761 42,794 42,794 42,794
Share of post-acquisition profits 89,987 55,657 – –
171,748 98,451 42,794 42,794
Share of net book value of associate 171,748 98,451 129,886 98,451
Analysis of above amount denominated in non-functional currency:
Malaysia Ringgit 41,862 – – –
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18. Investment in Associates (Continued)
The associate held by the company is listed below:
Name of Associate, Country of Incorporation, Place of Operations and Principal Activities (and Independent Auditors)
Effective Percentageof Equity Held
2013%
2012%
Besteel Pte Ltd (a)
Singapore
Distribution of rigging and mooring equipment
(Liew Keow Seng & Company, Chartered Accountants) 25 25
STS Seanly Marine Sdn. Bhd. (a)(b)
Malaysia
Supply of marine and engineering services and trading in related marine and engineering hard ware and accessories
(CK Chin, Chartered Accountants) 49 –
(a) Other independent auditors. Audited by firms of accountants other than member firms of RSM International of which RSM Chio Lim LLP in Singapore is a member. The name is indicated above.
(b) Not audited as it is not material. Equity accounted based on management accounts.
18. Investment in Associates (Continued)
The group’s share of the results of the associate company and its share of assets and liabilities are as follows:
Group
2013$
2012$
Current assets 250,558 99,717
Non-current assets 250 640
Current liabilities (79,060) (1,905)
Revenue 338,581 97,470
Cost and expenses (304,251) (92,337)
19. Inventories
Group
2013$
2012$
Goods held for resale 20,258,172 20,126,646
Inventories are stated after allowance.
Movement in above allowance:
Balance at beginning of the year (178,770) (87,380)
Charge to profit and loss included in cost of sales – (91,390)
Balance at end of the year (178,770) (178,770)
Changes in inventories of finished goods – decrease /(increase) 336,588 (1,023,413)
The amount of inventories included in cost of sales 28,196,944 25,674,609
Certain inventories are pledged as security for the bank facilities (see Note 25).
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Notes to the FiNaNcial statemeNts 30 June 2013
20. Trade and Other Receivables
Group Company
2013$
2012$
2013$
2012$
Trade receivables:
Outside parties 10,797,061 8,422,244 – –
Less: allowance for impairment (7,434) (11,034) – –
Subsidiaries (Note 3) – – 776 776
Subtotal 10,789,627 8,411,210 776 776
Other receivables:
Subsidiary (Note 3) – – 2,264,680 1,818,146
Deposits to secure services 481,700 79,793 8,000 8,000
Subtotal 481,700 79,793 2,272,680 1,826,146
Total trade and other receivables 11,271,327 8,491,003 2,273,456 1,826,922
Movements in above allowance:
Balance at beginning of year 11,034 22,906 – –
Used – (5,472) – –
Reversed to profit or loss included in Other Credits (3,600) (6,400) – –
Balance at end of year 7,434 11,034 – –
21. Other Assets
Group Company
2013$
2012$
2013$
2012$
Prepayments 58,598 260,069 7,350 86,492
22. Cash and Cash Equivalents
Group Company
2013$
2012$
2013$
2012$
Not restricted in use 5,056,521 7,029,224 3,398 33,433
Cash pledged for bank facilities #a 25,000 25,000 – –
Cash at end of the year 5,081,521 7,054,224 3,398 33,433
The interest earning balances are not significant.
#a This is for amount held by bankers to cover the bank guarantee issued.
22A. Cash and Cash Equivalents in Statement of Cash Flows:
Group
2013$
2012$
Amount as shown above 5,081,521 7,054,224
Cash pledged for bank facilities (25,000) (25,000)
Cash and cash equivalents for statement of cash flows purposes at end of year 5,056,521 7,029,224
22B. Non-cash transactions:
In 2012, there were acquisitions of plant and equipment with a total cost of $632,000 acquired by means of finance leases.
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23. Share Capital
Numberof shares
issuedSharecapital
$
Group and Company:
Ordinary shares of no par value:
Balance at beginning of the year 1 July 2011 111,800,000 15,480,668
Issue of shares (Note 27) 3,891,051 600,000
Balance at end of the year 30 June 2012 115,691,051 16,080,668
Issue of shares (Note 27) 2,500,000 396,000
Balance at end of the year 30 June 2013 118,191,051 16,476,668
The ordinary shares of no par value are fully paid, carry one vote each and have no right to fixed income. The company is not subject to any externally imposed capital requirements.
During the reporting year, 2,500,000 ordinary shares of no par value were issued at market price for the acquition of TEHO water & Envirotec Pte Ltd (Note 27A).
Capital management:
The objectives when managing capital are: to safeguard the reporting entity’s ability to continue as a going concern, so that it can continue to provide returns for owners and benefits for other stakeholders, and to provide an adequate return to owners by pricing the sales commensurately with the level of risk. The management sets the amount of capital to meet its requirements and the risk taken. There were no changes in the approach to capital management during the reporting year. The management manages the capital structure and makes adjustments to it where necessary or possible in the light of changes in conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the management may adjust the amount of dividends paid to owners, return capital to owners, issue new shares, or sell assets to reduce debt. Adjusted capital comprises all components of equity (that is, share capital and reserves).
23. Share Capital (Continued)
The management monitors the capital on the basis of the debt-to-adjusted capital ratio. This ratio is calculated as net debt / adjusted capital. Net debt is calculated as total borrowings less cash and cash equivalents. Adjusted capital comprises all components of equity (i.e. share capital, and retained earnings).
Group
2013$
2012$
Net debt:
All current and non-current borrowings including finance leases 15,419,486 13,956,909
Less: cash and cash equivalents (5,081,521) (7,054,224)
Net debt 10,337,965 6,902,685
Total Equity 28,728,514 27,346,363
Debt-to-adjusted capital ratio 36.0% 25.2%
The increase in debt-to-adjusted capital ratio resulted primarily from increase in bank borrowings. There was a favourable change with improved retained earnings.
The ordinary shares of no par value which are fully paid carry no right to fixed income. The holders of ordinary shares are entitled to receive dividends when declared by the company. All ordinary shares carry one vote per share without restrictions. In order to maintain its listing on the Singapore Exchange, the company has to have share capital with at least a free float of at least 10% of the shares. The company met the capital requirement on its initial listing and the rules limiting treasury share purchases mean it will automatically continue to satisfy that requirement, as it did throughout the year. Management receives a report from the registrars frequently on substantial share interests showing the non-free float and it demonstrated continuing compliance with the 10% limit throughout the year.
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23. Share Capital (Continued)
The company is a Catalist company and has appointed a sponsor to comply with the Catalist Rules and to facilitate certain corporate actions including rights issues, placement of shares, company warrants or other convertible securities for cash, major transactions, transactions requiring shareholders’ approval and schemes of arrangement.
24. Other Payables, Non-Current
Group Company2013
$2012
$2013
$2012
$
Amount owing to a shareholder (Note 27) (a) 723,000 – 723,000 –
The amount owing to a shareholder is for the acquisition of TEHO Water & Envirotec Pte Ltd (Formerly known as Seanly Technical Singapore Pte Ltd). This amount is expected to be due on 30 September 2014 and 30 September 2015. It has been discounted at 2% based on average borrowing cost of the Group.
25. Other Financial Liabilities
Group2013
$2012
$Non-current:Bank loans (secured) (Note 25A) 2,803,471 3,032,046Finance leases (Note 25C) 286,066 442,717
3,089,537 3,474,763Current:Bank loans (secured) (Note 25A) 5,379,115 1,839,093Trust receipts (secured) (Note 25B) 6,794,182 8,491,027Finance leases (Note 25C) 156,652 152,026
12,329,949 10,482,146Total 15,419,486 13,956,909
25. Other Financial Liabilities (Continued)
The ranges of floating interest rates per annum paid were as follows:
Group
2013 2012
Trust receipts and bills payable 1.40% - 2.35% 1.40% - 2.31%
The ranges of fixed interest rates per annum paid were as follows:
Group
2013 2012
Term loan 1 and 2 1.68% to 1.98% 1.68%
Term loan 3 1.36% to 1.95% –
Bank loan 2.19% 2.24%
25A. Bank Loans
Group
2013$
2012$
Term loans 1 and 2 3,033,047 3,807,864
Term loan 3 579,771 –
Money market loan 4,500,000 1,000,000
Bank loan 69,768 63,275
8,182,586 4,871,139
Due within 1 year 5,379,115 1,839,093
Due within 2 to 5 years 2,343,699 3,032,046
Due after 5 years 459,772 –
8,182,586 4,871,139
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25. Other Financial Liabilities (Continued)
25A. Bank Loans (Continued)
The agreements for certain of the bank loans, overdrafts and other credit facilities require the company to comply with certain financial covenants which include (a) the tangible net worth of not less than $16,000,000 at all times, (b) the total liabilities to tangible net worth of not more than 175% at all times and (c) total bank debts to tangible net worth of not more than 150% at all times.
Term loans 1 and 2 - The loans are covered by corporate guarantee by the parent company of $20,350,000 and secured by legal charges over the company’s leasehold buildings. The loans are repayable over 60 monthly instalments commencing one month from date of first drawdown. The loans were drawdown in March 2012.
Term loan 3 - The loans are secured by legal charges over the company’s leasehold buildings. The loans are repayable over 300 monthly instalments commencing 1 July 2012.
Bank loan - The loan is secured by all of the subsidiary’s assets and guaranteed by another subsidiary company.
25B. Trust Receipts
The trust receipts are covered by corporate guarantee by the parent company of $51,090,000 and secured by legal charges over the company’s leasehold buildings.
Minimum payments
Finance charges
Present value
2013: $ $ $
Minimum lease payments payable:
Due within 1 year 168,036 (11,384) 156,652
Due within 2 to 5 years 294,105 (8,039) 286,066
At end of the year 462,141 (19,423) 442,718
Net book value of plant and equipment under finance leases 601,717
25. Other Financial Liabilities (Continued)
25C. Finance Leases
Minimum payments
Finance charges
Present value
2012: $ $ $
Minimum lease payments payable:
Due within 1 year 168,036 (16,010) 152,026
Due within 2 to 5 years 462,140 (19,423) 442,717
At end of the year 630,176 (35,433) 594,743
Net book value of plant and equipment under finance leases 741,810
There are leases for certain of its plant and equipment under finance leases. The lease term is 4 years. For the reporting year ended 30 June 2013, the effective borrowing rate was 3.05 per cent. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The obligations under finance leases are secured by the lessor’s charge over the leased assets.
The fair value of the finance leases at fixed rate of interest is computed by discounting the future scheduled cash flows on the assumption that interest of 3.05 percent applicable to the similar finance lease and redemption payments will continue to be made in accordance with the term of lease agreement. The fair value if regarded as a level 3 fair value measurement for financial instruments. The fair value is $422,718 (2012:$594,743).
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26. Trade and Other Payables
Group Company
2013$
2012$
2013$
2012$
Trade payables:
Outside parties and accrued liabilities 2,045,589 3,577,808 – 134,141
Subtotal 2,045,589 3,577,808 – 134,141
Other payables:
Outside parties 881,637 526,384 64,009 500,000
Other – for advances – 112,990 – –
Subsidiaries (Note 3) – – 6,398,620 2,930,605
Subtotal 881,637 639,374 6,462,629 3,430,605
Total trade and other payables 2,927,226 4,217,182 6,462,629 3,564,746
27. Acquisitions of Subsidiaries
27A. TEHO Water & Envirotec Pte Ltd (Formerly known as Seanly Technical Singapore Pte Ltd)
On 30 April 2013 the group acquired 100% of the share capital of TEHO Water & Envirotec Pte Ltd (Formerly known as Seanly Technical Singapore Pte Ltd) (incorporated in Singapore). It became a subsidiary (see Note 17 for the principal activities). The transaction was accounted for by the acquisition method of accounting.
The consideration transferred is as follows
2013$
Consideration transferred:
Cash 1,250,000
2,500,000 shares issued at market price 396,000
Amount owing to a shareholder 723,000
Total consideration transferred 2,369,000
27. Acquisitions of Subsidiaries (Continued)
27A. TEHO Water & Envirotec Pte Ltd (Formerly known as Seanly Technical Singapore Pte Ltd) (Continued)
The net assets acquired and the related fair values are as determined through a purchase price allocation valuation carried out by an independent value are as follows:
Pre – acquisition book value under FRS
$
At fair values
$
Investment in associate 23,208 38,966
Property, plant and equipment 801,569 756,470
Inventories 453,114 468,114
Trade receivables 506,095 506,095
Other assets 7,954 7,954
Cash and cash equivalents 145,977 145,977
Income tax payable (42,339) (54,904)
Trade and other payables (560,843) (560,843)
Other financial liabilities (582,620) (582,620)
Deferred tax liabilities – (157,573)
752,115 567,636
The goodwill arising on acquisition is as follows:
2013$
Consideration transferred 2,369,000
Fair value of identifiable net assets acquired (567,636)
Goodwill and intangibles arising on acquisition (Note 16A and 16B) 1,801,364
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27. Acquisitions of Subsidiaries (Continued)
27A. TEHO Water & Envirotec Pte Ltd (Formerly known as Seanly Technical Singapore Pte Ltd) (Continued)
These consist of:
2013$
Goodwill 844,364
Intangibles 957,000
1,801,364
An analysis of the cash flows in respect of the acquisition is as follows:
At Fair Values
$
Cash consideration – TEHO Water & Envirotec Pte Ltd 1,250,000
Cash and cash equivalents acquired (145,977)
Net outflow of cash and cash equivalents on acquisition of TEHO Water & Envirotec Pte Ltd 1,104,023
Cash consideration paid on acquisition of TEHO Engineering Pte Ltd (Note 27B) 500,000
Total net outflow of cash and cash equivalents included in cash flows from investing activities 1,604,023
The goodwill arising on the acquisition of TEHO Water & Envirotec Pte Ltd is attributable to the anticipated profitability of this subsidiary. The goodwill is not deductible for tax purpose.
The intangibles arising on the acquisition of the subsidiary comprises the fair value of customer relationship of $890,000 and the fair value of order book outstanding at the date of acquisition of $67,000.
27. Acquisitions of Subsidiaries (Continued)
27A. TEHO Water & Envirotec Pte Ltd (Formerly known as Seanly Technical Singapore Pte Ltd) (Continued)
The contributions from the acquired subsidiary for the period between the date of acquisition and the end of the reporting year were as follows:
From date of acquisition in
2013$
For the reporting year 2013
$
Revenue 667,643 1,625,574
Profit, net of tax 49,345 139,092
27B. TEHO Engineering Pte Ltd (Formerly known as Finessco Systems Pte Ltd)
On 10 May 2012 the group acquired 100% of the share capital of TEHO Engineering Pte Ltd (Formerly known as Finessco Systems Pte Ltd) (incorporated in Singapore). It became a subsidiary (see Note 17 for the principal activities). The transaction was accounted for by the acquisition method of accounting.
The consideration transferred is as follows
2012$
Consideration transferred:
Cash 5,282,000
3,891,051 shares issued at market price 600,000
Amount owing to the shareholders 500,000
Total consideration transferred 6,382,000
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Notes to the FiNaNcial statemeNts 30 June 2013
27. Acquisitions of Subsidiaries (Continued)
27B. TEHO Engineering Pte Ltd (Formerly known as Finessco Systems Pte Ltd) (Continued)
The net assets acquired and the related fair values are as determined through a purchase price allocation valuation carried out by an independent valuer as follows:
Pre – acquisition book value under FRS
$
At fair values
$
Property, plant and equipment 2,893 2,893
Inventories 280,584 371,405
Trade receivables 637,319 637,319
Other assets 1,000 1,000
Cash and cash equivalents 1,833,468 1,833,468
Income tax payable (160,323) (220,170)
Trade and other payables (697,027) (697,027)
Deferred tax liabilities – (415,450)
1,897,914 1,513,438
The goodwill arising on acquisition is as follows:
2012$
Consideration transferred 6,382,000
Fair value of identifiable net assets acquired (1,513,438)
Goodwill and intangibles arising on acquisition (Note 16A and 16B) 4,868,562
27. Acquisitions of Subsidiaries (Continued)
27B. TEHO Engineering Pte Ltd (Formerly known as Finessco Systems Pte Ltd) (Continued)
These consist of:
2012$
Goodwill 2,515,562
Intangibles 2,353,000
4,868,562
An analysis of the cash flows in respect of the acquisition is as follows:
At Fair Value
$
Cash consideration 5,282,000
Cash and cash equivalents acquired (1,833,468)
Net outflow of cash and cash equivalents included in cash flows from investing activities 3,448,532
The goodwill arising on the acquisition of TEHO Engineering Pte Ltd is attributable to the anticipated profitability of this subsidiary. The goodwill is not deductible for tax purpose.
The intangibles arising on the acquisition of the subsidiary comprises the fair value of customer relationship of $1,715,000 and the fair value of order book outstanding at the date of acquisition of $638,000.
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Notes to the FiNaNcial statemeNts 30 June 2013
27. Acquisitions of Subsidiaries (Continued)
27B. TEHO Engineering Pte Ltd (Formerly known as Finessco Systems Pte Ltd) (Continued)
The contributions from the acquired subsidiary for the period between the date of acquisition and the end of the reporting year were as follows:
From date of acquisition in
2012$
For the reporting year 2012
$
Revenue 1,446,907 5,606,435
Profit, net of tax 405,276 1,163,109
28. Derivatives Financial Instruments
Knock Out Forward Contracts
This includes the gross amount of all notional values for contracts that have not yet been settled or cancelled. The amount of notional value outstanding is not necessarily a measure or indication of market risk, as the exposure of certain contracts may be offset by that of other contracts.
PrincipalReference currency Maturity
Fair valuegain/(loss)
$2013:Knock out forward contract 400,000 USD 31 Jul 2013 1,339Knock out forward contract 400,000 USD 30 Aug 2013 2,873Knock out forward contract 400,000 USD 30 Sep 2013 4,132Knock out forward contract 400,000 USD 31 Oct 2013 5,183Knock out forward contract 400,000 USD 25 Nov 2013 5,861Knock out forward contract 200,000 USD 8 Jul 2013 51Knock out forward contract 200,000 USD 12 Aug 2013 62Knock out forward contract 200,000 USD 9 Sep 2013 70Knock out forward contract 200,000 USD 8 Oct 2013 82Knock out forward contract 200,000 USD 8 Nov 2013 95Knock out forward contract 200,000 USD 9 Dec 2013 106Knock out forward contract 200,000 USD 8 Jan 2014 120Knock out forward contract 200,000 USD 10 Feb 2014 129
28. Derivatives Financial Instruments (Continued)
Knock Out Forward Contracts (Continued)
PrincipalReference currency Maturity
Fair valuegain/(loss)
$
2013: (Continued)
Knock out forward contract 100,000 USD 11 Jul 2013 –
Knock out forward contract 100,000 USD 12 Aug 2013 –
Knock out forward contract 100,000 USD 11 Sep 2013 –
Knock out forward contract 100,000 USD 11 Oct 2013 –
Knock out forward contract 100,000 USD 12 Nov 2013 –
Knock out forward contract 100,000 USD 11 Dec 2013 –
Knock out forward contract 100,000 USD 13 Jan 2014 –
4,300,000 20,103
2012:
Knock out forward contract 150,000 USD 31 Dec 2012 2,671
The purpose of these contracts is to mitigate the fluctuations of expected purchases (forecast transactions) denominated in USD.
The net fair value gains of the group’s knock out forward contracts were not considered to be significant, no adjustment were made to the profit or loss. The fair value is regarded as a level 2 fair value measurement for financial instruments.
Interest Rate Swap
The notional amount of the interest rate swap at 30 June 2011 was $3,440,000. It was designed to convert floating rate borrowings to fixed rate exposure at 3.08% over a two year period which expired on 11 April 2009. The swap was renewed and expired on 11 April 2012.
The fair value loss of $5,802 arising from the mark-to-market exercise (Level 2) of this derivative for the year ended 30 June 2012 was recognised in the profit or loss.
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Notes to the FiNaNcial statemeNts 30 June 2013
29. Financial Instruments: Information on Financial Risks
29A. Classification of Financial Assets and Liabilities
The following table summarises the carrying amount of financial assets and liabilities recorded at the end of the reporting year by FRS 39 categories:
Group Company
2013$
2012$
2013$
2012$
Financial assets:
Cash and bank balances 5,081,521 7,054,224 3,398 33,433
Loans and receivables 11,271,327 8,491,003 2,273,456 1,826,922
At end of year 16,352,848 15,545,227 2,276,854 1,860,355
Financial liabilities:
Borrowings at amortised cost 15,419,486 13,956,909 – –
Trade and other payables at amortised cost 3,650,226 4,217,182 7,185,629 3,564,746
At end of year 19,069,712 18,174,091 7,185,629 3,564,746
Further quantitative disclosures are included throughout these financial statements.
29B. Financial Risk Management
The main purpose for holding or issuing financial instruments is to raise and manage the finances for the entity’s operating, investing and financing activities. The main risks arising from the entity’s financial instruments are credit risk, liquidity risk and market risk comprising interest rate and currency risk exposures. The management has certain practices for the management of financial risks. The guidelines set up the short and long term objectives and action to be taken in order to manage the financial risks. The guidelines include the following:
29. Financial Instruments: Information on Financial Risks (Continued)
29B. Financial Risk Management (Continued)
1. Minimise interest rate, currency, credit and market risk for all kinds of transactions.
2. Maximise the use of “natural hedge”: favouring as much as possible the natural off-setting of sales and costs and payables and receivables denominated in the same currency and therefore put in place hedging strategies only for the excess balance. The same strategy is pursued with regard to interest rate risk.
3. All financial risk management activities are carried out and monitored by senior management staff.
4. All financial risk management activities are carried out following good market practices.
5. When appropriate consideration is given to investing in shares or similar instruments.
6. When appropriate consideration is given to entering into derivatives or any other similar instruments solely for hedging purposes.
With regard to derivatives, the policies include the following:
1. The management documents carefully all derivatives including the relationship between them and the hedged items at inception and throughout their life.
2. Ineffectiveness is recognised in profit or loss as soon as it arises.
3. Effectiveness is assessed at the inception of the hedge and at each end of the reporting year ensuring that FRS 39 criteria are met.
4. Only financial institutions with acceptable credit ratings are used as counterparties for derivatives.
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Notes to the FiNaNcial statemeNts 30 June 2013
29. Financial Instruments: Information on Financial Risks (Continued)
29C. Fair Value of Financial Instruments
The financial assets and financial liabilities at amortised cost are at a carrying amount that is a reasonable approximation of fair value.
29C.1. Fair value measurements recognised in the statement of financial position
The fair value measurements are classified using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The levels are: Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs). The methods and valuation techniques used and the assumptions applied in determining fair values are disclosed in the relevant Notes in these financial statements.
29D. Credit Risk on Financial Assets
Financial assets that are potentially subject to concentrations of credit risk and failures by counterparties to discharge their obligations in full or in a timely manner consist principally of cash balances with banks, cash equivalents and receivables. The maximum exposure to credit risk is: the total of the fair value of the financial instruments; the maximum amount the entity could have to pay if the guarantee is called on; and the full amount of any loan payable commitment at the end of the reporting year. Credit risk on cash balances with banks, derivative financial instruments and other financial assets is limited because the counter-parties are entities with acceptable credit ratings. For credit risk on receivables an ongoing credit evaluation is performed of the financial condition of the debtors and a loss from impairment is recognised in profit or loss. The exposure to credit risk is controlled by setting limits on the exposure to individual customers and these are disseminated to the relevant persons concerned and compliance is monitored by management. There is no significant concentration of credit risk, as the exposure is spread over a large number of counter-parties and customers unless otherwise disclosed in the notes to the financial statements below.
29. Financial Instruments: Information on Financial Risks (Continued)
29D. Credit Risk on Financial Assets (Continued)
Other than the cash restricted in use, cash and cash equivalents balances as disclosed in Note 22 represent short term deposits with a less than 90 day maturity.
As part of the process of setting customer credit limits, different credit terms are used. The average credit period generally granted to trade receivable customers is about 30 to 90 days (2012: 30 to 90 days). But some customers take a longer period to settle the amounts.
(a) Ageing analysis of the age of trade receivable amounts (unsecured) that are past due as at the end of reporting year but not impaired:
Group
2013$
2012$
Trade receivables:
91 to 120 days 1,035,753 1,077,994
Over 120 days 2,043,403 362,431
Total 3,079,156 1,440,425
(b) Ageing analysis as at the end of reporting year of trade receivable amounts that are impaired:
Group
2013$
2012$
Trade receivables:
Over 120 days 7,434 11,034
Total 7,434 11,034
The allowance which is disclosed in the note in trade receivables is based on individual accounts totalling $7,434 (2012: $11,034) that are determined to be impaired at the end of the reporting year. These are not secured.
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Notes to the FiNaNcial statemeNts 30 June 2013
29. Financial Instruments: Information on Financial Risks (Continued)
29D. Credit Risk on Financial Assets (Continued)
Other receivables are normally with no fixed terms and therefore there is no maturity.
Concentration of trade receivable customers as at the end of reporting year:
Group2013
$2012
$
Top 1 customer 1,035,032 825,140
Top 2 customers 1,659,780 1,319,154
Top 3 customers 2,127,926 1,646,508
29E. Liquidity Risk
The following table analyses the non-derivative financial liabilities by remaining contractual maturity (contractual and undiscounted cash flows):
Less than1 year
1 – 5years Over 5 years Total
Group $ $ $ $
2013:
Gross borrowings commitments 12,425,033 2,872,922 615,896 15,913,851
Trade and other payables 2,927,226 723,000 – 3,650,226
At end of the year 15,352,259 3,595,922 615,896 19,564,077
2012:
Gross borrowings commitments 10,558,539 3,731,298 – 14,289,837
Trade and other payables 4,217,182 – – 4,217,182
At end of the year 14,775,721 3,731,298 – 18,507,019
29. Financial Instruments: Information on Financial Risks (Continued)
29E. Liquidity Risk (Continued)
Less than1 year
1 – 5years Over 5 years Total
Company $ $ $ $
2013:
Trade and other payables 6,462,629 723,000 – 7,185,629
At end of the year 6,462,629 723,000 – 7,185,629
2012:
Trade and other payables 3,564,746 – – 3,564,746
At end of the year 3,564,746 – – 3,564,746
The above amounts disclosed in the maturity analysis are the contractual undiscounted cash flows and such undiscounted cash flows differ from the amount included in the statement of financial position. When the counterparty has a choice of when an amount is paid, the liability is included on the basis of the earliest date on which it can be required to pay. At the end of the reporting year no claims on the financial guarantees are expected.
Financial guarantee contracts – For financial guarantee contracts the maximum earliest period in which the guarantee would be called is used. At the end of the reporting year no claims on the financial guarantees are expected. The following table shows the maturity analysis of the contingent liabilities.
Less than1 year
$Total
$
Company
2013:
Corporate guarantees in favour of subsidiaries 51,090,000 51,090,000
At end of the year 51,090,000 51,090,000
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Notes to the FiNaNcial statemeNts 30 June 2013
29. Financial Instruments: Information on Financial Risks (Continued)
29E. Liquidity Risk (Continued)
Less than1 year
$Total
$
2012:
Corporate guarantees in favour of subsidiaries 62,090,000 62,090,000
At end of the year 62,090,000 62,090,000
The liquidity risk is managed on the basis of expected maturity dates of the financial liabilities. The average credit period taken to settle trade payables is about 30 days (2012: 30 days). The other payables are with short-term durations.
The liquidity risk refers to the difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. It is expected that all the liabilities will be paid at their contractual maturity. In order to meet such cash commitments the operating activity is expected to generate sufficient cash inflows.
The classification of the financial assets is shown in the statement of financial position as they may be available to meet liquidity needs and no further analysis is deemed necessary.
Bank facilities:
Group
2013$
2012$
Undrawn borrowing facilities 26,156,467 35,144,920
Unused bank guarantees 650,573 383,689
29. Financial Instruments: Information on Financial Risks (Continued)
29E. Liquidity Risk (Continued)
The undrawn borrowing facilities are available for operating activities and to settle other commitments. Borrowing facilities are maintained to ensure funds are available for the operations. A monthly schedule showing the maturity of financial liabilities and unused bank facilities is provided to management to assist them in monitoring the liquidity risk.
29F. Interest Rate Risk
The interest rate risk exposure is mainly from changes in fixed rate and floating interest rates. The following table analyses the breakdown of the significant financial instruments by type of interest rate:
Group
2013$
2012$
Financial assets:
Fixed rates 25,000 25,000
Floating rates 755,434 615,638
At end of year 780,434 640,638
Financial liabilities:
Fixed rates 6,475,764 5,402,607
Floating rates 8,943,722 8,554,302
At end of year 15,419,486 13,956,909
The floating rate debt obligations are with interest rates that are re-set regularly at one, three or six month intervals. The interest rates are disclosed in the respective notes.
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Notes to the FiNaNcial statemeNts 30 June 2013
29. Financial Instruments: Information on Financial Risks (Continued)
29F. Interest Rate Risk (Continued)
Sensitivity analysis:
Group
2013$
2012$
A hypothetical increase in interest rates by 50 basis points would have an adverse effect on profit before tax of 40,941 39,693
A hypothetical increase in interest rates by 100 basis points would have an adverse effect on profit before tax of 81,883 79,387
A hypothetical increase in interest rates by 150 basis points would have an adverse effect on profit before tax of 122,824 119,080
A hypothetical increase in interest rates by 200 basis points would have an adverse effect on profit before tax of 163,766 158,773
The analysis has been performed separately for fixed interest rate and floating interest rate financial instruments. The impact of a change in interest rates on fixed interest rate financial instruments has been assessed in terms of changing of their fair value. The impact of a change in interest rates on floating interest rate financial instruments has been assessed in terms of changing of their cash flows and therefore in terms of the impact on net expenses. The hypothetical changes in basis points are not based on observable market data (unobservable inputs).
29. Financial Instruments: Information on Financial Risks (Continued)
29G. Foreign Currency Risks
Analysis of amounts denominated in non-functional currencies:
GroupUnited
States Dollar Euro Others Total
At 30 June 2013: $ $ $ $
Financial assets:
Cash and cash equivalents 859,055 479,606 66,478 1,405,139
Loans and other receivables 1,804,802 385,735 – 2,190,537
Total financial assets 2,663,857 865,341 66,478 3,595,676
Financial liabilities:
Trade and other payables 830,856 486,052 255,808 1,572,716
Total financial liabilities 830,856 486,052 255,808 1,572,716
Net financial assets / (liabilities) at end of the year 1,833,001 379,289 (189,330) 2,022,960
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Notes to the FiNaNcial statemeNts 30 June 2013
29. Financial Instruments: Information on Financial Risks (Continued)
29G. Foreign Currency Risks (Continued)
GroupUnited
States Dollar Euro Others Total
At 30 June 2012: $ $ $ $
Financial assets:
Cash and cash equivalents 598,418 224,407 – 822,825
Loans and other receivables 408,972 452,405 1,405 862,782
Total financial assets 1,007,390 676,812 1,405 1,685,607
Financial liabilities:
Trade and other payables 748,115 1,047,017 239,201 2,034,333
Total financial liabilities 748,115 1,047,017 239,201 2,034,333
Net financial assets / (liabilities) at end of the year 259,275 (370,205) (237,796) (348,726)
There is exposure to foreign currency risk as part of its normal business.
Sensitivity analysis:
Group
2013$
2012$
A hypothetical 10% strengthening in the exchange rate of the functional currency $ against the US$ with all other variables held constant would have an adverse effect on pre-tax profit of (166,636) (23,570)
29. Financial Instruments: Information on Financial Risks (Continued)
29G. Foreign Currency Risks (Continued)
Sensitivity analysis: (Continued)
Group
2013$
2012$
A hypothetical 10% strengthening in the exchange rate of the functional currency $ against the Euro with all other variables held constant would have a favourable / (adverse) effect on pre-tax profit of (34,481) 33,655
A hypothetical 10% strengthening in the exchange rate of the functional currency $ against other currencies with all other variables held constant would have a favourable effect on pre-tax profit of 17,212 21,618
The above table shows sensitivity to a hypothetical 10% variation in the functional currency against the relevant foreign currencies. The sensitivity rate used is the reasonably possible change in foreign exchange rates. For similar rate weakening of the functional currency against the relevant foreign currencies, there would be comparable impacts in the opposite direction on the profit or loss.
The hypothetical changes in exchange rates are not based on observable market data (unobservable inputs). The sensitivity analysis is disclosed for each currency to which the entity has significant exposure at end of the reporting year. The analysis above has been carried out on the basis that there are no hedged transactions.
In management’s opinion, the above sensitivity analysis is unrepresentative of the foreign currency risks as the historical exposure does not reflect the exposure in future.
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Notes to the FiNaNcial statemeNts 30 June 2013
30. Capital Commitments
Estimated amounts committed at the end of the reporting year for future capital expenditure but not recognised in the financial statements are as follows:
Group
2013$
2012$
Commitment to renovate the office premises – 22,300
31. Operating Lease Payment Commitments
At the end of the reporting year, the total of future minimum lease payments commitments under non-cancellable operating leases are as follows:
Group
2013$
2012$
Not later than one year 553,032 538,735
Later than one year and not later than five years 1,374,754 1,098,603
Later than five years 934,806 1,127,046
Rental expense for the year 666,102 557,678
Operating lease payments are for rentals payable for certain properties. The lease rental terms are negotiated for an average term of 3 to 30 years and rentals are subject to an escalation clause but the amount of rent increase is not to exceed a certain percentage.
32. Operating Lease Income Commitments
At the end of the reporting year, the total of future minimum lease receivables commitments under non-cancellable operating leases are as follows:
Group
2013$
2012$
Not later than one year – 30,000
Rental income for the year 24,500 60,000
Operating lease income commitments are for certain property. The lease rental income terms are negotiated for an average term of 1 year.
33. Share-Based Payments
33A. Performance Share Plan
The company’s performance share plan, TEHO Performance Share Plan (the “PSP”), was approved and adopted by the shareholders at the company’s Extraordinary General Meeting held on 25 November 2011. The PSP is administered by the Remuneration Committee (“RC”) with such discretion, powers and duties as are conferred on it by the Board of Directors.
The PSP shall continue to be in force at the discretion of the RC, subject to a maximum period of 10 years commencing from its adoption by the shareholders and may continue beyond the stipulated period with the approval of the shareholders by an ordinary resolution in general meeting and of any relevant authorities which may then be required.
Under the rules of the PSP and at the absolute discretion of the RC, confirmed full-time employees of the group who are of the age of 18 years and above, and directors of the group who have contributed or will contribute to the success and the development of the group are eligible to participate in the PSP. However, participation in the PSP by the directors who are also controlling shareholders and their associates are subject to the approval by independent shareholders of the company.
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Notes to the FiNaNcial statemeNts 30 June 2013
33. Share-Based Payments (Continued)
33A. Performance Share Plan (Continued)
There were no awards granted under the PSP by the company or any corporation in the Group since its inception and during the reporting year.
There were no shares issued during the reporting year by virtue of the exercise of awards to take up unissued shares of the company or any corporation in the group.
There were no unissued shares under the PSP in the company or any corporation in the group as at the end of the reporting year.
34. Items in the Statement of Comprehensive Income
In addition to the charges and credits disclosed elsewhere in the notes to financial statements, this item includes the following charges:
Group
2013$
2012$
Audit fees to the independent auditors of the company 95,000 85,000
Audit fees to other independent auditors 19,678 14,107
Non-audit fees to the independent auditors of the company 9,200 42,500
Non-audit fees to other independent auditors 1,300 15,250
35. Changes and Adoption of Financial Reporting Standards
For the reporting year ended 30 June 2013 the following new or revised Singapore Financial Reporting Standards were adopted. The new or revised standards did not require any modification of the measurement methods or the presentation in the financial statements.
FRS No. Title
FRS 1 Amendments to FRS 1 – Presentation of Items of Other Comprehensive Income
FRS 12 Deferred Tax (Amendments to) – Recovery of Underlying Assets (*)
(*) Not relevant to the entity.
36. Future Changes in Financial Reporting Standards
The following new or revised Singapore Financial Reporting Standards that have been issued will be effective in future. The transfer to the new or revised standards from the effective dates is not expected to result in material adjustments to the financial position, results of operations, or cash flows for the following year.
FRS No. Title
Effective date for periods beginning
on or after
FRS 19 Employee Benefits (Revised) 1 Jan 2013
FRS 27 Separate Financial Statements (Revised) 1 Jan 2014
FRS 28 Investments in Associates and Joint Ventures (Revised)
1 Jan 2014
FRS 32 Amendment to FRS 32: Offsetting Financial Assets and Financial Liabilities
1 Jan 2014
FRS 36 Amendments to FRS 36 (Jul 2013): Recoverable Amount Disclosures for Non-Financial Assets
1 Jan 2014
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Notes to the FiNaNcial statemeNts 30 June 2013
36. Future Changes in Financial Reporting Standards (Continued)
FRS No. Title
Effective date for periods beginning
on or after
FRS 101 Amendments to FRS 101 – Government Loans (*)
1 Jan 2013
FRS 107 Amendments to FRS 107: Disclosures - Offsetting Financial Assets and Financial Liabilities
1 Jan 2013
FRS 110 Consolidated Financial Statements 1 Jan 2014
FRS 110 Amendments to FRS 110, FRS 111 and FRS 112: Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance
1 Jan 2014
FRS 111 Joint Arrangements (*) 1 Jan 2014
FRS 112 Disclosure of Interests in Other Entities 1 Jan 2014
FRS 113 Fair Value Measurements 1 Jan 2013
INT FRS 120 Stripping Costs in the Production Phase of a Surface Mine (*)
1 Jan 2013
INT FRS 121 Levies 1 Jan 2014
(*) Not relevant to the entity.
Issued and fully paid : $16,755,795.00
Total number o f issued shares : 118,191,051
Class of shares : Ordinary Shares
Voting Rights : On show of hands – each member present in person and each proxy shall have one vote.
: On poll – every member present in person or by proxy shall have one vote for every share he holds or represents.
SUBSTANTIAL SHAREHOLDERS
Direct Interest Deemed Interest
Number of Shares % Number of Shares %
Lim See Hoe 39,909,659 33.77 - -
Lim See Heng 19,800,140 16.75 - -
Lim Siew Cheng 16,500,111 13.96 - -
Lim Siew Choo 13,200,090 11.17 - -
Note:Lim See Hoe, Lim See Heng, Lim Siew Cheng and Lim Siew Choo are siblings.
SHAREHOLDINGS STATISTICS AS AT 17 SEPTEMBER 2013
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LIST OF 20 LARGEST SHAREHOLDERS
No. Name No. of Shares %
1 LIM SEE HOE 39,909,659 33.77
2 LIM SEE HENG 19,800,140 16.75
3 LIM SIEW CHENG 16,500,111 13.96
4 LIM SIEW CHOO 13,200,090 11.17
5 LIM SIEW LIAN (SOARE SIEW LIAN) 5,590,000 4.73
6 TAN CHIUN WEI 3,891,051 3.29
7 ALVIN CHEE SIONG 2,500,000 2.12
8 HONG LEONG FINANCE NOMINEES PTE LTD 800,000 0.68
9 CHAN WAI LEONG 616,000 0.52
10 BANK OF SINGAPORE NOMINEES PTE LTD 530,000 0.45
11 LAI WENG KAY 522,000 0.44
12 TAN WAH YONG 500,000 0.42
13 CIMB SECURITIES (SINGAPORE) PTE LTD 477,000 0.40
14 MAYBANK KIM ENG SECURITIES PTE LTD 470,000 0.40
15 TAN TECK CHONG 470,000 0.40
16 OCBC SECURITIES PRIVATE LTD 405,000 0.34
17 CHUA LI PENG 404,000 0.34
18 TEO HAN ENG 340,000 0.29
19 TAN JUI YAK 325,000 0.27
20 LEE NYEN FATT 280,000 0.24
107,530,051 90.98
DISTRIBUTION OF SHAREHOLDINGS
Size of ShareholdingsNo. of
Shareholders %No. of Shares %
1 - 999 0 0.00 0 0.00
1,000 - 10,000 84 27.27 610,000 0.52
10,001 - 1,000,000 217 70.46 16,190,000 13.70
1,000,001 and above 7 2.27 101,391,051 85.78
Total 308 100.00 118,191,051 100.00
Based on information available to the Company as at 17 September 2013, approximately 14.21% of the issued ordinary shares of the Company are held by the public, and therefore, Rule 723 of the Catalist Rules which requires that at least 10% of the ordinary shares of the Company be at all times held by the public, is complied with.
SHAREHOLDINGS STATISTICS AS AT 17 SEPTEMBER 2013
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TEHO INTERNATIONAL INC LTD.(Company Registration Number 200811433K)(Incorporated in the Republic of Singapore)
NOTICE IS HEREBY GIVEN that the Annual General Meeting of TEHO INTERNATIONAL INC LTD. (the “Company”) will be held at 8 Wilkie Road #03-08 Wilkie Edge, Singapore 228095 on Monday, 28 October 2013 at 3.00 p.m., for the following purposes:
AS ORDINARY BUSINESS:
1. To receive and adopt the Directors’ Report and Financial Statements for the financial year ended 30 June 2013 together with the Auditors’ Report thereon.
(Resolution 1)
2. To approve the payment of a final (tax exempt one-tier) dividend of 0.6 cent per ordinary share for the financial year ended 30 June 2013.
(Resolution 2)
3. To approve the payment of Directors’ fees of S$150,000 for the financial year ended 30 June 2013.
(Resolution 3)
4. To re-elect Ms Lim Siew Cheng, a Director, retiring by rotation under Article 107 of the Company’s Articles of Association.
(Resolution 4)
5. To re-elect Mr Kwah Thiam Hock, a Director, retiring by rotation under Article 107 of the Company’s Articles of Association. (see explanatory note 1)
(Resolution 5)
6. To note the retirement of Mr Khoo Ming Hon who is retiring pursuant to Article 107 of the Company’s Articles of Association. Mr Khoo has decided not to seek re-election. (see explanatory note 2)
7. To re-appoint Messrs RSM Chio Lim LLP as Auditors of the Company and to authorise the Directors to fix their remuneration.
(Resolution 6)
AS SPECIAL BUSINESS:
To consider and, if thought fit, to pass the following Resolution as Ordinary Resolution, with or without any modifications:
8. Ordinary Resolution: Authority to Allot and Issue Shares
“That pursuant to Section 161 of the Companies Act, Cap. 50, and Rule 806 of the Catalist Rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”), authority be and is hereby given to the Directors to:
(a) (i) issue shares in the capital of the Company (the “Shares”) whether by way of rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options that might or would require Shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares (collectively, “Instruments”),
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and
(b) (notwithstanding the authority conferred by this Ordinary Resolution may have ceased to be in force) issue Shares in pursuance of any Instruments made or granted by the Directors while this Ordinary Resolution was in force,
(Resolution 7)
NOTICE OF ANNUAL GENERAL MEETING
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provided that:
(i) the aggregate number of Shares or Instruments to be issued pursuant to this Ordinary Resolution (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Ordinary Resolution) shall not exceed 100% of the total number of issued share (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (ii) below), of which the aggregate number of shares to be issued other than on a pro rata basis to the shareholders of the Company (including shares to be issued in pursuance of Instruments made or granted pursuant to this Ordinary Resolution) shall not exceed 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (ii) below);
(ii) (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (i) above, the percentage of the total number of issued shares (excluding treasury shares) shall be based on the total number of issued share (excluding treasury shares) in the capital of the Company at the time of passing this Ordinary Resolution, after adjusting for:
(1) new Shares arising from the conversion or exercise of any convertible securities;
(2) new Shares arising from exercise of share options or vesting of share awards outstanding or subsisting at the time of passing this Resolution, provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Catalist Rules; and
(3) any subsequent bonus i s sue, consolidation or subdivision of Shares;
(c) in exercising the authority conferred by this Ordinary Resolution, the Directors shall comply with the provisions of the Catalist Rules for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and
(d) (unless revoked or varied by the Company in general meeting) this authority shall continue in force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting of the Company is required by law and the Listing Manual to be held, whichever is the earlier.”
(see explanatory note 3)
9. To transact any other business that may be properly transacted at an Annual General Meeting.
BY ORDER OF THE BOARD
Phua Sian ChinWee Woon HongJoint Company SecretariesSingapore
11 October 2013
Explanatory Notes:
1. Mr Kwah Thiam Hock will, upon re-appointment as a Director of the Company, remain as Chairman of the Audit Committee and a member of the Nominating and Remuneration Committees of the Company, and will be considered independent for the purposes of Rule 704(7) of the Catalist Rules.
2. Mr Khoo Ming Hon will retire as a Director of the Company at the conclusion of the Annual General Meeting. Upon Mr Khoo’s retirement, he will cease to be Chairman of the Remuneration committee and a member of the Audit and Nominating Committees. His replacement for each committee will be announced in due course.
NOTICE OF ANNUAL GENERAL MEETING
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3. The Ordinary Resolution 7 proposed in item 8 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the date of the next Annual General Meeting is to be held or is required by law to be held, whichever is the earlier, to allot and issue shares and convertible securities in the capital of the Company. The aggregate number of shares (including shares to be made in pursuance of Instruments made or granted pursuant to this Ordinary Resolution) to be allotted and issued shall not exceed 100% of the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of passing of this Ordinary Resolution. For issue of shares (including shares to be made in pursuance of Instruments made or granted pursuant to this Ordinary Resolution) other than on a pro-rata basis to all shareholders, the aggregate number of shares (including shares to be made in pursuance of Instruments made or granted pursuant to this Ordinary Resolution) to be allotted and issued shall not exceed 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Ordinary Resolution. This authority will, unless previously revoked or varied at a general meeting, expire at the next Annual General Meeting.
Notes:
(i) A member of the Company entitled to attend and vote at the Annual General Meeting may appoint not more than two proxies to attend and vote instead of him.
(ii) Where a member appoints two proxies, he shall specify the proportion of his shareholding to be represented by each proxy in the instrument appointing the proxies. A proxy need not be a member of the Company.
(iii) If the member is a corporation, the instrument appointing the proxy must be under seal or the hand of an officer or attorney duly authorised.
(iv) The instrument appointing a proxy must be deposited at the Registered Office of the Company at 1 Commonwealth Lane #09-23 One Commonwealth Singapore 149544, not less than 48 hours before the time appointed for holding the above Meeting.
NOTICE OF ANNUAL GENERAL MEETING
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TEHO INTERNATIONAL INC LTD.(Company Registration Number 200811433K)(Incorporated in the Republic of Singapore)
PROXY FORMANNUAL GENERAL MEETING
*I/We, (Name) of
(Address)
being a *member/members of TEHO INTERNATIONAL INC LTD. (the “Company”) hereby appoint:
Name AddressNRIC/Passport
NumberProportion ofShareholdings
(%)
and/or (delete as appropriate)
Name AddressNRIC/Passport
NumberProportion ofShareholdings
(%)
or failing *him/her, the Chairman of the Annual General Meeting (“AGM”) of the Company as *my/our *proxy/proxies to attend and to vote for *me/us on *my/our behalf and, if necessary to demand a poll, at the AGM of the Company to be held at 8 Wilkie Road #03-08 Wilkie Edge Singapore 228095 on Monday, 28 October 2013 at 3.00 p.m. and at any adjournment thereof.
(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions as set out in the Notice of AGM. In the absence of specific directions, the *proxy/proxies will vote or abstain as *he/they may think fit, as *he/they will on any other matter arising at the AGM.)
No. Resolutions relating to: For Against
Ordinary Business :
1. Adoption of Directors’ Reports and Financial Statements
2. Payment of proposed final dividend
3. Approval of Directors’ fees amounting to S$150,000
4. Re-election of Ms Lim Siew Cheng as a Director
5. Re-election of Mr Kwah Thiam Hock as a Director
6. Re-appointment of Messrs RSM Chio Lim LLP as Auditors
Special Business:
7. Ordinary Resolution: Authority to allot and issue shares
* Delete accordingly
Dated this day of 2013
Total Number of Shares held
Signature(s) of Shareholder(s)/or Common Seal of Corporate Shareholder
IMPORTANT: PLEASE READ NOTES OVERLEAF
PROXY FORM
Notes:
1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.
2. A member of the Company entitled to attend and vote at a AGM of the Company is entitled to appoint not more than two proxies to attend and vote on his behalf. A proxy need not be a member of the Company.
3. The instrument appointing a proxy or proxies must be deposited at the Company’s registered office at 1 Commonwealth Lane #09-23 One Commonwealth Singapore 149544, not less than 48 hours before the time appointed for the AGM.
4. Where a member appoints more than one proxy, he/she shall specify the proportion of his/her shareholdings to be represented by each proxy. If no percentage is specified, the first named proxy shall be deemed to represent 100 per cent. of the shareholding and the second named proxy shall be deemed to be an alternate to the first named.
5. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its Common Seal or under the hand of its attorney or a duly authorised officer.
6. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.
7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the AGM, in accordance with Section 179 of the Companies Act, Cap. 50.
8. The submission of an instrument or form appointing a proxy by a member does not preclude him/her from attending and voting in person at the AGM if he/she so wishes.
9. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of a member whose shares are entered against his/her name in the Depository Register, the Company may reject any instrument of proxy lodged if such member, being the appointor, is not shown to have shares entered against his/her name in the Depository Register 48 hours before the time appointed for holding the AGM , as certified by the Depository to the Company.
PROXY FORM
TEHO INTERNATIONAL INC LTD. 1 Commonwealth Lane #09-23
One Commonwealth, Singapore 149544