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Extracted from Annual Report 2019

Dear Shareholders,

The Year in Review

There's always a higher peak to surmount and conquer. There's always a better "us" we can aspire to become.
(山外有山, 人外有人)

Since our founding, the pursuit of becoming one of the world's leading providers for tower cranes and construction machinery through the delivery of high-quality and innovative products and solutions has always served as our underlying ethos. This translates to us a process of continually striving, refining and improving to deliver greater value to our stakeholders. The financial year 2019 ("FY2019") certainly kept us on our feet, and amidst the hustle and bustle of ramping up our capabilities and furthering our reach, it has been an exhilarating experience witnessing the Group scale towards new heights.

The Group's revenue experienced a 35.5% rise year-on-year to RMB885.4 million in FY2019, as compared to RMB653.5 million in FY2018. With the adoption of the Prefabricated Prefinished Volumetric Construction ("PPVC") method in Singapore and prefabricated construction methods in the PRC gaining momentum, demand for medium, large and mega size tower cranes in Singapore and the PRC provided a buoyant uplift to our sales. This was partially offset by more muted rental and service income, especially in the Hong Kong and Macau markets. Meanwhile, our average gross profit margin decreased from 29.0% in FY2018 to 27.0% in FY2019. While a greater proportion of our sales came from the relatively more lucrative big and mega tower crane categories, escalating steel costs, as well as mounting pressures from the competition hampered our average gross profit margin, resulting in a two percentage point dip. On the other hand, in absolute figures, the Group's gross profit rose 26.0% year-on-year to RMB238.7 million in FY2019, as compared to RMB189.5 million in FY2018. Consequently, net profit attributable to equity holders increased from RMB27.6 million in FY2018 to a more robust RMB61.5 million in FY2019.

Crossing a Pinnacle Milestone

Continuous innovation and developing state-of-the-art tower cranes is the core aspect of our business and in line with our strategy of building and leveraging on our brand's reputation. In FY2019, our intense research and development efforts continued to bear fruit, leading to the emergence of the STT3930 tower crane to the fore, the latest addition to our existing mega-sized topless tower crane series, which comprises of the STT2200, STT2630, STT2830 and STT3330. Spanning a radius of 21 metres and wielding a maximum lifting capacity of 200 tonnes, STT3930 stands as one of the world's largest topless tower cranes. It was designed to be highly suited for a wide range of mega scale construction projects, including nuclear and thermal power plants, bridges, airports, high speed rail and marine ports.

As a front-runner in its class, the STT3930 has garnered avid interest within our customer base. The first order has already been secured, which will see it undertaking another key national infrastructure project – the 10km-long Nanjing Puyi Yangtze River Bridge in the PRC. This builds on our expertise gained from the Hong Kong-Zhuhai-Macau bridge and Russian Kerch Strait bridge projects, which were both officially opened in 2018. We are heartened to receive yet another vote of confidence in the performance and abilities of our product and our team to participate in projects of this magnitude.

Hoisting our Flag Far and Wide

The ongoing Belt and Road Initiative spearheaded by the Chinese government has been a welcome development, serving as an ancillary framework supporting our drive into overseas markets. Under the banner of this initiative, we fielded six STL420 internal-climbing tower cranes – two to M Tower in Yangon, Myanmar, and four to Indonesia-1 in Jakarta. Once completed, M Tower will be Myanmar's first high-rise steelstructured office building at 111 meters tall, while Indonesia-1 will be the tallest twin tower in Indonesia.

In FY2019 we continued our marketing efforts to further promulgate the Yongmao brand. Bauma China 2018, a major trade fair in the construction sector, was a prominent platform to stage a showcase of our latest line up, including a display of the aforementioned STT3930 tower crane. It was also an opportune setting to connect with and reaffirm our ties with various industry delegates. We were also honoured to ink several key deals with our clients, both domestic and international, at the convention. One such highlight was the signing of a Memorandum of Understanding (MOU) with Tiong Woon Corporation Holding Ltd of Singapore, a long-standing business partner whom we have worked closely with over the years. The MOU sets in stone a monumental order for a total of 17 STT1330 and STT1830 topless tower cranes. The STT1830 will be one of the largest topless tower crane ever deployed to a Singapore residential construction project. With its shorter jib length of just 50 metres and tip load of 35.6 tonnes, it is highly suited to the stringent conditions of PPVC projects.

In addition to trade conventions, we also continued to participate in various trade association events. In October 2018, we hosted a conference for members of the Wuhan Construction Hoisting Machinery Industry Association, where we had the opportunity to feature the STT373A tower crane, and highlight its high applicability to evolving project requirements. We also served as the managing unit of the China Construction Machinery Industry Association's 5th assembly. Through a dialogue session, CEO Tian Ruo Nan shared Yongmao's vision for a paradigm shift to recognise high-grade innovation as the primary driver for future growth. Additionally, we hosted a cohort of technical experts from various trade associations to a hands-on demonstration session of the STT3930 at our Fushun plant, in order to foster deeper technical insight into our product and to broaden our perspectives from their feedback.

Our active participation with trade associations has strengthened our ability to stay abreast of industry trends, better understand the needs and concerns of our industry peers and business partners and elevated our standing within the construction community.

Market Development

The US-China trade war which began in mid-2018 has since escalated sharply, with substantial tariffs imposed on both sides. However, the effects of the ongoing dispute on the Group have been limited at this current stage as the Group has minimal trade exposure to the US market.

In large part due to these trade tensions, the World Bank projected a more muted growth rate of 6.2% for the PRC in 2019, down from the 6.6% rate of growth the PRC experienced in 2018. Despite growing pessimism centred on the trade war, favourable macroeconomic developments have also surfaced. In a bid to mitigate the trade war's effects, the Chinese government has announced that it would ramp up infrastructure spending by RMB1.35 trillion. In addition, the prefabricated construction method in the PRC is also continuing to take root, and the Chinese government is targeting for 30 per cent of newly added buildings to be prefabricated by 2026.

Over in Singapore, local regulators have also prepared initiatives that are likely to give PPVC a further boost. An upcoming Off- Site Construction Special Scheme is set to reduce manpower costs at prefabrication facilities, while the SGD295 million Productivity Innovation Project scheme will help lower the adoption costs of technologies that improve productivity and reengineer work processes, including PPVC.

The aforementioned developments are both propitious and welcomed as our specialised tower cranes are designed to support prefabricated construction and PPVC. As such, the field of prefabricated construction and PPVC will continue to serve as a point of our strategic focus and a growth catalyst for the year ahead.

Dividend and Acknowledgements

On behalf of the board, I like to express my deep appreciation to our business partners, management, staff and shareholders for their contributions to Yongmao's continued success. In appreciation of our shareholders' steadfast support, we are proposing to reward shareholders with a final dividend of 3.0 Singapore cents for FY2019, subject to approval at the upcoming Annual General Meeting.

It has been a fruitful, productive year for Yongmao, and I look forward to your continued support as we gear up and set our sights on ascending greater heights in FY2020.

Sun Zhao Lin
Executive Chairman