Far East : Annual Report

Towards a Resilient and

Sustainable

Future

ANNUAL REPORT 2022

OUR

VISION

A highly motivated and inspired team, working in unison towards leadership, striving for excellence through quality and technology and being ever sensitive and responsive to its employees, customers and the society in which we live.

CONTENTS

1. Corporate Profile
2. CEO's Message

1. At A Glance

1. Board of Directors

1. Executive Officers & Key Management

1. Group Structure
2. Financial Contents

This Annual Report has been reviewed by the Company's sponsor, SAC Capital Private Limited (the "Sponsor"). This Annual Report has not been examined or approved by the Singapore Exchange Securities Trading Limited ("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 Ms Lee Khai Yinn (Telephone: [phone]) at 1 Robinson Road, #21-00 AIA Tower, Singapore 048542.

Founded in 1953, Far East Group is one of the pioneers in the refrigeration and air-conditioning business in Singapore and a leading regional distributor of commercial and light industrial refrigeration systems and products with more than 69 years of experience in the Heating, Ventilation, Air-conditioning and Refrigeration ("HVAC&R") industry in Southeast Asia ("SEA") and the People's Republic of China (the "PRC"). In 2011, the Group was listed on the Catalist Board of the Singapore Exchange.

Headquartered in Singapore with approximately 400 employees globally, the Group has subsidiaries in Singapore, Malaysia, Indonesia, Vietnam, Myanmar, Hong Kong and the PRC. Other than our physical presence in SEA and the PRC, the Group also works with distributors and dealers in countries including Malaysia, Indonesia, Vietnam, Thailand, Myanmar, the Philippines, Mauritius, Sri Lanka, Turkey and Australia.

The Group is a comprehensive provider of refrigeration and air-conditioning systems, products and services to various industries including, but not limited to Commercial & Retail, F&B, Supermarkets, Cold-Storages, Warehouse and Logistics, Hospitality, Healthcare, Oil, Marine and Gas, etc. Our manufacturing facilities for heat-exchangers and condensing units are based in the PRC and certain condensing units are built in Singapore. These heat-exchangers and condensing units are exported to various parts of SEA and the PRC. We are also engaged in the distribution of air- conditioning products and contracting and installation of air-conditioning systems in Singapore.

As a major Wholesaler and Distributor regionally, we represent multiple internationally renowned product brands in the refrigeration and air- conditioning market such as Bitzer, Danfoss, Schneider-Eliwell and Emerson etc. We offer a full suite of services ranging from consultation, engineering design, equipment supplies, commissioning and aftersales support. Our long-standing and close relationships with our partners ensure genuine and quality products are readily available through our distribution network.

Our Manufacturing arm has also established itself as one of China's leading providers of a comprehensive range of quality energy-efficientheat-exchangers, compressor rack systems and condensing units under our own "Eden" and "Elite" brands.

Eden products are manufactured by Eden Refrigeration Manufacturing (Jiangsu) Co., Ltd. (ISO9001:2015) which produces international standard heat-exchangers using the latest design and heat transfer technology in manufacturing a wide range of unit coolers, brine coolers, condensers and custom coils for Commercial, Industrial and Marine applications. All our unit coolers and air-cooled condensers are Conformitè Europëenne (CE) certified and in compliance with the listed European Directives BS EN 60204-1:2006+A1:2009 on safety guidance on machinery.

ELITE's compressor rack systems, outdoor packaged refrigeration units and condensing units are designed according to standards widely used in low-temperature storage, food processing, slaughtering processing, chemical, agricultural products processing, cold chain logistics, hospitals, supermarkets and other fields.

Our Engineering Solutions arm provides engineering solutions in our system designs to meet evolving customer needs and requirements; and knowing that every engineering challenge has an ultimate solution, drives us forward towards achieving excellence.

M-TechAir-Con & Security Engineering Pte Ltd ("M-Tech"), established in Singapore since 1993, is an Air-Conditioning and Mechanical Ventilation ("ACMV") service provider for residential and commercial buildings, with vast experience and technical expertise in the design, supply and installation of ACMV and electrical systems.

M-Tech is a registered contractor with the Building and Construction Authority of Singapore (BCA), and certified in Air-conditioning, Refrigeration

• Ventilation Works (ME01-L5), Communication & Security Systems (ME04-L1) and Electrical Engineering (ME05-L1).

RSP Systems Pte Ltd is the System Integration arm of Far East Group in Singapore, specialising in providing a host of monitoring systems ranging from temperature monitoring, energy & resource monitoring, alarms management & asset management system tools; and incorporating Internet of Things (IoT) devices from Eliwell, Schneider Electric and other third-party devices. These systems allow for quick deployment, full system management control and data analytics for troubleshooting and improving efficiency of any refrigeration and HVAC&R system.

In 2018, the Group relocated its regional headquarters to 51 Ubi Avenue 3, Singapore 408858 which operates as our regional distribution centre.

Environmental, Social, and Governance (ESG) and Sustainability considerations have always been part of Far East Group's core values that are key to our long-term business strategy and we appreciate the opportunity to present our achievements and ambitions in this area. The Group aims to work with our suppliers and customers towards the phasing out of harmful gases and development of energy-efficient products, which are the two areas that can yield mutual benefit to both our business and society at large. At the same time, we recognise that our people are key drivers of our success and we place great emphasis on nurturing them by enhancing their training and development and taking care of their health and safety. It is our responsibility to exceed the expectations of our stakeholders in the market and we strive to do so by delivering high quality and safe products, maintaining financial stability and tackling the risk of cybersecurity through robust internal controls, policies and measures.

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ANNUAL REPORT 2022

DEAR SHAREHOLDERS,

On behalf of the Board of Directors ("Board" or "Directors"), I am pleased to present to you the annual report of Far East Group Limited ("Far East Group" or the "Group") for the financial year ended 31 December ("FY") 2022.

Far East Group started FY2022 with plenty of uncertainties. The world was still battling the COVID-19 pandemic even though many people whom we have spoken with considered that the worst was over. In addition, in February 2022, Russia invaded Ukraine and a whole new set of issues such as soaring energy costs, high interest rates, etc. ensued amid high inflation rates. Despite a recovery in FY2021, we had no clear indication of which direction the regional economies in which the Group has a presence were headed or would end up.

In spite of these uncertainties and the rocky start, we stayed focused on our vision to have a highly motivated and inspired team working in unison and striving for excellence through providing quality and technologies, and being ever sensitive and responsive to our employees, customers, suppliers and society in which we live. We maintained our course to achieve the goals set out before us - to deliver maximum value to our stakeholders.

I am proud to announce that through the concerted efforts of the Management and all our staff, we have achieved a record revenue of S$104 million in FY2022 which is a historic milestone for Far East Group. This milestone was achieved amid the challenging global economic and political conditions in FY2022 and in spite of our China operations being affected by the various COVID-19lock-downs and restrictions.

Our efforts to optimise our operating costs has been ongoing since the onset of the COVID-19 pandemic when we had to scrutinise and carefully consider our cost structures and operate as a much leaner organisation. Efficiency is the key driver of such efforts and the objective to be efficient at various levels of the businesses that we are in became even more important in times of uncertainties. The re-segmentation carried out in FY2021 into the Wholesale and Distribution, Manufacturing, and Engineering Solutions segments allowed us to focus on each segment more clearly and to apply targeted strategies to the issues faced by each segment.

In FY2022, the revenue from our Wholesale and Distribution segment grew by approximately 17% compared with FY2021 on the back of increasing demand from certain F&B sectors and more orders from contractors for commercial installation projects. The revenue from our Engineering Solutions segment continued to show strong growth of approximately 70% due to a large installation project on hand. Due largely to the abrupt and protracted periods of lock-downs in China, the revenue from our Manufacturing segment shrunk by approximately 18%. Inflationary and supply chain pressures continue to weigh upon the various segments in

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	ANNUAL REPORT 2022

the Group, albeit not as sharply as in the past year. High labour cost and shortage of labour supply affect the Engineering Solutions segment the most as it is a labour-intensive business where skilled labour is required. Financing costs have also increased sharply due to the impact of high interest rates.

Nevertheless, the Group hopes to leverage on the recovery of the various regional economies that the Group operates in, especially in China, for the Manufacturing segment to catch up with the pace of completion for projects that were previously stalled or put on hold. While revenue growth is expected for all three segments, it is envisaged that the Manufacturing and Engineering Solutions segments may have more room for growth compared with the Wholesale and Distribution segment. Margins may continue to be tight as the world is still experiencing many new uncertainties in light of the geopolitical tensions between the USA and China, which may have indirect consequences on the region.

The Group will also focus on sustainability in terms of our products, operations and business model to deliver more value to our stakeholders. Seizing opportunities for inorganic growth to diversify and spread the risks amongst the various businesses through mergers and acquisitions to add value to shareholders continue to be a key objective of the Group.

Operations and Financial Review

The Group's revenue improved by S$21.1 million or 25.4% to S$104.2 million in FY2022 from S$83.1 million in FY2021, mainly due to the recovery of the Wholesale and Distribution and Engineering Solutions segments.

The Engineering Solutions segment is the largest revenue contributor to the Group's FY2022 results, accounting for 41.7% of total revenue. The Wholesale and Distribution segment accounted for 40.6% of total revenue, while the Manufacturing segment accounted for the remaining 17.7%.

Gross profit increased by S$4.1	million or 24.3% to	S$21.0	million
in FY2022 from S$16.9 million	in FY2021, with gross	profit	margin

decreasing by 0.2 percentage points to 20.1% from 20.3% over the comparative period.

The Group generated S$12.0 million net cash flows from operating activities. Net cash flows generated from investing activities of S$2.7 million were mainly from the disposal of investment securities. The Group used S$15.4 million net cash flows in financing activities, repaying loans and trade facilities as well as dividends to shareholders. Cash and cash equivalents decreased from S$6.8 million as at FY2021 to S$6.0 million as at FY2022.

The Group reported a net profit attributable to shareholders of S$2.1 million in FY2022, compared with a loss of S$32,000 in FY2021. Earnings per share stood at 1.86 cents in FY2022, compared with a loss per share of 0.03 cents in FY2021 while net asset value per share increased to 41.0 cents as at 31 December 2022 from 40.3 cents the year before.

Dividend

The Company has recommended a final (tax exempt one-tier) dividend of 0.20 cents per ordinary share for FY2022, subject to the shareholders' approval at the forthcoming Annual General Meeting.

Appreciation

On behalf of my fellow Directors, I would also like to thank all shareholders, customers and business partners for your continued support and trust. I would also like to extend my sincere appreciation to our management and staff for their hard work and dedication to the Company and in pulling through this pandemic together as one cohesive unit.

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ANNUAL REPORT 2022