Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.
Profit & Loss
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED INCOME STATEMENT
Jan – Jun 2020 ("1H20")
The Group's revenue decreased 14.7% year-on-year ("yoy") from $322.6 million for 1H19 to $275.1 million for 1H20. The decline in revenue was attributed to a decrease in revenue from all business segments except for the Healthcare segment which increased 17.9% yoy to $34.5 million, mainly driven by the increase in orders secured amid COVID-19 and new projects launched.
Revenue from the Group's Automotive segment decreased 29.4% yoy to $84.2 million. This was mainly due to mandatory government closures of the Group's manufacturing facilities, except for those involved in certain essential goods and services, due to COVID-19 in countries like China, India, Malaysia and Mexico where our manufacturing facilities are located. Although the affected facilities have gradually resumed operations, orders are low as customers in US and Europe are affected by COVID-19 shutdowns.
Revenue from the Group's Consumer/IT segment declined 12.0% yoy to $105.6 million. This was due to (i) a deliberate strategic decision to exit the lower-margin business of a particular customer in February 2019; (ii) shut down of the Group's manufacturing facilities in China, Malaysia and Singapore, except for those involved in certain essential goods and services, as a result of COVID-19. The decline in revenue within the Consumer/IT segment was partially offset by strong orders from three customers.
Revenue from the Mould Fabrication segment declined 6.0% yoy to $50.7 million. This was due to a decrease in demand from customers in the Automotive and Consumer/IT segments, partially offset by an increase in orders from existing and new customers from the Healthcare segment.
The Group's gross profit increased 2.1% yoy from $32.8 million for 1H19 to $33.5 million for 1H20. Gross profit margin improved from 10.2% for 1H19 to 12.2% for 1H20. This was mainly due to (i) the completion of relocation of the Group's parts operations from one plant in Shanghai to Chuzhou; (ii) change in product mix; (iii) tightening of costs, pay cuts and the implementation of shorter work weeks in plants where orders are low; (iv) improvement in operational efficiency; (v) reduction and exemption of social security contributions by the Human Resource and Social Security Bureau in China; (vi) waiver of foreign worker levy ("FWL") in Singapore. Without the reduction and exemption on social security contribution and waiver of FWL, the gross margin would be 11.4%.
The increase in other income was mainly attributable to various government grants received by the Group due to COVID-19 of $3.3 million in 1H20, alongside a net foreign exchange gain reported of $0.7 million for 1H20 as compared to a net foreign exchange loss of $0.5 million for 1H19 under other operating expenses.
The decrease in marketing and distribution and administrative expenses was due to the tightening of costs, pay cuts and the implementation of shorter work weeks in plants where orders are low.
The decrease in other expenses was mainly due to the non-occurrence during the period of foreign exchange loss, onerous rental, and allowance for impairment on property, plant and equipment ("PPE"), which amounted to $1.2 million in 1H19 and reduction in retrenchment costs of $0.3 million (1H19: $0.5 million).
The Group reported a net profit of $8.3 million for 1H20 compared to a net loss of $0.3 million for 1H19. Excluding the impact from net foreign exchange (gain)/loss, retrenchment costs, onerous rent, allowance for the impairment on PPE, net loss/(gain) on the disposal of PPE, government grants due to COVID-19 and reduction and exemption on social security contribution and waiver of foreign worker levy, core net profit would have been $1.9 million for 1H20 as compared to $1.2 million for 1H19, representing a 54.1% yoy increase.
*Onerous rent refers to rent paid at the Group's operations in Shanghai and Thailand despite the shifting of operations from these locations. The Group was required to pay rent at these vacant premises during 2Q19 as the rental agreements will expire at a later date.
CONSOLIDATED BALANCE SHEET
The Group's PPE amounted to $175.5 million as at 30 June 2020 as compared to $171.7 million as at 31 December 2019. PPE was stated net of depreciation charges of $13.7 million (1H19: $14.1 million), partially offset by currency and additions of $16.8 million (1H19: $12.4 million).
The increase in contract assets was due to higher unbilled (uninvoiced) amounts.
The decrease in trade and other receivables compared to 31 December 2019 was due to lower revenue recorded in 1H20.
The increase in contract liabilities was due to more considerations received or due from customers where the related revenue has not been recognised.
The Group maintained a cash balance of $132.3 million as at 30 June 2020 (31 December 2019: $103.4 million). This resulted in a net cash position of $31.3 million (31 December 2019: net debt position of $1.0 million) after accounting for loans and borrowings (excluding lease liabilities) amounting to $101.0 million (31 December 2019: $104.4 million).
CONSOLIDATED CASHFLOW STATEMENT
Jan - Jun 20 ("1H20")
Net cash flows from operating activities amounted to $45.7 million for 1H20 as compared to $11.9 million for 1H19. Net cash flows used in investing activities amounted to $10.7 million for 1H20 as compared to net cash flows from investing activities of $14.8 million for 1H19. This was due to higher net proceeds received from the disposal of PPE for 1H19 as compared to 1H20.
Net cash flows used in financing activities amounted to $7.2 million for 1H20 as compared to $21.3 million for 1H19 due to the payment of dividends of $9.5 million in 1H19.
Commentary On Current Year Prospects
The Group continues to face headwinds in the form of pricing pressure and negative market sentiment due to continuing US-China tensions. In addition, the COVID-19 pandemic continues to cause considerable uncertainties for the Group's ongoing operations.
Over the course of 1H2020, the Group was impacted by mandatory government closures of its facilities in China, Singapore, Malaysia, Mexico and India due to COVID-19. Operations in China, Singapore and Malaysia have resumed. Mexico is progressively ramping up operations following the easing of lockdown measures since 31 May 2020. India is currently still under a partial lockdown which is expected to be in place until 31 August 2020 as the country perseveres with efforts to contain the outbreak.
On a segmental basis, the Group's Automotive segment is expected to experience a longer road to recovery, as orders for existing projects are low due to the impact of Covid-19 across US and Europe. On the other hand, while the Group's Consumer/IT segment initially experienced softening demand from customers, this segment has seen gradual recovery since June 2020.
One of the brighter spots for the Group relates to its Healthcare segment, which continues to garner momentum, having secured new projects from new and existing customers. While growth has been driven by the increase in orders secured amid COVID-19, the Healthcare segment has been the fastest growing segment in recent years even before the onset of COVID-19, and the Group expects this trend to continue.
Despite the current market conditions, the Group continues to receive queries from both new and existing customers for new projects within each segment.
However, our immediate attitude for the second half is one of caution and heightened vigilance as we are unable to predict if lock ups and shut downs will recur, nor are we able to quantify the economic impact on end demand of our customers e.g. for automobiles.
So moving into 2H2020, the Group will focus on what it can control and manage. We remain committed to tightening cost controls, boosting productivity and implementing overall operational excellence across our various business segments and manufacturing facilities. The Group will also continue to monitor the evolving COVID-19 situation closely and take the necessary measures.
The Group remains confident in its resilient business model and healthy balance sheet as the long-term sustainability of its operations remains on track.