Sunningdale Technologies

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REVIEW OF THE FINANCIAL HIGHLIGHTS
Extracted from Annual Report 2015



REVIEW OF FINANCIAL PERFORMANCE


The Group completed the acquisition of Sunningdale Singapore Holdings Pte Ltd ("SSH") and its subsidiaries ("SSH Group") in November 2014. SSH Group is also the holding company of First Engineering Limited ("FEL") Group.


The financial results for the full year ended 31 December 2015 ("FY2015") reflected full twelve months contribution from FEL Group while full year ended 31 December 2014 ("FY2014") had only one month's contribution.


The Group's revenue increased by 41.8% year-on-year ("yoy") from $475.6 million for FY2014 to $674.5 million for FY2015. The increase came from growth in all business segments of the Group.


The Group recorded a gross profit of $90.8 million for FY2015, an increase of 51.6% yoy from $59.9 million for FY2014. Gross margin improved from 12.6% for FY2014 to 13.5% for FY2015 due to an increase in capacity utilisation, product mix and strengthening of the US Dollar and Euro.


The increase in other income was due to a foreign exchange gain of $12.8 million for FY2015 compared to $1.4 million for FY2014. This was partially offset by the negative goodwill of $4.5 million recognised for FY2014 arising from the acquisition of FEL Group.


The marketing, distribution and administrative expenses for FY2014 included only one month of expenses from FEL Group.


The increase in other expenses was due to (i) amortisation of intangible assets of $1.7 million for FY2015 compared to $0.4 million for FY2014 and (ii) impairment loss on property, plant and equipment of $1.0 million for FY2015 as compared to a reversal of impairment loss of $0.2 million for FY2014.


The Group achieved a net profit of $42.1 million for FY2015 compared to $27.7 million for FY2014. Excluding the negative goodwill, acquisition expenses, foreign exchange gain / loss and disposal of non-current assets held for sale, the net profit would have been $29.4 million for FY2015 and $21.4 million for FY2014.


The earnings per share was 22.68 Singapore cents for FY2015 compared to 16.48# Singapore cents for FY2014.


The net asset value per share increased from $1.65# as at 31 December 2014 to $1.77 as at 31 December 2015. The net tangible asset per share also increased from $1.54# as at 31 December 2014 to $1.67 as at 31 December 2015.


(Note: # - post share consolidation of 5 to 1)


PROFORMA BASIS


With the acquisition of FEL completed only in November 2014, the Group's revenue increased 7.2% yoy from $629.3 million for FY2014(P) to $674.5 million for FY2015 on a pro forma basis (as is acquired on 1 January 2014). The increase similarly came from all business segments with the exception of Healthcare business segment.


FY2015
$'000
FY2014(Proforma)
$'000
Inc/(Dec)
%
Automotive 219,126 197,003 11.2
Consumer/IT 268,832 261,247 2.9
Healthcare 49,775 50,599 (1.6)
Mould Fabrication 136,731 120,494 13.5
674,464 629,343 7.2

Revenue from the Automotive and Consumer/IT business segments increased by 11.2% yoy to $219.1 million and 2.9% yoy to $268.8 million for FY2015 respectively driven by an increase in orders from existing and new projects.


The marginal decrease in revenue from the Healthcare business segment was due to a slowdown in the China market while the increase in revenue from our Mould Fabrication business was mainly due to more orders billed and recognized, as per the project's progressive revenue recognition.


FY2015
$'000
FY2014(Proforma)
$'000
Inc/(Dec)
%
Revenue 674,464 629,343 7.2
Gross Profit 90,842 81,391 11.6
Gross Margin 13.5% 12.9% 0.6 pts
Marketing and Distribution 15,203 14,481 5.0
Administrative Expenses 42,818 45,782 (6.5)
Net Profit after tax 42,104 31,600 33.24

On a pro forma basis,

FINANCIAL POSITION AND CASHFLOWS


The Group's property, plant and equipment amounted to $186.9 million as at 31 December 2015 compared to $193.6 million as at 31 December 2014. The decrease in property, plant and equipment was mainly due to (i) the addition of $26.7 million in capital expenditure for machineries and the acquisition of leasehold land and construction in progress for our new factory in Chuzhou, China, and (ii) the addition of $7.6 million due to the acquisition of the SIA Skan-Tooling, offset by depreciation charges of $32.1 million (FY2014: $24.1 million), allowance of impairment loss of $1.0 million (FY2014: reversal of impairment loss of $0.2 million) and write offs of $0.4 million (FY2014: $0.3 million).


The decrease in deferred tax assets was due to a reversal of the temporary differences between accounting profit and taxable profit.


The increase in trade and other receivables was due to stronger sales in the last quarter of the year while the decrease in loans and borrowings was due to repayments.


The Group maintained a cash balance of $121.1 million as at 31 December 2015 (31 December 2014: $103.1 million), resulting in a net cash position of $1.1 million (31 December 2014: net debts of $33.9 million).


BUSINESS SEGMENTS PERFORMANCE


Note: the revenue contribution from FEL Group was twelve months for FY2015 and one month for FY2014.


FY2015
$'000
FY2014
$'000
Inc/(Dec)
%
Automotive 219,126 121,572 80.2
Consumer/IT 268,832 210,882 27.5
Healthcare 49,775 37,697 32.0
Mould Fabrication 136,731 105,462 29.6
674,464 475,613 41.8

Revenue from the Automotive business segment increased by 80.2% yoy from $121.6 million for FY2014 to $219.1million for FY2015. The Automotive segment's contribution to Group revenue was 32.5% (FY2014: 25.6%). The increase in profit was due to higher utilisation in line with an increase in orders, change in product mix and strengthening of the US Dollar and Euro.


Our consumer/IT business segment continues to be the key revenue generator with a 27.5% yoy increase in revenue from $210.9 million for FY2014 to $268.8 million for FY2015. The segment accounted for 39.9% of the Group's revenue for FY2015 as compared to 44.3% for FY2014. Despite the decrease in revenue contribution, profitability in the consumer/IT segment improved due to (i) a change in product mix, (ii) better utilisation in our Southern China operations, and (iii) the strengthening of the US Dollar.


Revenue from our Healthcare business segment increased by 32.0% yoy from $37.7 million for FY2014 to $49.8million for FY2015. Profit in the Healthcare segment declined marginally from $2.6 million for FY2014 to $2.5 million for FY2015.


Revenue from our Mould Fabrication business segment increased by 29.6% yoy from $105.5 million for FY2014 to $136.7 million for FY2015. This increase was mainly attributed to increase orders from existing and new projects. The Mould Fabrication segment accounted for 20.2% of the Group's revenue for FY2015, a drop from the 22.2% for FY2014. Despite the increase in revenue, profitability declined due to lower utilisation in our Southern China.


GEOGRAPHIC SEGMENTS PERFORMANCE


Sunningdale Tech (Thailand) Co. Ltd. was incorporated on 26 November 2014 and began shipments in July 2015.


Operations in China and Hong Kong contribute to the bulk of the Group's revenue and increased from 44.6% for FY2014 to 48.1% for FY2015. Revenue from operations in China and Hong Kong increased from $212.2 million for FY2014 to $324.5 million for FY2015. This was mainly due to new projects and an increase in orders from our automotive and consumer/ IT segments.


Contributions from our Singapore and Malaysia operations decreased marginally from 40.8% for FY2014 to 40.4% for FY2015. In absolute figures, revenue from our Singapore and Malaysia operations increased from $194.1 million for FY2014 to $272.5 million for FY2015. The increase was mainly due to a rise in orders from our Automotive, Consumer/IT and Healthcare business segments.


The contribution in revenue from the Group's operations in other regions decreased from 14.6% for FY2014 to 11.5% for FY2015. However, in absolute figures, revenue from the Group's operations in other regions increased from $69.3 million for FY2014 to $77.4 million for FY2015.