REVIEW OF THE FINANCIAL HIGHLIGHTS
Extracted from Annual Report 2019

The Group’s revenue decreased 7.3% year-on-year (“yoy”) from $726.8 million for FY18 to $673.8 million for FY19.

The Group reported a decrease in revenue from all business segments except for the Healthcare segment.

The Group’s gross profit decreased 14.7% yoy from $87.1 million for FY18 to $74.3 million for FY19. Correspondingly, the Group’s gross profit margin declined from 12.0% for FY18 to 11.0% for FY19. This was mainly due to lower levels of utilisation as a result of the decline in orders, lower levels of utilisation during the initial start-up phase at the Group’s new plant in Penang and the relocation of one of the Group’s plastic component operations from Shanghai to Chuzhou.

The decrease in other income was due to a gain on disposal of a property amounting to $13.1 million for FY18 and none for FY19.

The decrease in other expenses for FY19 was mainly due to lower retrenchment costs which amounted to $1.3 million (FY18: $3.9 million). Conversely, the Group reported net foreign exchange losses of $1.1 million (FY18: net foreign exchange gain $0.7 million), incurred a penalty of $0.4 million on the early termination of rental contracts due to the consolidation of two operating locations into one location in Tianjin, and onerous rental at the Group’s operations in Shanghai and Thailand despite shifting operations out of these locations. Onerous rental refers to rental paid for the Group’s premises in Shanghai and Thailand despite the shifting of operations from these premises. The Group was required to pay rental for these vacant premises till it expired in 4Q2019.

The increase in finance costs for FY19 was due to accounting for interest expense on lease liabilities relating to right-of-use assets upon the adoption of SFRS(I) 16.

The Group achieved a net profit of $8.0 million for FY19 compared to a net profit of $29.8 million for FY18. Excluding the impact from net foreign exchange loss/gain, retrenchment costs, onerous rental, penalty on the early termination of rental contracts, net gain on disposal of property, plant and equipment (“PPE”), allowance for impairment loss on PPE and transaction costs relating to acquisition of a subsidiary, the Group’s net profit would have been $11.9 million for FY19 and $20.9 million for FY2018, representing a 43.3% decline.

 

The Group’s basic earnings per share amounted to 15.70 Singapore cents for FY2018 as compared to 4.19 Singapore cents for FY2019.

The Group’s net assets per share decreased from $2.00 as at 31 December 2018 to $1.93 as at 31 December 2019. Similarly, the Group’s net tangible assets per share decreased from $1.93 as at 31 December 2018 to $1.86 as at 31 December 2019.

FINANCIAL POSITION AND CASHFLOWS

The Group’s PPE amounted to $171.7 million as at 31 December 2019 as compared to $190.4 million as at 31 December 2018. PPE was stated net of depreciation charges of $27.3 million (FY18: $29.2 million), partially offset by currency realignment, reclassification of land use rights to right-of-use assets and additions of $32.8 million (FY18: $37.2 million). During the year, the Group purchased a building for $5.7 million in Singapore to consolidate warehousing inhouse and to expand the Group’s manufacturing capacity in Singapore.

Upon the adoption of SFRS(I) 16, the Group recognised right-of-use assets and lease liabilities as of 1 January 2019.

Contract assets refer to the right to consideration for work completed but not yet invoiced at reporting date. These are new accounts as required by the new standard SFRS(I) 15 on revenue. The decrease in contract assets was due to lower unbilled amounts. It should also be noted that there was lower revenue recognised.

The decrease in prepayments was due to lower prepaid expenses in respect of foreign worker levy, insurance and maintenance contracts.

The decrease in trade and other receivables compared to 2018 was largely due to collection of sale proceeds of $28.9 million in January 2019 from the disposal of a property in Zhongshan, China, which took place in late 2018.

Contract liabilities refer to the obligation to transfer goods to customers for which considerations have been received or are due from customers, in accordance with billing terms agreed with customers. These are new accounts as required by the new standard SFRS(I) 15 on revenue. The decrease was due to lesser considerations received or due from customers where the related revenue has not been recognised.

The Group maintained a cash balance of $103.4 million as at 31 December 2019 (31 December 2018: $88.7 million). This resulted in a net debt position of $1.0 million (31 December 2018: net debt position of $21.0 million) after accounting for loans and borrowings excluding the lease liabilities arising from right-of-use assets, amounting to $104.4 million (31 December 2018: $109.7 million). The decrease in net debt was mainly due to the collection of proceeds from the disposal of a property and cash generated from operations. This was partially offset by the purchase of PPE, payment of dividends and retrenchment costs.

BUSINESS SEGMENT PEFORMANCE

 

Revenue from the Group’s Automotive segment decreased 9.2% yoy from $269.9 million to $245.1 million. This was mainly due to a decrease in orders from customers as a result of weakening demand across global automotive markets and certain projects reaching end-of-life, partially offset by new projects launched. Excluding retrenchment costs, net foreign exchange loss/gain, onerous rental, penalty on the early termination of rental contracts and net gain on disposal of a property, the Automotive segment reported a loss of $12.1 million, as compared to profit of $1.3 million for FY 2018. The Automotive segment was also impacted by the duplication of costs from the relocation of the Group’s plastic component operations from one plant in Shanghai to Chuzhou. The Automotive segment’s contribution to the Group’s revenue was 36.4% (FY2018: 37.1%).

Revenue from the Group’s Consumer/IT segment declined 7.7% yoy from $274.2 million to $253.0 million. This was due to a slowdown in demand from customers for certain projects and the Group’s deliberate shift away from low-margin projects, partially offset by new projects launched. Excluding retrenchment costs, net foreign exchange loss/gain, onerous rental, penalty on early termination of rental contracts and net gain on disposal of a property, the Consumer/IT segment’s profit was $20.3 million for FY2019 as compared to $24.3 million for FY2018. The Consumer/IT segment’s contribution to the Group revenue was 37.6% (FY2018: 37.7%).

Revenue from the Group’s Healthcare segment increased 1.0% yoy from $56.7 million to $57.3 million. This was due to new projects from new and existing customers, partially offset by a customer pulling certain projects in-house and delays in the qualification of tools for a new project set for mass production. Excluding retrenchment costs, net foreign exchange loss/gain, onerous rental, penalty on early termination of rental contracts and net gain on disposal of a property, the Healthcare segment’s profit was $5.5 million for FY2019 as compared to $0.6 million for FY2018 due to change in product mix. The Healthcare segment’s contribution to the Group revenue was 8.5% (FY2018: 7.8%).

Revenue from the Mould Fabrication segment declined 6.1% yoy from $125.9 million to $118.3 million. This was due to a decrease in demand from customers in the Automotive industry, partially offset by an increase in orders from customers in the Healthcare industry. Excluding retrenchment costs, net foreign exchange loss/gain, onerous rental, penalty on early termination of rental contracts and net gain on disposal of a property, the Mould Fabrication segment’s profit was $8.5 million for FY2019 as compared to $5.8 million for FY2018 due to change in product mix. The Mould Fabrication segment’s contribution to the Group revenue was 17.6% (FY2018 17.3%).

GEOGRAPHIC SEGMENT PERFORMANCE

Revenue contribution from the Group’s operations in China and Hong Kong decreased 9.3% yoy from $310.7 million for FY2018 to $281.9 million for FY2019. This was mainly due to project end-oflife and a decrease in orders from customers in Automotive and Consumer/IT segments which was partially offset by an increase in orders from the Healthcare segment.

Revenue contributions from the Group’s operations in Singapore, Thailand, Indonesia and Malaysia increased marginally from 43.4% for FY2018 to 44.2% for FY2019. However, in absolute figures, revenue from the Group’s operations in Singapore, Thailand, Indonesia and Malaysia decreased from $315.2 million for FY2018 to $297.6 million for FY2019. This was mainly due to project endof- life and a decrease in orders from customers in Automotive and Consumer/IT segments which was partially offset by an increase in orders from the Healthcare segment and higher revenue from the Mould Fabrication segment.

Revenue contribution from the Group’s operations in other locations decreased 6.5% yoy from $100.9 million for FY2018 to $94.3 million for FY2019 due to a decrease in revenue from all business segments except for the Automotive segment. This was due to the Group’s strategic discontinuation of a low margin contract in the Consumer/IT segment, lower revenue from the Healthcare segment, partially offset by new projects launched in the Automotive segment.