Full Year Results Financial Statement And Related Announcement
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Profit & Loss Statement
Group Performance Review
The Group's revenue of $12.2 million for FY2016 decreased by 36.5% from FY2015 mainly due to continued weak worldwide demand from the HDD markets as well as more intensified price competition.
Despite sales declining by 36.5%, the Group managed to record a gross profit of $0.2 million for FY2016. This was mainly due to lower inventory cost in FY2016 after impairing inventories to net realizable value as a result of soft aluminium prices, as well as lower depreciation expenses after disposal of old extrusion machines.
Other operating income decreased by 32.4% to $3.5 million, compared to $5.1 million in FY2015. Other operating income was lower due to lower scrap sales, lower exchange gain and no write back of provision for China operations for FY2016 as that business was disposed of. The decrease was partially offset by a $0.9 million gain on sale of old extrusion machines.
Finance income decreased by 37.3% to $0.07 million from $0.12 million. Finance income comprised interest income earned on bank fixed deposits. The decrease was mainly due to lower bank fixed deposits as cash was utilized to finance the construction of a new factory at Tuas South.
Selling and distribution expenses decreased marginally by 1.1% despite a 36.5% decrease in sales. This was mainly due to certain portion of operating costs being fixed in nature.
Administrative expenses increased by 4.8% to $3.9 million from $3.7 million in FY2015. The increase was mainly due to increase in land rental expenses in FY2016 as well as write-back of performance bonus in FY2015.
Other operating expenses related to a fair value assessment of the Tuas South property, of which an impairment of $1.6 million was recorded.
No finance cost was recorded in FY2016 as they have been capitalized as part of the Tuas South factory costs. We recorded $0.02 million finance cost in FY2015 on loans taken to fund the investment in China subsidiary and these bank loans have since been fully repaid in FY2016.
Share of results of associated company's loss for FY2016 was $0.14 million, compared with share of loss of $0.16 million in FY2015.
At the pre-tax level, the Group's continuing operations reported a loss of $2.5 million, compared with a profit of $0.8 million in FY2015.
Group Balance Sheet and Cash Flow Review
The Group's non-current assets increased by $4.0 million from $20.3 million as at 31 December 2015 to $24.3 million as at 31 December 2016. The increase was mainly due to construction of Tuas South property. The increase was partially offset by the depreciation of property, plant and equipment, sale of old extrusion machines, and decrease in investment in an associated company arising from share of results.
The Group reported total current assets of $33.4 million as at 31 December 2016, a decrease of $4.5 million from last year end of $37.9 million. The decrease was mainly due to lower inventory level held by the Group and absence of assets of a disposed subsidiary. The decrease was offset by increase in cash and cash equivalents.
The Group's total current liabilities increased by $1.0 million from $3.7 million as at 31 December 2015 to $4.7 million as at 31 December 2016. The increase was mainly due to $1.8 million accrual of Tuas construction costs as the factory was substantially completed. The increase was offset by the deconsolidation of the disposed subsidiary.
The Group's total non-current liabilities increased by $2.0 million from $4.8 million as at 31 December 2015 to $6.8 million as at 31 December 2016. The increase was mainly due to bank loans taken to finance the construction of Tuas South factory.
Net cash generated from operating activities for FY2016 was $4.1 million compared with net cash generated from operating activities of $2.6 million for the corresponding period last year. The increase was due mainly to lower inventory and receivable balances.
The Group's net cash used in investing activities for FY2016 was $4.1 million, which was $0.8 million higher as compared to FY2015 mainly due to the additions in property, plant and equipment resulting from the construction of factory at Tuas South. The increase in net cash used in investing activities was partially offset by proceeds from disposal of old extrusion machines.
The Group's net cash received from financing activities for FY2016 was $2.2 million, compared to $2.0 million in FY2015. In 2016, the net cash received was due to proceeds from term loan taken to finance the construction of factory at Tuas South. In 2015, the net cash received was due to the proceeds from the share placement.
Commentary On Current Year Prospects
Worldwide demand for personal computer and hard disk drive products remained poor. The Group's core Electronics & Precision Engineering segment, faced lower customer orders in FY2016. Outlook for personal computer and hard disk drive industries is expected to continue to be subdued.
Lingering uncertainty in economic and geo-political environments following the US presidential election and impending elections in the EU region may continue to pose headwinds for global business climate.
The Group will maintain its efforts to streamline operating costs and improve efficiencies in its operations. Ongoing fluctuations in energy prices and raw material costs will continue to have significant impact on the Group's profitability, and will be monitored closely.
In January this year, the Group moved into its new factory at 15 Tuas South Street 13. Relocation of plant machinery, equipment and office had been completed without major disruption to business operations.
The board continues to review the options available to the use of the existing land and building at Penjuru Lane.