Financial Statement Announcement for the second quarter ended 30 June 2019
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Profit & Loss
Consolidated Statement of Comprehensive Income
Review of Performance
CONSOLIDATED INCOME STATEMENT
April - June 2019 ("2Q19")
The Group's revenue decreased 10.3% year-on-year ("yoy") from $181.9 million for 2Q18 to $163.1 million for 2Q19. The decline in revenue was attributed to a decrease in revenue from all business segments except for the Group's Healthcare segment which increased 11.0% yoy to $15.2 million driven by strong demand from two customers.
Revenue from the Group's Consumer/IT segment declined 7.6% yoy to $62.3 million. This was due to the deliberate exit of business from one customer in February 2019 and a decrease in demand due to weak market sentiment. The decline in revenue within the Consumer/IT segment was partially offset by new business from a new customer.
Revenue from the Group's Automotive segment decreased 15.5% yoy to $60.0 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.
The Group's gross profit decreased 32.4% yoy from $23.0 million for 2Q18 to $15.6 million for 2Q19. Correspondingly, the gross profit margin declined from 12.7% for 2Q18 to 9.6% for 2Q19. This was mainly due to lower utilisation as a result of the decline in orders, lower utilisation during the initial start-up phase at the Group's new plant in Penang and the relocation of the Group's Shanghai operations to Chuzhou.
The decrease in other income was mainly due to the Group reporting foreign exchange gain of $3.4 million in 2Q18 as compared to $0.3 million in 2Q19.
The increase in finance costs was due to accounting for finance costs on lease liabilities of $0.3 million on adoption of SFRS(I) 16.
The Group reported a net loss of $1.1 million for 2Q19 compared to a net profit of $9.7 million for 2Q18. Excluding the impact from net foreign exchange gain, retrenchment costs, onerous rental, insurance claim, allowance for impairment of property, plant and equipment ("PPE") and (gain)/loss on the disposal of PPE and finance costs on lease liabilities, net loss would have been $0.7 million for 2Q19 compared with a net profit of $6.5 million for 2Q18, representing a 110.4% yoy decline.
* Onerous rental refers to rent paid at the Group's operations in Shanghai and Thailand despite the shifting of operations from these locations. The Group was still required to pay rent at these vacant premises during 2Q2019 as the rental agreements will expire at a later date.
CONSOLIDATED BALANCE SHEET
The Group's PPE amounted to $184.0 million as at 30 June 2019 as compared to $190.4 million as at 31 December 2018. PPE was stated net of depreciation charges of $14.1 million (1H18: $15.0 million), partially offset by currency realignment, reclassification of land use rights to right-of-use assets and additions of $12.4 million (1H18: $21.8 million).
On adoption of SFRS(I) 16, the Group recognised right-of-use assets and lease liabilities as of 1 January 2019.
The decrease in trade and other receivables was due to the proceeds on disposal of the property of $28.2 million collected on 3 January 2019.
The Group maintained a cash balance of $93.5 million as at 30 June 2019 (31 December 2018: $88.7 million). This resulted in a net debt position of $7.2 million (31 December 2018: net debt position of $21.0 million) after accounting for loans and borrowings amounting to $100.7 million (31 December 2018: $109.7 million). The decrease in net debt was mainly due to the collection of proceeds from the disposal of the property and cash generated from operations. This was partially offset by the payment of dividends and retrenchment costs.
CONSOLIDATED CASHFLOW STATEMENT
April - June 2019 ("2Q19")
Net cash flows from operating activities amounted to $45,000 for 2Q19 as compared to $4.2 million for 2Q18. Net cash flows used in investing activities amounted to $4.3 million for 2Q19 as compared to $11.9 million for 2Q18 mainly due to payments for the purchase of PPE.
Net cash flows used in financing activities amounted to $15.1 million for 2Q19 as compared to $10.0 million for 2Q18.
Commentary On Current Year Prospects
Similar to 4Q2018, the Group continues to face pressure in the form of rising labour costs, price pressure and negative market sentiment. In addition, the Group continues to be impacted by a slowdown in the automotive market, especially in China.
While still in the initial start-up phase of its operations, the Group expects production and utilisation at its Penang facility to gradually improve in 2H2019. Similarly, the Group has accelerated the shift of its operations from Shanghai to the lower-cost region of Chuzhou. Completion of this shift is expected to take place by 3Q2019.
The Group's technological capabilities and global manufacturing footprint have led to business queries from both new and existing customers. Despite the downturn in the Automotive segment, the Group continues to garner momentum in the Consumer/IT and Healthcare segments as it has secured multiple new projects from customers.
The Group's continued improvements in tightening cost controls and enhancing operational efficiency have translated to improved margins from the lows of 4Q2018. The Group expects margin pressure to ease in the coming quarters as it continues its emphasis on controlling costs and boosting productivity. While remaining vigilant of the headwinds, the Group remains confident in its resilient business model as the long-term sustainability of its operations remains on track.