Building Sound Business Fundamentals and a Sustainable Business

The Group’s business slowed down in Financial Year 2024 (“FY2024”) but managed to remain profitable, although its profitability was significantly lower compared to the past three years. In the current financial year, market activities in the semiconductor industry have been sluggish. This was partly due to lukewarm general market conditions, as well as intensified trade tensions and a volatile political landscape, all of which had had a significant global impact on the semiconductor industry. The tariff threats and tit-for-tat trade measures have disrupted global trade, leaving companies to weigh their next moves. Decision-making has become more challenging on many fronts, as the stakes are high. In response, most chipmakers have adopted a cautious, wait-and-see approach. As a result, the construction sector within the semiconductor industry has been relatively quiet, negatively impacting the Group’s business and leading to a significant drop in revenue. The trade tensions have also led some duct manufacturers to set up new factories in the Southeast Asia region, partly to avoid and manage trade restrictions. Despite the market turbulence, we remain on course, pursuing our goals, building sound business fundamentals, and investing in talent and technology. We remain optimistic about long-term market prospects, despite ongoing instability.

Last year was filled with eventful activities, and most of these efforts were aimed at transforming our business and organisation in order to scale greater heights. With the dedication of our new management members and the infusion of novel ideas, we spared no effort, intensifying our previous initiatives and achieving breakthroughs by further elevating operational productivity and delivering high quality products. We firmly believe that quality is a never-ending journey, which motivates us to pursue excellence in both production and product quality. All the initiatives, efforts, and investments in new production facilities – such as new machines, 3D scanners, and QR systems, which were rolled out last year – have driven our production capabilities to new milestones on various fronts. Additionally, the IT infrastructure was upgraded as part of the business integration process. Overall, these innovative efforts are designed to ensure that our business stays relevant, remains ahead of the game, and is prepared for any market upswing at a moment’s notice.

Financial Performance

Despite the volatile business landscape, the Group managed to remain profitable. While business volume dropped significantly, the Group did not undertake a right-sizing exercise. As part of its organic business expansion and talent development, production capacity, workforce, and resources were retained, and operations were strengthened in preparation for future projects and business opportunities.

The operational earnings dropped, with net profit after tax decreasing by 85.7%, from $3.55 million in Financial Year 2023 (“FY2023”) (before other gains from deconsolidation and accounts payables written back, totaling $4.01 million) to $0.51 million in FY2024. This decline was primarily driven by lower revenue and costs related to the retention of production capacity. Revenue totaled $7.84 million, a decrease of $7.95 million or 50.4% from $$15.79 million in FY2023. However, the reduction in administrative and other operating expenses helped mitigate the impact on profit. Administrative expenses decreased by 28.4%, or $1.05 million, from $3.71 million in FY2023 to $2.66 million in FY2024, mainly due to lower employee performance bonus expenses. Other operating expenses decreased by $0.37 million, or 32.8%, from $1.12 million in FY2023 to $0.75 million in FY2024.

The cash and cash equivalents stood at $18.39 million, a slight decrease of $0.85 million. The bulk of the cash, amounting to $16.40 million, is placed in fixed deposits, which generated interest income of $0.57 million, compared to $0.60 million in the prior year. The buybacks of the company’s shares amounted to $0.26 million. The Group will continue its prudent approach to cash and credit management.

Looking Ahead

The semiconductor sector is expected to maintain its momentum in the coming years. Artificial Intelligence (“AI”) has emerged as a key technological trend, acting as a catalyst for the semiconductor industry. The growing shift in technological demand, driven by investments in technology, is poised to fuel further growth in the sector. Additionally, the rising global consumption of consumer electronics supports market expansion. Several countries, including Singapore and Malaysia, are working to attract more major chipmakers and capitalise on the AI wave.

On the other hand, geopolitical factors contribute to the dynamism and volatility of the semiconductor industry. The market’s fundamental order has been disrupted, and the unpredictable nature of conflicts has given rise to significant business risks. Ongoing trade tensions, particularly between major economies, could substantially impact the industry, with chipmakers potentially seeking alternative supply sources or shifting production capacities to other regions. This uncertainty makes predictions inherently difficult. Geopolitics is now increasingly shaping how companies do business.

We recognise the shift in the market environment and its dynamism, which require changes and adjustments to our organisation and business management approach. We focused on making internal changes rather than dwelling on the macro environment (which is beyond our control). As part of our talent-building efforts, we have brought in new management team members who bring fresh ideas, business vibrancy, contacts, and networks. These initiatives help us to develop the business, expand internationally, and diversify our product offerings across various industries, while also strengthening our business management, marketing, and customer relationships. We have hired skilled employees from diverse fields to continue building a knowledge-based company. Organisational processes across different business units and functions have been integrated and harmonised as part of our readiness to undertake greenfield projects and prepare for the future through investments in capability building. The product development and operational process revamp, along with our ESG efforts and commitment, allow us to offer more environmentally friendly and value-for-money coated ducts and related products, helping us fend off competition.

The competition within the Southeast Asia region has intensified, prompting us to adopt a proactive business approach and mindset, focusing not only on quality and product excellence but also on strategic innovation. We are transitioning from being merely a product manufacturer and seller to a provider of solutions and technologies. Additionally, we have begun exploring new ventures in untapped areas to expand our business, and these developments require persistence, discipline, and long-term commitment.