Tai Sin Electric Limited

24 Gul Crecent, Jurong Town, Singapore 629531

T: (+65) 6672 9292 E: ir@taisin.com.sg


Email This Print ThisChairman's Statement

Extracted from Annual Report 2018

Dear Shareholders,

Slower market conditions continued to pose many challenges for the Group during the financial year ended 30 June 2018. In particular, new projects were fewer in the construction as well as the infrastructure sectors in Southeast Asia. Some major projects were also delayed or shelved.

Uncertainties continued to reign amid geopolitical and trade tensions in various parts of the world, threatening to unravel the global economic recovery that began over the last two years.

In spite of the difficult business environment, I am pleased to report that the Group achieved a 16.05% increase in revenue to $324.54 million, compared to $279.65 million for the previous financial year.

The bulk of the revenue increase came from the Cable & Wire ("C&W") Segment, which posted a 20.43% rise to reach $210.64 million, up from $174.91, mainly due to higher copper prices and tonnage delivery.

Electrical Material Distribution ("EMD") Segment's revenue grew 14.36% to $82.96 million, while the Test & Inspection ("T&I") Segment saw its turnover decline by 4.54% to $25.79 million.

Higher revenue notwithstanding, gross profit for the year slid 6.70%, or $3.86 million, to $53.69 million, from $57.55 million reported for FY2017. Higher costs and fiercer pricing competition eroded margins for the C&W and T&I Segments.

The surge in copper prices during the year under review also affected margins of products delivered by the C&W Segment.

Costs of sales increased by 21.95% to $270.85 million, from $222.10 million, due to higher copper prices, while selling and distribution, and administrative expenses rose marginally.

"In spite of the difficult business environment, I am pleased to report that the Group achieved a 16.05% increase in revenue to $324.54 million, compared to $279.65 million for the previous financial year."

The Group also suffered a foreign exchange loss of $1.11 million due to fluctuation of the US dollar, resulting in a slight increase of other operating expenses by $0.46 million to $1.89 million.

However, the Group's share of profit from associates increased by $3.33 million to $3.67 million, due to higher profit contribution from Nylect International Pte Ltd, mainly attributable to the gain on disposal of its investment in Kingsland Development Pte Ltd.

Profit attributable to shareholders was $15.46 million, compared to $18.18 million for the previous year.

Net asset backing per ordinary share rose by 3.56% to 39.80 cents from 38.43 cents previously.

The Group's cash and bank balances declined by $3.33 million to $18.75 million, due to settlement of bank borrowings and payables towards year's end.

Short-term bank borrowings increased by $9.76 million primarily because of higher borrowings by C&W and T&I Segments.

Higher sales in the last quarter of the financial year saw trade receivables increase by $15.97 million to reach $96.77 million, while trade payable rose by $5.22 million to $28.73 million, due to higher purchases by C&W Segment towards the end of the financial year.

During the year, CAST Laboratories Pte Ltd ("CLPL"), a subsidiary of the Group, acquired a 30% interest in Astar Laboratory Pte Ltd ("Astar") for an aggregate purchase consideration of $888,000. Astar, established in 2013, is in the business of providing environmental monitoring, testing and consultancy services catering to the needs of the Manufacturing, Marine, Shipping, Oil & Gas, Petrochemicals and Process industries.

CONFRONTING CONTINUED UNCERTAINTIES & VOLATILITIES

The Singapore economy is continuing to expand in the year 2018, following recovery from the year before. The increased economic activities had contributed in some ways to the slightly higher Group revenue. However, going forward, the market for our business will remain challenging both domestically and regionally, in some parts due to several uncertain external factors.

Business from the Singapore Construction and Infrastructure clusters will continue to buttress the Group's performance. However, the stagnant business pie and accompanying intense competition will pose ongoing challenges for all our business units.

In particular, volatility of copper prices and fluctuation of foreign exchange rates will require greater acumen and prudence in projects tenders.

The government has maintained its gross domestic product ("GDP") growth forecast of 2.5% to 3.5% for 2018, following last year's credible expansion of 3.6%.

However, the mounting trade tensions between The United States and some of the major economies has resulted in a lot of uncertainties, making forward planning difficult, especially for our business.

We look forward to the demand of our Group's products and services from the successful en-bloc acquisitions by developers in the last 24 months, notwithstanding the new property cooling measures introduced by the government in the second half of 2018.

We expect continued investments in infrastructures within the region, especially in Singapore, as it will continue to be the main focus of our marketing efforts besides the Commercial & Residential sector.

BOLSTERING OUR REGIONAL EXPANSION

The International Monetary Fund's ("IMF") Regional Economic Outlook released in April 2018 said the prospects for Asia and the Pacific "remains strong, and the region continues to be the most dynamic of the global economy".

It projected that the economies of Indonesia, Malaysia, The Philippines, Thailand and Vietnam will collectively maintain growth above 5% this year and next. However, it flagged downside risks over the medium term.

On the upside, IMF said "global recovery could again prove stronger than expected". It added that over time both the Comprehensive and Progressive Agreement for Trans-Pacific Partnership ("CPTPP") and implementation of the Belt and Road Initiative ("BRI") could support trade, investment, and growth.

The Tai Sin Electric Group will remain steadfast in expanding and nurturing its markets in the region, including the newer ones such as Myanmar, Cambodia and The Philippines. Business units in the Group will continue to leverage on each other's core strengths to secure new business, including the more established presence in Indonesia, Malaysia and Vietnam.

We will introduce new innovations and technology to help us establish a strong market presence across different business sectors and achieve profitable traction.

GEARING UP FOR A SMART ECONOMY

The Tai Sin Electric Group aims to become a Smart Enterprise, leveraging on digitisation to better manage, develop and grow its businesses. We believe that by doing so, we will be able to keep abreast of the advancement of IT use in the region and globally to ensure our sustainability into the future.

We have engaged an external consultant to guide and prepare our Singapore manufacturing operations for transition into Industry 4.0 over the next few years.

"The Tai Sin Electric Group will remain steadfast in expanding and nurturing its markets in the region, including the newer ones such as Myanmar, Cambodia and The Philippines. Business units in the Group will continue to leverage each other's core strengths to secure new business, including the more established presence in Indonesia, Malaysia and Vietnam."

To ensure our smart enterprise journey will be successful, we will be preparing our staff for the digitisation programme that involves the adoption of the Internet of Things ("IoT"). We will do this by further leveraging the government's skills development programmes.

Our continuing training and skills development efforts will allow us to keep our employees abreast of the latest developments in the industry so that they can better serve our customers. At the same time, it will also ensure that our staff will always be equipped with best practices and enjoy conducive work environments that comply with the government's workplace safety and health standards.

We expect the next few years to be a period of major transformation for the Group as we prepare for Industry 4.0 and embrace a much bigger market footprint in the region. It will also be a time when we will have to be more responsive to opportunities as competition intensifies for attracting talent and growing the business.

EVERYONE HAS A ROLE IN OUR SUCCESS

We would like to acknowledge the invaluable contributions of Professor Brian Lee Chang Leng, who was our Non- Executive and Independent Director and also formerly, Chairman of the Board from November 2003 to December 2014. He retired from the Board during the financial year under review. We thank him for his stewardship and wish him good health and success in his future endeavours.

Our people, from the management team to the production, marketing, administration and general staff, are the backbone of our organisation.

We treasure their contributions and will continue to ensure they adapt and thrive in the ever-changing business environment, so that together we can overcome whatever challenges that may arise from beyond the horizon.

On behalf of the board of directors, I would like to record our sincere appreciation for their dedication and support, and look forward to their continued quality contribution in the years ahead.

We are also very fortunate to have – through good and bad times - understanding and supportive customers and business partners, who will always be the cornerstone of our success. For this, we are ever grateful.

Our shareholders have also played an important role by keeping faith in us with patience and understanding year in and out. A very big thank you to every one of them.

I am pleased to announce that the Board has decided to declare a final dividend of 1.50 cent per ordinary share subject to approval at the annual general meeting.


Tay Joo Soon
Chairman