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 2017

Dear Shareholders,

The Tai Sin Electric Group is a home-grown company with a proud tradition of dedication, hard work and prudence in operational and financial management. This business ethos has sustained us and helped to build the business over the last 37 years to what it is today.

For many years, the Group has derived its income mainly from sales in Singapore, Malaysia, Vietnam and Brunei until five years ago when we made concerted efforts to bring our brand further afield into other neighbouring countries.

Our business in the new markets, such as in Indonesia, Cambodia, Myanmar, Thailand and the Philippines, are still fledgling, but we are poised to ride on their economic growth in the years ahead.

The Volatility, Uncertainty, Complexity and Ambiguity of previous years had accompanied us into 2017, further sustaining the economic slowdown that was earlier triggered by the sharp fall in oil prices from mid-2014.

As a result, the local construction and manufacturing sectors on which the Group depends on for growth had continued to stagnate and new projects were scarce.

For the year ended 30 June 2017, the Group's sales revenue totaled $279.65 million, compared to $320.91 million in 2016. Of the four business units, only our Electrical Material Distribution ("EMD") segment saw an increase in revenues for the year.

Our Cable & Wire ("C&W") segment continued as main revenue contributor, with sales of $174.91 million, a drop of 19% from $216.85 million in the previous year. EMD's sales rose 4% to reach $72.54 million, while revenue for the Test & Inspection ("T&I") segment slid a tad to $27.02 million, from $27.13 million in 2016.

Profit before tax ("PBT") was $21.50 million, compared to $27.58 million in 2016, with all four business units reporting positive bottom line.

"the slowdown in the property market and decline in the number of major public sector developments had a strong impact on total sales revenue in the year under review."

Cash and cash equivalents was $22.08 million, compared to the previous year, a drop of 35% due to acquisition of all minority shares in CAST Laboratories Pte Ltd ("CLPL"), investment property in Malaysia and repayment of short-term bank borrowings net during the year. Inventories climbed by 4% to $63.59 million. Short-term borrowings were reduced substantially by 73% to $9.99 million, due to repayment of short-term borrowings.

Trade receivables were lower at $80.80 million, compared to the previous year. A bigger allowance of $1.34 million was made for doubtful receivables.

During the financial year, the Group acquired the remaining 20.9% of the share it did not already own in CLPL, for a consideration of $3.4 million, to allow the T&I segment to have greater latitude in its pursuit of growth and better returns from its Singapore operations.

UNCERTAINTIES AND VOLATILITY CONTINUE TO HAMPER GROWTH

As the mainstay of the Group's business is primarily from construction and infrastructure projects in Singapore, the slowdown in the property market and decline in the number of major public sector developments had a strong impact on total sales revenue in the year under review.

There were fewer construction projects awarded in FY2017, and going forward it is anybody's guess when the private sector market would pick up and whether more public projects would be launched.

The better outlook for manufacturing in the first half of 2017 did not offer any consolation, as the chemical, oil & gas, and offshore & marine clusters were still in downturn mode.

For the whole of 2017, the government has projected Singapore's economic growth at the higher end of the 2-3% band. However, political uncertainties around the world and increased nationalistic trade tendencies, coupled with unstable economic developments in major developing countries, continue to dampen business sentiments.

LOOKING OUTWARDS TO SUPPORT GROWTH

All the core Tai Sin operating units have in recent years directed more of their energy and resources to growing their export business, and have made small but encouraging progress. For C&W segment, continued efforts have been made to increase exports from Singapore, as well as boost local sales in Malaysia and Vietnam subsidiaries where they have cable and wire production plants.

The EMD segment is further developing its nascent export business, having successfully broken into the Myanmar market. It will further build on its relationships with Singapore contractors to vie for projects in other Southeast Asian countries.

The T&I segment has built a good reputation in Malaysia and Indonesia, having worked with established contractors and engineering procurement and construction companies. Its initial success in Batam has helped it to expand into other states in Indonesia's oil & gas and infrastructure businesses for its non-destructive testing ("NDT") and heat treatment ("HT") services. In Malaysia, it has reinforced its presence in Johor by expanding its operation and workforce to establish itself as a volume player in NDT services. In FY 2017, it extended its NDT service into the Pasir Gudang industrial complex and further North to Malacca to support projects there.

The potential for growth in Southeast Asia cannot be ignored. The International Monetary Fund ("IMF") has expected economic growth in the region to accelerate. It has projected growth in the Association of Southeast Asian Nations ("ASEAN") to inch up to 4.9% for 2017, from 4.8% in 2016, and a slightly higher 5.1% in 2018.

IMF said the growth outlook is clouded by "significant downside risks" including tightening global financial conditions, more inward-looking policies and the effects of China's economic transition.

As for public sector spending on infrastructure, the Asian Development Bank expects Southeast Asian countries to invest 5.7% of their GDP on infrastructure development to drive economic growth.

Our team will make determined and unrelenting efforts to extend the scale and effectiveness of their operations outside Singapore to win good quality, high yield projects for the Group, as well as increase the export of our Groups' products and services.

The business segments have already been collaborating with each other in their overseas operations, by synergising, sharing resources and working economies of scale into their project tenders. The ultimate aim is for the core operating units to work together to offer one-stop solutions for every construction and infrastructure development need.

We will continue to selectively identify more opportunities in the region for the continued expansion of our external wing.

STRENGTHENING OUR TALENT POOL AND INTERNAL RESOURCES

Over the years we have strategically invested substantially in our people, systems and plants to maximise our productivity and profit potential across all business units.

Our Singapore production facilities are constantly being upgraded to increase their production scheduling and output flexibility to better meet customer demands. Our information technology team has been expanded to extend and integrate the information systems across the Group's value chain, in order to provide more effective smart solutions to all the business units.

As an aspiring employer of choice, we have made human capital a priority by providing ongoing upskilling, management training and career development opportunities to everyone to ensure that we will always have a competent talent pool to bring us forward.

The Group's management team is dedicated, focused and value-driven, that has been honed to be highly strategic, yet adaptable to change, in their daily approach to managing the Group's business.

Together, they are poised to adapt and thrive in the face of the current intractably difficult operating environment beset by increasing costs, heightened competition and economic uncertainties.

WE APPRECIATE THE CONTINUED SUPPORT

We recognise the important role every one of our management and staff has played to support the Group. On behalf of the Board of Directors, I would like to record our deep appreciation for their dedication and effort.

Our sustainability would not have been possible without the strong support of our customers, business partners and associates. We thank every one of them for their patience, understanding and goodwill through the good and the difficult years.

We would also like to express our appreciation to our shareholders for their continued faith in us to deliver results. I am pleased to announce that the Board has decided to declare a final dividend of 1.60 cent per ordinary share subject to approval at the annual general meeting.


Tay Joo Soon
Chairman