Results for the financial year ended 30 June 2014 (FY2014)
Q1. Has Micro-Mechanics witnessed any changes in the competitive landscape for the semiconductor tooling business?
While the supply side of the competition equation has remained largely unchanged, the landscape in the semiconductor tooling market is being increasingly dictated by customers' demand for higher precision, smaller feature sizes and shorter delivery lead time (cycle time). Although some of our competitors such as the small workshops may have lower product selling prices than Micro-Mechanics, we believe our value-add to customers lies in our ability to deliver a wide range of "Perfect Tools, On Time, Every Time."
Back to topQ2. Does the Group have good pricing power for its tooling business?
Despite the persistent selling price pressure that is typical in the semiconductor industry, the Group's tooling business has maintained a steady gross profit margin of above 50% over the past five years. This can be attributed to our in-house R&D utilising proprietary materials and automated manufacturing processes which enable Micro-Mechanics to deliver perfect tools and parts with fast cycle time to meet our customers' requirements.
Q3. What factors contributed to the improved gross profit margin of the CMA division in FY2014?
The CMA division's gross profit margin in FY2014 expanded to 23.2%, from 6.3% in FY2013, as a result of a number of factors - higher utilisation due to a 32.9% increase in CMA sales, improved operational efficiency as we gradually moved production to our 24/7 Manufacturing Line, and a shift in sales mix as we steadily exited lower margin products.
Q4. What is the Group's strategy to grow sales of its CMA division?
We are increasing our focus on our customers and the value that we bring to their business in order to build sustainable long term relationships and grow with our customers. By ensuring we deliver on our mission to supply "Perfect Parts and Tools, On Time, Every Time" based on repeatable, scalable and cost-effective processes, the Group's aim is to engineer new parts for our customers to steadily increase our share of the customer's wallet.
Q5. Micro-Mechanics net profit increased by 51% in FY2014. Why is the Group not paying a higher dividend?
The Group has recommended a final dividend of 2.0 cents per share (one tier tax-exempt) in respect of FY2014. If approved by shareholders at the Annual General Meeting to be held on 27 October 2014, this would bring our total dividend for FY2014 to 3.0 cents per share (one tier tax-exempt). Since the Group's public listing in 2003, we have been paying consistent and regular dividends every year despite experiencing the ups and downs of the business cycle. Including the final dividend for FY2014, we would have distributed a total of 34.9 cents to shareholders over the past 11 years. Our Board of Directors decides on the dividends to be distributed each year after taking into account our expected requirements for working capital, capital expenditure and our aim of remaining debt free.