Results for the financial year ended 30 June 30 2004
Q. The company recently reported a sterling 63% surge in earnings for the financial year ended June 2004 (FY04). What accounted for the strong double-digit profit growth?
A. First of all, our sales grew 28% to $23.2 million aided by a recovery in the semiconductor industry as well as our growing strength in key markets such as China, where sales jumped 43% during the year. Secondly, we have worked continuously to counter-balance price pressures by focusing on quality, cost and operational improvements. Coupled with a higher plant utilisation rate of 78% in FY04, up from 61% in FY03, our gross profit margin increased to 63%, from 61% in FY03. Finally, the performance is also due to our efforts to maintain a sensible expense structure. During the year, we kept the increase in total expenses before tax to 10%. When measured against sales, these expenses fell from 43% to 37%. In a nutshell, our strong profit growth was achieved through healthy growth, operational improvements and sensible controls.
Back to topQ. The company's revenue and net profit rose sharply in the second half of FY2004 versus the first half. Revenue rose to $10 million to $13.2 million while net profit grew from $2.9 million to $4.7 million. What were the reasons for these significant improvements?
A. Our performance improved steadily during FY2004 as the semiconductor industry recovered from one of the worst downturns in its history. On a quarterly basis, sales rose from $4.7 million in Q1 to $5.3 million in Q2 and $6.0 million in Q3. In Q4, our sales reached $7.2 million, representing growth of 53% over Q1 sales. At the same time, we managed to improve our gross profit margin by a full 2 percentage points to 63% by staying focused on quality, cost and operational improvements as well as containing expense growth to around 10% of sales.
Q. In terms of the key markets that you operate in, which ones posted the strongest growth rates in FY2004 over FY2003 and why?
A. During FY04, our business in China increased 43%. A few years ago, we established local presence through a sales office in Shanghai. This helped us gain access to local customers and enabled us to support our international customers' new factories in China. To further develop the potential of this exciting market, we are setting up a plant in Suzhou that will start manufacturing by the end of 2004. While China is often in the spotlight, we are also pleased with the strong double-digit growth of our manufacturing subsidiaries in Singapore, Malaysia, Thailand and the Philippines. Together with our sales offices in Taiwan, Switzerland and the United States, we are well placed to support our global customers, locally.
Q. Turning to your balance sheet, the company's cash position rose from $6.4 million in FY2003 to $10.5 million in FY2004. Can you explain the increase?
A. In good times or bad, we believe there is no substitute for a strong balance sheet. During FY04, we generated cash flow from operating activities of $6.4 million. After deducting a dividend distribution of $0.01 per share totaling $1.1 million, $2.0 million in capital expenditures and $1.1 million in income tax, we ended the year with $10.5 million in cash. With $28.1 million in net assets and no bank borrowings, our aim is to have a strong balance sheet and a financial performance that ultimately rewards our shareholders.
Q. You paid out a higher dividend of 1.5 cents in FY2004 versus 1 cent in FY2003. Can you elaborate on your dividend payout policy? Are you likely to increase dividend payout in future?
A. FY2004 marked our first full year as a publicly listed company. We achieved a record performance, with sales increasing 28% to $23.2 million and net income surging 64% to $4.7 million. To share our better results, we proposed a higher dividend of 1.5 cents per share. While we have not established a formal dividend policy, our proposal for a higher dividend this year reflects our overall aim of achieving a high level of financial performance that should ultimately reward shareholders.