Financials Reports

First Quarter Results Financial Statement And Related Announcement

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Condensed Interim Financial Statements For First Quarter and Three Months Ended 30 September 2024

Condensed Interim Consolidated Statement Of Profit Or Loss And Other Comprehensive Income For The First Quarter And Three Months Ended 30 September 2024

Condensed Interim Statements Of Financial Position

Review Of Performance

Review Of Profit And Loss

Group Revenue

For the three months ended 30 September 2024 ("1QFY2025"), the Group's revenue increased by 2.5% year-on- year ("yoy") to S$16.2 million from S$15.9 million in 1QFY2024. This is generally in line with the trend of global semiconductor sales. On a quarter-on-quarter ("qoq") basis, Group revenue in 1QFY2025 was 8.8% higher than S$14.9 million in 4QFY2024, marking the third consecutive quarter of revenue increase.

Revenue by segment

In 1QFY2025, sales from the consumable tools segment increased by 1.4% to S$12.7 million from S$12.6 million in 1QFY2024, while the qoq sales increased by 3.8% from S$12.3 million in 4QFY2024. Consumable tools remained as the Group's core business segment, which accounted for 78.4% of the Group's revenue in 1QFY2025.

On a geographical basis, sales from China decreased by 4.9% but remained as the Group's largest geographical market with a contribution of 31.2% to the Group's revenue in 1QFY2025.

Sales in Wafer Fabrication Equipment Parts ("WFE") increased by 6.7% to S$3.5 million in 1QFY2025 from $3.3 million in the same quarter a year ago and contributed 21.6% to the Group's revenue. WFE sales increased by 31.8% from S$2.7 million in 4QFY2024 on qoq bsis. The geographical markets for the WFE segment are mainly USA and Singapore.

Capacity Utilisation

In line with the revenue recovery trend observed, the Group's average capacity utilisation rate increased for the second consecutive quarter to 49%.

As announced in FY2024, the Group aims to achieve average capacity utilisation in the range of 50 to 65%. This will allow the Group to capture sudden surges in industry or customer demand that are typical for the semiconductor industry.

Gross Profit (GP) Margin

The Group's gross profit increased by 6.5% yoy to S$8.2 million in 1QFY2025 as gross profit margin increased to 50.7% in 1QFY2025. This was due to improved operating leverage and better product mix which has seen a sustained increase in the Group's gross profit margin levels over the last four quarters.

Other income, Distribution Expenses, Administrative Expenses, Other Operating Expenses and Net Finance Expense

For 1QFY2025, the Group's other income increased by 27.8% to S$110k from S$86k in 1QFY2024. This was attributed mainly to higher scrap sales reported in 1QFY2025.

The Group continues to prioritise prudent capital management and financial discipline, particularly on its expense structure. Distribution expenses in 1QFY2025 were relatively stable at S$0.8 million. Administrative expenses increased by 12.6% to S$2.4 million in 1QFY2025 from S$2.1 million in 1QFY2024 due mainly to increase in stock written off in view of the change in inventory policy and higher staff performance bonus. Other operating expenses in 1QFY2025 decreased by 18.4% from S$1.1 million in 1QFY2024 to S$0.9 million as a result of the cost-reduction measures implemented at MMUS.

Net finance costs increased by 8.7% to S$106k as compared to S$98k in 1QFY2024. This was mainly due to foreign exchange loss incurred during the period with the strenghtening of the Singapore dollar against other currencies.

In aggregate, the Group's administrative, distribution, other operating expenses and net finance costs (net of other income) remained stable at S$4.1 million in 1QFY2025. The overhead expenses as a percentage of sales in 1QFY2025 remained comparable to 1QFY2024, with improvement of 1.8% as compared to 4QFY2024.

Profit before Tax and Net Profit

As a result of the above, the Group's profit before tax increased by 10.7% to S$4.2 million in 1QFY2025 from S$3.7 million in 1QFY2024.

Income tax expenses increased by 2.3% to S$1.1 million in 1QFY2025 from S$1.0 million in 1QFY2024. For 1QFY2025, the Group's effective tax rate decreased to 25.9% from 28.0% in 1QFY2024. The tax expenses included a provision of S$87k for withholding tax on dividends to be remitted to Singapore from various overseas subsidiaries.

After deducting income tax expenses, the Group's net profit increased by 14.0% yoy to S$3.1 million in 1QFY2025 from S$2.7 million in 1QFY2024.

On a sequential basis, net profit in 1QFY2025 gained 48% qoq from S$2.1 million in 4QFY2024. Net profit margin in 1QFY2025 was 18.9% as compared to 17.0% in 1QFY2024 and 13.9% in 4QFY2024.

Correspondingly, the Group's earnings per share increased to 2.21 cents in 1QFY2025 from 1.94 cents in 1QFY2024.

Balance Sheet

The Group maintained a resilient financial position. As at 30 September 2024, the Group's balance sheet had total assets of S$59.2 million (FY2024: S$56.9 million), shareholders' equity of S$48.9 million (FY2024: S$46.1 million), cash and cash equivalents of S$19.3 million (FY2024: S$16.6 million) and no bank borrowings.

Long Term Assets

As at 30 September 2024, the amount of non-current assets was relatively stable at S$23.5 million as compared to 30 June 2024.

Trade Receivables

Total trade receivables as at 30 September 2024 of S$11.3 million was higher than S$10.8 million as at 30 June 2024 mainly due to higher sales in the current quarter. Of this, S$10k was outstanding for 90 days or more (S$3.7k at end of 30 June 2024). There is no bad debts written off during the period.

Trade & Other Payables

As at 30 September 2024, the Group's trade payables totaled S$946k (30 June 2024: S$924k), with amount of S$589 outstanding for 30 days or more (30 June 2024: S$13.1k).

Non-trade payables and accrued expenses totaled remained at approximately S$0.8 million as at 30 September 2024 and 30 June 2024 and S$3.6 million (S$3.7 million at end of 30 June 2024) respectively as at 30 June 2024.

Long term liabilities

As at 30 September 2024, the deferred tax liabilities were largely unchanged at S$1.4 million.

Inventory

The Group continuously manages its inventory to avoid over-stocking and minimise write-offs. As a percentage of annualised sales, the Group's inventory of S$4.1 million as at 30 September 2024 (S$3.9 million at end of FY2024) was 6.3% (6.7% at end of FY2024). Inventory written off amounted to S$99k (1QFY2024:S$21k).

Capital Expenditure

The Group's capital expenditure in 1QFY2025 amounted to S$610k which was mainly related to the purchases of plant and equipment in China and computers and software in Philippines, China and USA.

For FY2025, the Group expects to incur capital expenditure of approximately S$5.0 million on machinery and equipment to upgrade the production capacity and capabilities of the Group's five factories.

Cash Flow Analysis

The Group generated net cash from operations of S$4.1 million in 1QFY2025 (S$3.6 million in 1QFY2024). After deducting net cash used for investing activities of S$888k and net cash used for financing activities of S$390k, the Group generated free cash flow of S$2.8 million and ended 1QFY2025 with cash and cash equivalents of S$19.3 million which included S$0.1 million in pledged deposits.

Commentary On Current Year Prospects

Sector performance and outlook

Heading into FY2025, the Group continues to believe that the global semiconductor industry is in the advanced stages of rebalancing production and inventory. According to World Semiconductor Trade Statistics (WSTS), global sales of semiconductors are expected to recover to their 2022 peak by the end of 2024 with sales of US$611 billion. In line with this trend*, Group revenue increased for the third consecutive quarter to S$16.2 million for the three months ended 30 September 2024.

Looking ahead, the WSTS expects the global semiconductor sales to grow 12.5% to US$687 billion in 2025. Despite the improved operating environment, the Group remains cautiously optimistic about the continued recovery of the semiconductor industry, particularly as macroeconomic and geopolitical uncertainties continue to evolve.

*Note: WSTS forecasts global semiconductor sales, and while the Group's manufacturing of high precision tools and parts is part of the semiconductor industry's supply chain, the Group's performance in specific business segments during any particular time period may not always correlate with the general sales trend of the semiconductor industry.

Update on key initiatives for FY2025

The Group continues to execute and progress several key initiatives to drive earnings recovery for FY2025, with positive impact observed in 1QFY2025. These include:

Sustaining the turnaround and returning to profitability at MMUS

In 2HFY2024, the Group strategically recalibrated MMUS's engineering and product focus to create a more compelling, competitive and higher-value product mix of process-critical parts for the WFE industry. The Group also implemented a host of initiatives to optimise costs and improve efficiency as part of its overarching focus on enhancing operational excellence and accelerating innovation across its facilities.

Since then, core operating performance at MMUS has improved significantly. WFE revenue increased by 31.8% qoq and 6.7% yoy to S$3.5 million for 1QFY2025. MMUS saw orders rebounding in tandem with an improved product mix and continues to observe the positive momentum in 2QFY2025. Through the cost optimisation initiatives at MMUS, the Group's other operating expenses decreased by 18.4% yoy to S$0.9 million for 1QFY2025.

Correspondingly, the Group's WFE segment turned profitable with a profit before tax of S$213k for 1Q2025 for the Group's WFE segment, compared to a loss of S$426k for 1QFY2024.

The Group is encouraged by the progress at MMUS and intends to continue its focus on sustaining this momentum.

Executing the ‘Five-Star Factory' initiative

The ‘Five-Star Factory' initiative has continued to yield positive impact across the Group's operations, as demonstrated by the continued upward momentum in sales recovery in 1QFY2025. Looking to the rest of FY2025, the Group remains focused on strengthening the five fundamentals or "pillars" to accelerate excellence across its five factories. These include:

• High-Performance Teams: Building a high-performance team of talented people with the right skills in the right positions, upskilling the Group's workforce through training programmes, and aligning incentive systems with measurements of progress and performance.
  
  
• Fast, Effective & Local Support to Global Customers:: trengthening the Group's decentralised structure, thus further improving its ability to respond to its customers' evolving needs quickly and effectively and to solve high-value customer and industry problems.
  
  
• Workplace Efficiency, Health, and Safety: Implementing "8S" practices by all personnel resulting in organised, productive, clean, safe and environmentally responsible operations.
  
  
• Operational Excellence: Leveraging lean engineering and management principles, data and automation to develop fast, flawless and cost-effective manufacturing.
  
  
• Innovation Excellence: Creating a culture that promotes fresh thinking and ingenuity that drives product and process innovations and improvements, enables new manufacturing capability, and encourages the adoption of new technologies and methodologies.

Prioritising disciplined capital management and good governance

The Group continues to exercise disciplined capital management and uphold good governance to deliver sustainable long-term shareholder returns. During 1QFY2025, the Group generated net cash from operating activities of S$4.1 million. After deducting net cash used in investing activities of S$888k and net cash used in financing activities of S$390k, the Group generated free cash flow of S$2.8 million for 1QFY2025 with S$19.3 million in cash which included S$0.1 million in pledged deposits and no bank borrowings.

Business outlook

Looking to the rest of FY2025, the Group remains focused on its goal to become a leading Next Generation Supplier of high precision tools and parts used in process-critical applications for the wafer-fabrication and assembly processes of the semiconductor industry. The Group remains cautiously optimistic of the continued recovery of the semiconductor industry amid ongoing macroeconomic and geopolitical uncertainty. The Group remains vigilant and focused on building the core foundation of the business to future-proof its operations for sustainable high- quality earnings and long-term growth.