Executive Management Report
(extracted from Annual Report 2024)
To all our stakeholders,
We entered the financial year faced with a challenging operating environment, as the global semiconductor industry continued to adjust to the effects of a sharp industry downcycle. In the 12 months ended 30 June 2024 ("FY2024"), makers of chips and Wafer Fabrication Equipment ("WFE") scaled back production and worked through excess inventory in response to the sudden drop in demand for chips the year prior.
In line with these market conditions, the Group's revenue decreased 13.6% year-on-year ("yoy") to S$57.9 million for FY2024. During the period, our USA subsidiary ("MMUS"), our second-largest geographical market by revenue, was impacted by the slowdown in the WFE sector with sales falling to S$10.2 million from S$18.5 million in FY2023. Comparatively, our Asia subsidiaries, which focus on processcritical consumable tools for chip packaging, posted a slight sales decline of 1.7% yoy to S$47.7 million.
As a result, the Group's gross profit declined 12.8% to S$27.2 million for FY2024. Despite lower revenue for FY2024, gross profit margin improved from 46.5% for FY2023 to 47.0% for FY2024 as the Group focused on higher-value work and exercised strict financial discipline to control costs and mitigate impact from operating deleverage.
The disciplined cost management also translated to a 10.9% yoy decline in total administrative, distribution and other operating expenses (net of finance expense and other income) to S$15.7 million for FY2024. Consequently, the Group's EBITDA decreased 10.4% yoy to S$18.4 million for FY2024. However, EBITDA margin improved from 30.6% for FY2023 to 31.7% for FY2024 and a resulting net profit of S$8.0 million for FY2024.
According to World Semiconductor Trade Statistics ("WSTS"), the semiconductor industry began to recover in FY2024, with revenue growing 9.8% to US$569 billion. In its latest forecast, the WSTS now expects global semiconductor sales to fully recover to its 2022 peak by the end of 2024 with sales of US$611 billion. While the Group is encouraged by the positive industry outlook, we believe the industry is still in the advanced stages of rebalancing inventory and production.
As such, we remain focused on driving earnings recovery and futureproofing the business for sustainable long-term growth. To this end, we are continuing to work on several key initiatives heading into FY2025.
Returning MMUS to profitability
In 2H2024, the Group completed a restructuring plan at MMUS, where we strategically recalibrated the engineering and product mix to create a more compelling, competitive, and higher-value proposition within the WFE industry. We also implemented a host of other initiatives to optimise costs and improve efficiency as part of our overarching focus on enhancing operational excellence and accelerating innovation across our facilities.
Going forward, we expect the completed restructuring plan to be earnings accretive to MMUS. So far, the plan has yielded encouraging results, delivering annual operating cost savings on an ongoing basis. Since the start of FY2025, the Group has also seen a rebound in orders at MMUS. Going forward, we remain focused on sustaining this momentum and returning MMUS to profitability in FY2025.
Progressing our 'Five-Star Factory' initiative for efficient performance
The Group also launched the 'Five-Star Factory' initiative in FY2024 to accelerate excellence across the Group. It strengthens the fundamentals for stringent and complex manufacturing across our five decentralised facilities in US and across Asia. Led by Deputy CEO Mr. Kyle Borch, the 'Five-Star Factory' initiative aims to maximise performance, innovation, safety and efficiency across our five plants, so that we can respond to our customers' needs with greater agility. In the long-term, we believe this will elevate the Group's competitiveness and support our ambitions for sustainable growth. Mr. Kyle Borch will share more details on the progress of these efforts in his Deputy CEO Message.
Prioritising prudent capital management and corporate governance for sustainable value
Throughout its history, the Group has actively prioritised prudent capital management to weather and overcome the cyclicality of the semiconductor industry. Our efforts to maintain a strong balance sheet and efficiently allocate capital are underpinned by our continued commitment to enhance and protect stakeholder value with strong financial discipline and corporate governance standards.
These guiding principles enabled the Group to stay cash flow positive despite the challenging operating environment in FY2024, with net cash from operations of S$14.6 million. We also remained prudent around capital expenditure with net cash used in investing activities of S$2.2 million or 3.9% of sales. Net cash used in financing activities was S$9.9 million, mainly for the payment of dividends in respect of FY2023 and 1HFY2024. The Group ended FY2024 in a net cash position with S$16.6 million in cash and no bank borrowings. The strong financials position the Group favourably to mitigate market externalities and make prompt decisions to capitalise on investment and growth opportunities as they emerge.
As we conclude FY2024, I am confident that our abovementioned efforts have sharpened our competitive edge and strengthened the core foundations for us to deliver sustained earnings recovery and long-term shareholder growth. This would not be possible without the right people in the right positions working to make everything happen. With that, I would like to express my sincere thanks to our Board of Directors, particularly our outgoing Independent Non-Executive Chairperson Ms. Sumitri Menon and Audit Committee Chairperson Ms. Lai Chin Yee, for their guidance and commitment to the Group throughout their tenure. We are pleased to welcome Mr. Kazuo Takeda and Ms. Chua Siew Hwi, who joined the Board as Independent Non- Executive Directors in November 2023 and April 2024 respectively. They add extensive experience and deep expertise to our leadership bench as we progress on our growth ambitions. I am also grateful to our employees who have played an integral role in our progress this past year, and to our customers for their continued patronage of Micro-Mechanics.
Stepping into FY2025, I am excited to partner with our key stakeholders as we continue to pursue Five-Star excellence across our facilities and realise our ultimate aspiration to become a leading Next Generation Supplier of high precision, process-critical tools and parts for the semiconductor industry.
Sincerely yours,
Christopher R. Borch
Founder and Chief Executive Officer