Extracted from Annual Report 2008
The Group’s sales for the financial year ended 30 September 2008 declined 32% to $217 million from $320 million in FY2007. This was primarily due to the decline of the FPC division sales from $258.3 million in FY2007 to $150 million in FY2008. Lower demand, fewer high volume programs and low average unit selling price for programs in the Communications and Wireless Portables, Display and Imaging and Data Storage segments contributed to the decline in FPC division sales. Other contributory factors included the weaker US dollar (“USD”) in the first three quarters of the financial year which had a negative impact on our USD denominated sales upon translation to Singapore dollar (“SGD”) and a higher volume of products shipped without component assembly also contributed to the overall decline in turnover for the FPC division.
Consequent on the lower sales, downward pressure on prices leading to reduced margins, less favorable product mix and aggravated by higher metal prices, the FPC Division incurred a loss at the gross margin level.
The PCB division continued to deliver encouraging results in FY2008; sales grew by 8% from $61.6 million in FY2007 to $66.7 million in FY2008 on increased demands from existing customers and better product mix. The Division continued to capitalize on its niche in high layer count and thick copper PCB for application in the power supply industry. Gross margin however dipped from 16.1% to 12.5% due to high metal prices and higher level of outsourcing. There was a one-off impairment charge of $0.9 million on the old PCB factory building as most of the plant and equipment has been relocated to the new facility. The group is expected to benefit from consolidating the two plants due to better efficiency and better capacity utilisation.
In tandem with the reduced sales, the Group's distribution expenses were lower by $2.8 million to $7.1 million in FY2008. Lower foreign exchange losses on our USD denominated sales and reduction in freight cost were the factors contributing to the decline. The Group’s administrative expenses were also lower by $2.0 million from $13.0 million in FY2007 to $11.0 million in FY2008 aided by hedging of the USD and reduction in staffing cost.
Other operating income were lower by $2.5 million compared to $7.4 million in FY2007. In FY2007, we recognized a one-off gain from the sale of quoted investment in SIIX Corporation (“SIIX”) amounting to $1.9m. Interest income from fixed deposits declined due to the lower return on SGD deposits. Recovery of gold and other precious metals saw an increase due to the higher volume and rise in commodity prices. Other operating expenses decreased by $0.9 million from $2.9m million in FY2007 to $2.0 million in FY2008 which is due mainly to the merger expenses incurred in FY2007.
Consequent on the FPC division incurring an operating loss, there is no tax payable for the Group under review notwithstanding that the PCB Division reported profit for the year. Arising from our continued investment in our Malaysian subsidiary, there is a write back of tax due to the claw back of investment allowances. The Group ended the financial year with a loss of $10.0 million against a profit of $9.9 million after tax in FY2007.
As a result of the losses incurred, the Group operating cash flow declined from $18.0 million in FY2007 to $0.4 million in FY2008. Net cash used in investing activities of $16.0 million was mainly due to fixed assets additions of $16.6 million offset by interest income of $0.5 million. Net cash used in financing activities of $3.5 million was mainly due to $6.6 million dividend payment and offset by proceeds of short-term bank loan of $3.2 million. The Group cash balance declined to $42.4 million as at 30 September 2008 from $61.9 million as at 30 September 2007.
