UMS Holdings Limited

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First Quarter Results Financial Statement And Related Announcement

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UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 31 MARCH 2017

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Comprehensive Income

Balance Sheet

Balance Sheet

Review Of Performance

Financial Review

Revenue

Revenue for the three months ended 31 March 2017 ("1Q2017") surged by 105% from S$20.4 million a year ago ("1Q2016") to S$41.8 million. This was mainly attributed to the strong performance by our Semiconductor business segment. On a sequential basis, revenue in 1Q2017 increased by 22% from S$34.2 million in the preceding quarter ("4Q2016").

The revenue boost came mainly from the Group's semiconductor business segment which leapt by 108% to S$40.9 million from S$19.6 million in the previous corresponding period. Semiconductor Integrated System sales jumped 192% from S$8.3 million in 1Q2016 to S$24.3 million in 1Q2017. Revenue from component sales increased by 47% from S$11.3 million in 1Q2016 to S$16.6 million in 1Q2017. Revenue contributions from the Others segment increased 17% to $0.88 million from S$0.75 million in the same period.

Compared to 4Q2016, 1Q2017, revenue contributions from the semiconductor segment rose by 26%. Revenue in Others segment decreased 51% due mainly to the fluctuations in shipment dates of water disinfection equipment, which comprises Kalf Engineering's projects.

Geographically, Singapore continues to account for most or 75% of the Group's revenue, contributing S$31.2 million in 1Q2017, a 186% jump from S$10.9 million in 1Q2016. The increase is mainly due to strong demand for the Semiconductor Integrated System.

Contributions from the US also surged. For 1Q2017, sales in US soared 66% to $4.1 million from $2.5 million in 1Q2016 as a result of higher component sales for new system built.

Revenue from the Others segment slipped 11% vs 1Q2016 mainly due to lower component sales to a customer in China.

Profitability

Net profit in 1Q2017 shot up by 230% to S$11.2 million from S$3.4 million in 1Q2016.

The surge in net profit came on the back of the Group's strong sales growth in 1Q2017. An increase in net finance income and reduced foreign exchange loss also contributed to the higher net profit.

UMS's gross material margin in 1Q2017 eased to 51% from 60% in 1Q2016 arising from a change in product mix. In the quarter under review, the Group secured higher integrated systems sales - which command a lower margin compared to component sales.

During the current quarter, employee benefits expense increased by 35% to S$3.5 million mainly due to higher overtime and provision for bonus. Depreciation expense fell by 12% to S$1.3 million from S$1.4 million in 1Q2016 - as more plant and equipment become fully depreciated. Other expenses increased 23% over last year to support the higher level of production activities undertaken. Other charges/ credits in 1Q2017 declined by 45% - mainly due to lower exchange loss. The exchange loss is attributed to the depreciation of USD during the quarter.

Income tax rose in line with the higher profits generated.

Cashflow

In 1Q2017, UMS continued to achieve strong cash flow - as evidenced by the Group registering $7.8 million positive net cash from operating activities.

The Group also generated $6.8 million free cash flow in 1Q2017. The Group would have generated more cash if not for the higher working capital deployed to secure materials for the coming quarters.

The Group recorded an all-time record level of cash and cash equivalents of S$48.1 million as at 31 Mar 2017.

Commentary

Fab equipment spending is expected to reach an industry all-time record, to more than US$46 billion in 2017, according to the latest version of the SEMI (www.semi.org) World Fab Forecast. The record is expected to be broken again in 2018, with spending hitting near the US$50 billion mark (Source: Unprecedented spending for fab equipment expected, SEMI (March 7, 2017)).

The largest growth drivers for the industry are mobile devices (including devices using SSDs), automotive, and IoT (Internet of Things).

These buoyant trends augur well for UMS as we are well-poised to ride on this growth wave to scale greater heights.

We will step up our plans to expand our production capacity - especially in Penang. By doing so, we will be able to take advantage of larger pool of talent and more favourable tax status. We will invest more in our Penang facilities with additional new cleanrooms to boost capacity. We intend to invest an additional RM80 million in Penang over the next few years.

Going forward, UMS will continue to drive growth in our existing semiconductor business segment while embarking on its diversification strategy to broaden our revenue and income streams and to minimize exposure risks to any single source or market.

Recently, we took a majority stake in Kalf Engineering, a company that specialises in water and chemical engineering solutions for the offshore, power generation and chemical industries. It has secured seven projects in Asia, the Middle East and South America worth approximately S$13 million.

Five of the new projects are expected to be completed in the second half of 2017, while the other two in China and Middle East are expected to be completed in the second half of 2018. The five projects, scheduled for completion this year, will be expected to contribute to the Group's financial performance in FY2017.

Apart from these seven projects secured, Kalf is also in the midst of procuring additional projects.

Barring unforeseen circumstances, the Board of Directors remains optimistic that the Group will deliver an improved performance in FY2017.