This printed article is located at http://umsgroup.listedcompany.com/financials.html

Financials

Full Year Financial Statement And Dividend Announcement

Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2017

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Comprehensive Income

Balance Sheet

Balance Sheet

Review Of Performance

Financial Review

Revenue

UMS revenue for the three months ended 31 December 2017 ("4Q2017") rose 13% to S$38.7 million, as compared to S$34.2 million in the previous corresponding period ("4Q2016"). This was mainly due to higher sales from the semiconductor segment. While Semiconductor Integrated System sales eased 1% from S$18.5 million in 4Q2016 to S$18.2 million in 4Q2017, revenue from component sales increased by 39% from S$13.9 million in 4Q2016 to S$19.3 million in 4Q2017.

On a sequential basis, revenue in the Semiconductor segment softened by 5% from the preceding quarter ("3Q2017"). Revenue in the Group's "Others" segment was higher by S$1 million due to improved sales arising from more shipment of systems from its subsidiary Kalf Engineering.

Despite a sales dip of 7% compared to 4Q2016, Singapore remains the major contributor - accounting for more than 60% of the Group's total sales in 4Q2017. The lower revenue was mainly due to lower shipment of Semiconductor Integrated System sales. Revenue in the US shot up by 63% compared to 4Q2016 whereas revenue in Malaysia and Others increased by 235% and 51% respectively mainly due to higher component sales.

For the full year ended Dec 31, 2017 ("FY2017"), UMS revenue surged by 56% when compared to FY2016. Revenue in the Semiconductor segment jumped 58% while sales in Others decreased by S$0.7 million. Both segments of the Group's semiconductor division showed improved results. Semiconductor Integrated System sales soared 73% from S$50.5 million to S$87.4 million in FY2017. Revenue from component sales also went up - by 43% from S$50.9 million in FY2016 to S$73.0 million FY2017.

Geographically, sales in Singapore surged 67% as compared to FY2016 mainly due to stronger Semiconductor Integrated System sales. Revenue in the Group's other served markets also improved considerably - with US sales increasing 61% vs FY2016 while revenue in Malaysia more than tripled to S$6.0 million vs S$2.0 million in the previous year and Others increased 12% in the period under review. The better performance was mainly due to higher component sales

Profitability

Net profit attributable to shareholders in 4Q2017 shot up by 166% to S$15.8 million from S$5.9 million in 4Q2016.

The surge in net profit came on the back of the Group's improved sales in 4Q2017 and the higher proportion of component sales compared to 4Q2016. Gross material margin at 58% in 4Q2017 is comparable to 3Q2017.

During the period under review, the Group's expenses increased due to consolidation of Kalf Engineering results as well as higher personnel costs, legal and professional fees and other expenses resulting from more production activities undertaken. The Group also saw increased exchange loss due to the weaker US dollar. However, the higher expenses were offset by lower depreciation costs, a one-off S$1.8 million gain on disposal of some old equipment and the S$1.1m write back of inventory provision. The Group also wrote back S$0.5 million overprovision in tax during the quarter.

For the full year, net profit attributable to shareholders more than doubled to S$52.0 million in FY2017 compared to S$22.6 million in FY2016. The profit surge was achieved on the back of higher sales during the period under review.

Gross material margin in FY2017 remained stable at 54.7% (vs 54.1% in FY2016). Expenses were generally higher due to the higher cost from more production activities, the consolidation of Kalf Engineering results, increased personnel costs, legal and professional fees as well as higher exchange loss arising from the depreciation of the US dollar. Income tax expense also rose 64% in line with the higher profits.

However, the Group benefitted from a 20% decline in depreciation costs, a S$1.9 million gain on disposal of some old equipment and the S$0.9 million write back of past inventory provision.

Cashflow

The Group's financial position continued to strengthen. As at Dec 31, 2017, UMS chalked up healthy net cash and cash equivalents of S$40.6 million.

It registered positive net cash of S$11.4 million from operating activities and S$6.7 million of free cash flow in 4Q17. UMS continued to invest to grow its production activities which resulted in an increase in capital expenditure - as part of the RM80 million capex plan previously announced to expand its Penang production facility. Inventories also rose to S$49.6m, mainly due to the commencement of a new parts consignment program with its key customer.

For FY2017, the Group continued to reward shareholders. Dividend payout went up to S$26.8 million from S$25.7 million in FY2016.

For the full year, the Group registered positive net cash from operating activities of S$39.2 million and free cash flow of S$30.4 million.

Commentary

SEMI, the global industry association representing the electronics manufacturing supply chain, has projected that worldwide sales of new semiconductor manufacturing equipment will hit 7.5 percent growth in 2018 and it is expected to result in sales of US$60.1 billion for the global semiconductor equipment market – another record-breaking year. *

Global semiconductor demand will continue to be driven by a diversity of applications including Augmented Reality (AR), Virtual Reality (VR), Artificial Intelligence (AI), cloud storage, Smart Automotive (driver assistance and autonomous), Smart Manufacturing, and Smart MedTech. These proliferating demand drivers and ensuing increasing silicon (semiconductor) content in electronics is fuelling a semiconductor "super cycle." The industry is seeing the evolution of China transitioning away from being a consumer of chips towards developing a self-sufficient semiconductor supply chain. Advancements have been made in chip production with over 24 new fab construction projections underway or planned, prompting the wafer fab equipment market in China alone to exceed US$11 billion in 2018 and to potentially surpass US$18 billion by 2020.**

These bullish global trends herald good news for UMS as it expects to gain from this uptrend. Order flow remains strong with its key customer forecasting double-digit revenue and profit growth in 2018 as it remains a direct beneficiary of the boom in Artificial Intelligence (AI) and Big Data. Sensor technology, memory power and data retention as well as the smart device "explosion" will drive revenue growth through 2018 and beyond.***

UMS has also enlarged its production capacity in Penang (Malaysia) to cater to the buoyant demand. The new cleanroom and the new system integration team in Penang are already in place. This will allow UMS to reap twin benefits of lower costs and ready capacity to take advantage of increased orders going forward. With the successful transition of our system integration operation from Singapore to Penang, our key customer will be able to enjoy cost savings offered by the Group. The Group's Malaysian subsidiary Ultimate Manufacturing Solutions Sdn Bhd, which will manage the system integration operations, has also received in principle approval for 10 Year Pioneer Tax Incentive from Malaysian Investment Development Authority (MIDA).

Going forward, the Group will continue to seek opportunities to diversify its business portfolio to reduce the dependency on its semiconductor segment. In January 2018, UMS acquired 29.5% or 429,864,300 ordinary shares of Catalist-listed JEP Holdings Ltd ("JEP"). JEP's core business has good long term growth potential and can leverage on UMS's financial and operational strength.

Barring unforeseen circumstances, prospects remain bright for FY2018.

Sources:

*SEMI- December 12, 2017
**SEMI- Semiconductor Super Cycle Nov 9, 2017
***CNBC - "The Future of Competition" - Nov 17, 2017

Please read our General Disclaimer & Warning carefully.Use of this Website constitutes acceptance of the Terms of Website Use.
Copyright © 2018. ListedCompany.com. All Rights Reserved.