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Financials

Second Quarter Financial Statement And Dividend Announcement

Financials Archive

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UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE PERIOD ENDED 30 JUNE 2018

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Comprehensive Income

Balance Sheet

Balance Sheet

Review Of Performance

Financial Review

Revenue

2Q2018

Revenue for the second quarter ended 30 June 2018 fell 18% to S$35.2 million from S$42.7 million a year ago, mainly due to a 17% decline in sales from its semiconductor business and the absence of revenue contribution from its "Others" segment.

On a sequential basis, 2Q2018 revenue eased 6% compared to 1Q2018 as sales from its semiconductor segment dipped by 5% from 1Q2018.

Within the semiconductor segment, revenue from its Semiconductor Integrated Systems shrank by 40% to S$14.7 million from S$24.5 million in 2Q2017, while revenue from component sales increased by 13% to S$20.5 million in 2Q2018 vs S$18.2 million for the year-ago period.

All of the Group's geographical markets (except for Singapore and Others) registered higher sales, with Taiwan and US markets showing the highest increase. Compared to 2Q2017, Taiwan sales rose 45% - benefitting from higher component spares sales. The US market also saw its 2Q2018 revenue increase by 31% vs 2Q2017 on the back of higher component sales for new systems. However, Singapore sales decreased by 36% from the same quarter a year ago due mainly to weaker demand for Semiconductor Integrated Systems.

1H2018

Revenue for 1H2018 was lower by 14% on-year as its semiconductor sales went down 14% while revenue in Others segment declined by 46%.

Except for Singapore and Others, all of the of the Group's geographical markets clocked in improved sales. 1H2018 revenue in Singapore decreased by 30% on-year which stemmed from lower demand for the Semiconductor Integrated System. US saw its 1H2018 revenue go up by 38% vs 1H2017 mainly due to higher component sales. Taiwan revenue also went up by 31% vs 1H2017 - a result of higher demand for component spares.

Profitability

2QFY2018

Despite the lower revenue, Group net profit for 2Q2018 shot up 26% to reach $14.5 million versus S$11.5 million in 2Q2017.The Group benefitted from higher gross material margin which rose to 64% up from 51% for the corresponding quarter a year ago. This was due to a change in its product mix which included more component sales which enjoy higher margins compared to integrated systems sales. The Group's efforts to recover its component business continue to bring positive result to the Group's bottom line.

The Group also reaped savings as a result of lower upkeep of machinery expenses, legal and professional fees and rental expense. The Group also benefited from foreign exchange gain of S$1.4 million from the US currency appreciation against SGD.

The Group's income tax expense was kept steady compared to 2Q2017 despite higher profits as our Malaysia subsidiaries had benefitted from Pioneer Tax incentives in the country.

1HFY2018

The group registered net profit gains of 14% for 1H2018 compared to 1H2017. Profit attributable to shareholders for 1H2018 went up to S$25.9 million compared to S$22.7 million in 1H2017.

Gross material margins for 1H2018 rose to 61% from 51% in 1H2017. The gains were mainly due to changes in product mix with component sales reaping higher margins compared to Integrated Systems sales.

The Group benefited from exchange gains of S$0.3 million as a result of the appreciation of the US dollar.

Despite higher profit margins, the Groups enjoyed lower tax expenses due to Pioneer Tax incentives from Malaysia subsidiaries.

The Group also benefitted from further savings as other expenses, which includes upkeep of machinery and rental expenses, decreased 5%.

Cashflow

2Q2018

For 2QFY2018, it reaped S$5.0 million positive net cash from operating activities and S$3.3 million free cash flow. The lower operating cash flow is mainly due to higher raw material purchases and payout of 2017 bonuses.

The Group incurred capex of S$1.7 million during the quarter - in line with our plan to invest in new capacity to grow our business.

With the strengthening USD (against SGD) during the quarter, the Group also took the opportunity to pare down S$6.5 million of bank borrowings.

1H2018

For 1H2018The Group reaped strong net cash of S$20.2 million from operating activities and S$15.3 million free cash flow compared to S$20.8 million and S$17.1 million in 1H2017 respectively.

As of 30 June 2018, after the dividend payments of S$16.1 million and S$28.2 million investment in JEP Holdings, UMS continues to show healthy net cash and cash equivalents of S$11.6 million.

Commentary

Global billings for semiconductor equipment remain robust although the growth rate has softened. According to the latest report by SEMI, billings of North American equipment manufacturers declined for June 2018 by 8 percent from the historic high but is still 8 percent higher than billings for the same period last year.1

Leading chipmakers in Asia have also cut sales forecast to single digit growth rates in the second half of 2018 as a result of the rising trade tensions between the US and its major allies and China and slower demand for high-end smartphone sales as well as a more conservative outlook for cryptocurrency mining.2

In the mid-to-long term, prospects for the industry remain bright. SEMI, the global industry association representing the electronics manufacturing supply chain, reported in July 2018 that worldwide sales of new semiconductor manufacturing equipment are projected to increase 10.8 percent to $62.7 billion in 2018, exceeding the historic high of $56.6 billion set last year. Another record-breaking year for the equipment market is expected in 2019, with 7.7 percent forecast growth to $67.6 billion.3

In view of these trends, the Group expects to remain profitable for the full year despite softer revenue in the second half of FY2018. The Group is also optimistic of positive contributions from its acquisition of non-ferrous metal alloys specialist, Starke Singapore Pte Ltd.

Source:

1 Refer to http://www.semi.org/en/north-american-semiconductor-equipment-industry-posts-june-2018-billings - July 24, 2018

2 Refer to https://asia.nikkei.com/Business/Companies/Apple-supplier-TSMC-forecasts-mobile-revenue-drop-for-2018 - July 19, 2018

3 Refer to http://www.semi.org/en/627-billion-semiconductor-equipment-forecast-tops-previous-record-korea-top-china-closes-gap - July 9, 2018

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