UMS Holdings Limited

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Extracted from Annual Report 2015

“The Group's FY2015 revenue edged up marginally to S$111.1 million compared to S$109.8 million in FY2014. However, despite the stable revenue, the Group is pleased to report that it has achieved a record-breaking net profit of S$34.3 million during the year, marking a 38% increase from S$24.9 million recorded in the previous year. This makes FY2015 the most profitable year in UMS' history.„

Chairman and CEO Statement

Dear Shareholders,

FY2015 has been a very rewarding year for UMS. While the general business environment continued to be plagued by global uncertainties, UMS' business remained stable. The Group's FY2015 revenue edged up marginally to S$111.1 million compared to S$109.8 million in FY2014. However, despite the stable revenue, the Group is pleased to report that it has achieved a record-breaking net profit of S$34.3 million during the year, marking a 38% increase from S$24.9 million recorded in the previous year. This makes FY2015 the most profitable year in UMS' history. This was attributable to favourable business conditions such as the strengthening of US dollar, lower raw material costs, the continuous practice of cost control and a better mix of products sold.

In view of the Group's excellent financial performance, the Board of Directors (the "Directors") is pleased to recommend and propose a final dividend of TWO (2.0) Singapore cents and a special dividend of ONE (1.0) Singapore cent. Subject to the approval of the shareholders, this will bring the total dividends declared and proposed for FY2015 to SIX (6.0) Singapore cents.

Business Performance

The global semiconductor equipment industry remained stable in FY2015. UMS experienced a pickup in orders during 1Q2015 following a weaker 4Q2014. Subsequently, the Group experienced two consecutive strong quarters in 2Q2015 and 3Q2015 that bolstered its revenue for the entire year.

In terms of segmental revenue contribution, UMS' component sales for FY2015 was strong, outperforming that of integrated system sales. The consumables segment of its component business provided the Group with a recurring income, thereby giving some stability to its revenue stream.

As stated earlier, the Group's net profit after tax performed tremendously well, rising to a record breaking S$34.3 million in FY2015. The Group's gross material margin grew 6 percentage points to 60% compared to 54% a year ago. The appreciation of US dollar boosted the Group's revenue while the weakened Malaysian Ringgit reduced the Group's operational costs. Furthermore, lower raw material costs due to the weakening global economy also contributed to the Group's margin growth.

The Group has always held a tight rein over its costs, as the management is committed to continuously improve the bottom line and maximize value for its shareholders. Towards the end of the year, the Group completed the planned transfer of a substantial amount of production activities to its Penang plant and vacated most of its leased space in 25 Changi North Rise, Changi North Industrial Estate. This allowed the Group to achieve cost savings in terms of lower energy costs and rental expenses.

Strong Cash Flow Generation

The Group's strong cash generation ability has always been one of its greatest strength and FY2015 was no exception. UMS generated operating cash flow of S$35.8 million and free cash flow of S$31.3 million in FY2015 compared to S$35.6 million and S$28.9 million in FY2014 respectively. As such, the Group ended the year with a record net cash and cash equivalent of S$38.9 million even as it paid out S$25.7 million dividends in FY2015.

Strategic Diversification

Over the years, UMS has always explored opportunities to diversify its business portfolio to reduce the dependency on its semiconductor segment. In January 2016, the Group signed a definitive agreement with All Star Fortress Sdn Bhd to invest in the company which will allow it to make inroads into the Malaysian and regional aerospace manufacturing industry.

With the increasing trend of international aerospace players outsourcing more work as well as the Malaysian Government's efforts to further develop the local aerospace manufacturing industry, the Group expects this new venture to put it in a good position to capture these strong growth potentials.

Moving forward, The Group will continue to seek opportunities with good long term growth potential and where it can leverage on its financial and operational strength.

Outlook

The lower business activities from the last quarter of FY2015 are expected to follow into FY2016. While business activities in the first half of FY2016 are expected to be subdued, UMS remains positive about the outlook for FY2016 and the profitability of the Group over the longer term.

SEMI, a leading global semiconductor trade association, had expected global semiconductor equipment sales to grow, albeit nominally at 1.4% in 20161.

Appreciation

On behalf of the Board, we would like to express our heartfelt appreciation to all our stakeholders, which include our shareholders, customers, business associates and partners, for their continuous support of UMS.

In addition, we would also want to single out our employees and express our special appreciation for their commitment, dedication and hard work. Without them, the UMS can never be what it is today.

Last but not least, we would like to thank our fellow Board members for their invaluable advice and guidance over the years.

A Special Note of Thanks from the CEO

On behalf of the Board, I would like to take this opportunity to thank Mr Soh Gim Teik who will be stepping down after the forthcoming Annual General Meeting for his invaluable contributions and guidance to the Board and wish him well for his future endeavours.

Soh Gim Teik

Chairman
UMS Holdings Limited

Luong Andy

Chief Executive Officer
UMS Holdings Limited
   
1 Refer to http://www.semi.org/en/node/60181