Bradley Fraser Kerr / Chairman Leslie Lim Kuak Choi / CEO
DEAR SHAREHOLDERS
On behalf of the Board of Directors, we present the Annual Report and Financial Statements of the Group for the financial year ended 31 December 2009.
The Long Shadow of Economic Recession
The effect of the economic recession and financial crisis continued to be felt strongly in the first half of 2009 - when sales and production volume decreased significantly. Given the conditions at the beginning of the year, the management of Kinergy implemented certain austerity measures designed to preserve the Group's viability and to reduce losses. These measures included the lay off of excess and unproductive workers, pay cuts, shorter working week, no encashment of overtime, sending staff for SPUR (Skills Programme for Upgrading & Resilience) training sponsored by the Singapore Government, and implementing tight budgetary control over operating expenses. To ensure the Group's liquidity, management also tapped into a $5 million bridging loan from Spring Singapore - repayable over a 4-year period.
Financial & Operational Performance
The Group saw a rebound in demand in the 2H2009. Sales generated in the second half of 2009 was $46.9 million - a 302% increase from 1st Half. For the year ended 31 December 2009, total Group sales revenue increased by $3.6 million (6.1%) to $62.4 million, as compared to the corresponding period in 2008. Revenue for the EMS business division increased by $11.1 million (26.0%); while the OEM business division revenue decreased by $7.5 million (46.5%). The Group is pleased to report a substantial increase in sales revenue of $15.4 million (58.3%) from its principal customer, in FY2009 as compared to the corresponding period in FY2008. In terms of product mix, the EMS business division accounted for approximately 86.1% of the Group's total turnover (FY2008: 72.5%).
The austerity measures and tight budgetary controls implemented in 2009 have enabled the Group to reduce its manufacturing, marketing & administrative expenses by $3.4 million (13.8%) from the previous year. These savings - including Job Credit funding of $419,000 from the Singapore Government - have enabled the Group to report a lower loss after tax of $3.1 million (FY2008: 5.8 million) - an improvement of 47.5% over the prior year.
At the end of FY2009, net current assets remained at $16.3 million (FY2008: $16.3 million); as an increase in current assets was offset by a corresponding increase in current liabilities. Due to the loss incurred for the year ended 31 December 2009, our shareholders' equity balance has decreased to $26.9 million (FY2008: $30.2 million). Net asset value per ordinary share has also declined in value to 21 cents as compared to 24 cents in FY2008. There is no change in the share capital of the Company and the total number of ordinary shares as at end of FY2009 remained unchanged from last year at 128,040,000. The Company also does not hold any treasury shares.
Dividends
The Board is not proposing any dividend to be paid out.
Prospect for FY2010
Despite the strong orders received at the beginning of the year, the business outlook for 2010 remains unclear. The market consensus is that customer confidence has returned in general. This, coupled with worldwide low inventory levels, has fuelled the surge for customer orders for the Group.
However, the continued growth for the year may be dampened by 2 basic economic issues :-
- the unemployment rate in US, Europe and Japan continue to be over 9% with no improvements expected in the next 12 months. This phenomenon will put a restraint on consumer spending; and,
- the uncertain fiscal health of European countries such as Spain, Italy, Ireland, Portugal and especially Greece.
Acknowledgment
Our heartfelt thanks go to all our customers, business associates, valued suppliers and shareholders for their support. We would like to express our sincere appreciation to our fellow Board Directors for their invaluable contribution, counsel and guidance - especially during this difficult period.
We would also like to thank our Group management and staff for their invaluable contributions and dedication during these challenging times.
We look forward to everyone's continued support for a brighter future.
Bradley Fraser Kerr
Chairman
Leslie Lim Kuak Choi
CEO
