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 2008.
The Gloom of Economic Recession
The severe downturn of manufacturing activities beginning in the middle of 2008 has resulted in substantially lower demand for Kinergy's services and products. Among the worst performing global industries are the electronic semiconductor, in which Kinergy is a very active participant, and automotive. Other less cyclical industries, such as medical and test measurement, are also affected though not at the same degree of severity. The downturn in these industries has conspired to create a net loss for Kinergy for the year.
Financial & Operational Performance
For the year under review, Kinergy saw its sales turnover decrease by 42.9% from $103 million in 2007 to $58.9 million in 2008. Revenue for the EMS Division fell by 49.5% and OEM Division by 12.8% respectively from FY2007.
While total operating expenses decreased by 3.6% from FY2007 - the decrease was insufficient to cover the shortfall in revenue. As a result, after 5 years of continuous profitable performance, the Board is reporting a loss of $5.8 million.
As at the end of FY2008, working capital remained healthy at $16.3 million (FY2007: $23.8 million) and working capital ratio has improved to 1.9 times (FY2007: 1.8 times).
Equity balance or shareholders' fund has decreased to $30.2 million (FY2007: $36.2 million) as a result of the loss incurred for the year, and the dividend paid out during the year.
Dividends
The Group paid a final dividend of 1 cent per ordinary share (tax exempt one-tier) on 21 May 2008. The Board is not proposing that any dividend be paid for the year under review.
Prospect for FY2009
The world economic recession is expected to continue for the next 12 months. Although demand from most of our major customers has decreased, Kinergy has recently been appointed as the sole contract manufacturer, to build complete machines, by several companies in the United States. This would suggest there is growing trend from some U.S. companies to speed up programs to outsource to Asia to remain cost competitive. The Board is hopeful that many more such new customers from non-semiconductor sectors will be secured. These new customers, together with expected gradual pick-up of business from our existing customers at the last quarter of this year, may contribute to a less bleak economic outlook for the year.
The Company has restructured itself for greater efficiency in preparation for any economic pick-up in 2010. As such it has taken all necessary and difficult measures to cut down any excess manpower, routine expenses, and capital expenditure.
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 so during this difficult period.
We would also like to thank our Group management and staff for their contributions and dedication in riding out 2008 and 2009, and working together with the Board to survive the current economic storm.
We look forward to everyone's continued support for a bright future.
Bradley Fraser Kerr
Chairman
Leslie Lim Kuak Choi
CEO
