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Review of Performance
Review for the Second Half year ended 31 December 2020 (2H'20)
Turnover (2H'20 vs 2H'19)
The Group's revenue for the July-to-December 2020 half year ("2H'20") increased S$6.1 million or 6.3% to S$103.5 million from S$97.4 million in 2H'19. The higher revenue was mainly due to:
Net Profit ((2H'20 vs 2H'19))
The Group 2H'20 profit was S$10.1 million, an increase of S$1.2 million compared to 2H'19 mainly due to:
Offset by favourable variance
Review for 12 months ended 31 December 2020 (12M'20)
Turnover (12M'20 vs 12M'19)
The Group's revenue for the January-to-December 2020 period ("12M'20") decreased slightly by S$3.5 million or 1.9% to S$183.2 million from S$186.7 million in 12M'19, mainly due to the reduction of revenue of OA products, offset by the increase in revenue for TV and display and Auto products.
In line with the recovery of the Chinese auto industry post COVID-19 pandemic, demand for auto products increased in 2H'20 compared to 1H'20. However, demand for OA products remains weak despite higher revenue in 2H'20 compared to 1H'20. Demand for TV and display products continued to be strong in 2H'20, as earlier explained in in section (A) above. As a result, net overall FY20 revenue for the three businesses was slightly lower compared to FY19.
Net Profit (12M'20 vs 12M'19)
The InnoTek Group recorded a profit of S$13.9 million for 12M'20, lower by S$2.8 million from the profit of S$16.7 million in 12M'19, due mainly to:
Offset by favourable variance
The COVID-19 outbreak at the beginning of 2020 had impacted the Group's 1H'20 financial performance. For 2H'20, the Group's end customers in Europe, United States and Japan were still affected by COVID-19. However, due to the recovery of China's auto market and increase in demand for TV/Display products which was lifted by stay-at-home restrictions amid the pandemic. Together with team efforts of the Group's employees to overcome difficulties, the Group's 2H'20 performance has improved compared to 1H'20.
China's economy is expected to continue to recover in 2021 in line with its ability to control COVID-19. However countries outside China have not effectively controlled the pandemic to date. Hence, the global economy is expected to continue to be unfavourable in 2021, affecting the global supply chain. Due to ongoing supply chain issues, the Group expects prices for raw materials to rise, while delays or disruptions in import and export are expected to translate into higher logistics-related costs.
Despite the decrease in demand for OA products in 2020, the Group looks forward to market recovery in 2021, and will remain committed to improving Quality, Cost, Delivery and Services ("QCDS") to ensure continual trust from customers. We will also seek to move up the value chain from single-part manufacturing to offer parts assembly.
The Group expects its Auto segment – the main revenue contributor - to continue growing in view of domestic demand in the world's largest car market. This sector is undergoing major changes which include a shift towards electric vehicles, increased digitalization and charging stations. The China Automobile Manufacturers Association has forecast that China's car sales are expected to increase by up to 4% year-on-year to exceed 26 million units in 2021. In particular, 1.8 million new energy vehicles, representing a 40% increase y-o-y, are expected to be added to the market this year. The Group will intensify focus on the Auto business in 2021. We will continue to find new customers while deepening our relationships with current ones as they adapt to the changing operating environment.
For the TV/Display products business, the Group expects the demand in 2020 brought about by stay-at-home restrictions amid the pandemic to weaken in 2021. It will continue to work closely with customers to support their TV bezel requirements and will actively serve and develop new customers, domestically and globally.
Our Thailand factory commenced commercial production in 2020 but production volume has been affected by decrease in global demand for OA products due to the pandemic. Besides OA, it also plans to develop and support automotive customers in Thailand.
Anticipating volatility in the coming months, the Group will continue to implement cost control measures and invest in production automation to remain competitive in the face of rising operational costs in China. As domestic competition remains intense, the Group continues to improve quality, service excellence while striving to move up the value chain. The Group is also looking to expand its customer base, both domestically and overseas, and to diversify its range of products.