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Review of Performance
Review for the Quarter ended 31 March 2018 (Q1'18)
The Group's revenue for the January-to-March 2018 quarter (“Q1'18”) decreased S$3.5 million or 6.8% to S$47.6 million from S$51.1 million in Q1'17. However in term of sales in HK$, the Group revenue increased from HK$279.9 million to HK$282.6 million. This is due to the weakening of the HK$/S$ in Q1'18 at 5.936 compared to 5.477 in Q1'17.
In term of HK$, the slightly higher revenue was mainly due to:
InnoTek Group was profitable in Q1'18 with a profit of S$0.1 million, a decrease of S$2.4 million compared to the profit of S$2.5 million in Q1'17 was due mainly to:
Although international trade has been affected by global economic and political developments, China is enjoying economic stability on the domestic front. Products and industries that serve the demands of daily life such as the automotive sector are expected to maintain moderate growth.
The Group's operations have been affected by unstable raw material prices, rising labour costs and tougher competition.
The Group's TV segment maintained stable order volume this quarter. This was largely attributable to strong sales in overseas markets, as well as high demand for existing products such as TV bezels and heat sinks. The Group believes that there is demand for large, high-definition (HD) TVs in domestic and overseas markets. It will introduce measures such as automation to improve manufacturing efficiency and boost the quality of new products, which will need to be of even better quality going forward in order to support higher-resolution content.
Several of the Group's Japanese customers in the Office Automation (“OA”) business are shifting production from China to Southeast Asia, a transition which is expected to conclude in the next two years. At the same time, these customers have introduced tighter requirements for Chinese suppliers and now work almost exclusively with selected elite suppliers. Nevertheless, the Group's OA sales held steady due to stable orders and partial transfer orders from other suppliers. The Group will continue to grow its OA market share by transforming from a single-component supplier to an assembly supplier.
The Group's subsidiaries in Thailand and Weihai, China – Mansfield (Thailand) Co., Ltd. (“Mansfield Thailand”) and Mansfield Technology (Weihai) Co., Ltd. (“Mansfield Weihai”) – are still in development. As such, their performance is not yet reflected in this quarter's results. Mansfield Thailand's plant is on track for its scheduled completion in mid-May 2018 and is slated to begin production in 2H'18. Mansfield Weihai recently secured factory certification to support our customer printer-related activities in China and will commence production in 2H'18.
The Group is confident of its prospects in the automotive business. Although the switch between new and old programmes will impact its performance in the short term, it is actively engaging with existing customers to acquire new orders. The Group is targeting strategic cooperation with global Tier 1 suppliers, and has made some headway on this in Q1'18. In addition to basic interior parts, it will continue to produce functional and safety parts to enhance its suite of offerings.
The Group remains cautious about its outlook for FY2018. It will implement process reforms and product innovation this year as well as promote manufacturing automation and employee incentives (on a contract or individual component basis) to improve its productivity and competitiveness. At the same time, it will seek to strengthen relationships with existing clients and pursue customer acquisitions in order to develop its capabilities in a sustainable manner.