CEO Message
Dear Valued Shareholders,
Over the past years, we have updated shareholders on our continued efforts to improve internal efficiencies. Initiatives such as quality and cost control by reducing scrap rates, constant shopfloor improvements and automation have helped to contribute to our eighth consecutive year of profitability. I must place on record here the hard work and dedication of the management and staff for this achievement.
For this year’s report, I am outlining some of the expansion strategies to provide a perspective on what we have tried to achieve in the past few years and what lies ahead.
InnoTek’s journey over the last several years has been to build upon internal efficiencies while pursuing strategic expansion.
GEOGRAPHICAL
As shareholders are aware, the Mansfield division which carries out metal stamping activities has had a long history of operations in China. We currently operate in Wuhan, Suzhou, Chuzhou and Dongguan. Much has been written about the slowdown in the domestic economy, rising costs as well as geopolitical factors. That said, even though we have now established facilities in Southeast Asia, our core operations will remain in China for the foreseeable future.
We first began broadening our geographical footprint with the establishment of our facility in Rayong, Thailand, in June 2018. Mansfield Thailand Co. Ltd. has started accepting new OA orders and will be commencing the next level of mass production.
It is noteworthy that our decision to expand to Thailand pre-dated the pandemic and the U.S.-China tensions. The expansion was in fact, a response to an ongoing trend of manufacturers relocating their operations out of China as a result of cost and other strategic reasons.
As we emerged from the pandemic, we also had to account for geopolitical factors that have prompted the “China+1” strategy. Accordingly, we acquired a 70%-stake in a subsidiary in Bac Giang, Vietnam, in February 2023, which provides stamping and sheet metal processing for OA, financial equipment and EV charging station components.
This subsidiary is our latest addition to our manufacturing footprint, following the establishment of Mansfield Vietnam Co. Ltd. (“Mansfield Vietnam”) in August 2021. Located in the Bac Ninh Province, Mansfield Vietnam has commenced mass production of TV bezels in the second half of FY’23, and we expect production activities to gain further momentum in FY’24.
We now have a fairly stable manufacturing footprint which will allow us to maintain competitiveness amidst the challenges in the operating environment. As business volume for our Southeast Asian units grows, we will also introduce more mature processes, such as automation, to our operations. Having a physical presence in these two new locations in Vietnam also opens up opportunities for us to build new capabilities and attract new customers, which we look forward to.
PRODUCT EXPANSIONBeyond geographical expansion, our subsidiary in Bac Giang is significant as we have now expanded our product range to include sheet metal processing.
In the last two years, we have also diversified our customer base from the traditional segments of TV/Display, Auto, and OA. I am particularly excited about our new business traction in the emerging industries of GPU servers for AI, gaming machines, medical equipment, and financial equipment. Indeed, I am pleased to share that the fruits of our labour have begun to materialise, gaining momentum after the pandemic.
In particular, our foray into the GPU server market, offers significant potential. Global demand for advanced GPU servers has risen exponentially alongside the rise of generative AI. Indeed, while this trend is still in the early days, its potential impact on almost every sector of modern industry appears to be profound.
We will continue to build upon the early successes of these new field businesses which we believe can offer margins, while propelling us to move up the value chain.
FINANCIAL REVIEWRevenue for FY’23 grew to S$205.6 million, 10.1% higher compared to S$186.8 million a year ago. The increase was driven by improved performance in the Auto segment, as well as higher contributions from new-field segments, partially offset by lower turnover from the OA and TV/Display segments.
The Auto segment gained momentum during FY’23, driven by demand in China for EVs and a recovery in international markets. This has translated into higher sales of tooling and EV battery components.
In contrast, demand for the OA segment was softer due to the trend of companies shifting their manufacturing operations from China to Southeast Asia. In response, the Group has been proactively engaging key customers to secure new projects and higher-volume orders. Meanwhile, our TV/Display segment recorded lower turnover due to customers’ overhang of inventory left over from the pandemic.
Scrap and rework rates have continued to decrease, reflecting our efforts to optimise operational efficiency through diligent cost control and quality management. Additionally, we recorded lower costs of raw materials which contributed to margin improvements.
These efforts lifted gross profit to S$33.0 million in FY’23 compared to S$27.2 million a year ago. The 21.2% increase outstrips the revenue growth rate of the comparative periods. Gross profit margin improved to 16.0% in FY’23 from 14.6% in the previous year.
Net profit for FY’23 increased 93.3% to S$4.4 million (FY’22: S$2.3 million), which includes a S$1.4 million impairment loss for one of our subsidiaries in China. Without this non-cash, non-recurring impairment, our net profit for FY’23 would have been higher at S$5.8 million.
Earnings per share grew to 2.01 Singapore cents in FY’23, compared to 0.98 Singapore cent in FY’22, while net asset value per share stood at 74.9 Singapore cents as at 31 December 2023, compared to 76.4 Singapore cents a year ago. We continue to maintain a robust balance sheet, with a net cash balance of S$50.2 million as at the end of FY’23.
GROUP STRATEGY IN PERSPECTIVE Outlook
Having laid the groundwork for long-term growth, we are optimistic about the future of InnoTek. Our diversification efforts have already started to bear fruit, with new revenue streams and long-term partnerships. Our strong balance sheet also gives us the flexibility to invest in growth opportunities, while managing the uncertainties in the operating environment. Barring unforeseen circumstances, FY’24 will be a better year.
We look forward to manufacturing demand recovering on the back of economic growth and will continue to improve our operations and expand our service offerings while ensuring costs remain competitive. Lastly, we continue to relentlessly improve QCDS – quality, cost, delivery and service – to sharpen our competitiveness and deliver added value to our customers and stakeholders.
APPRECIATIONMr. Steven Chong and Mr. Sunny Wong, who have been our Independent Directors since September 2012 and November 2014, respectively, will be stepping down from their roles at the upcoming AGM. I would like to thank Mr. Steven Chong and Mr. Sunny Wong for their invaluable guidance during their time on the Board. InnoTek would not be where we are today without their support.
I would also like to express my appreciation to our customers, business associates, and suppliers for their contributions; we are thankful for the opportunity to serve you and will continue to innovate and exceed your expectations. I would also like to thank the InnoTek staff for their hard work and commitment to excellence.
Last but not least, thank you, our shareholders for your belief in our vision. We will continue to forge ahead and seize the opportunities that lie ahead.
Mr. Lou Yiliang
CEO, Executive and Non-Independent Director
