On behalf of the Board of Directors, I am pleased to present the annual report for the financial year ended 31 December 2012 (FY2012).
In FY2012, the Group continued to benefit from its comprehensive product lines, extensive distribution network, diversified customer base and a strong management team delivering a 7% growth in revenue. This is despite operating under a volatile operating environment with uncertainties over the growth pace of the major economies and the Eurozone debt crisis. Profitability however declined as the Group faced increased cost of businesses in most of the countries it operates in.
For FY2012, Serial System posted a turnover of $825.4 million and net profit of $9.2 million when compared to turnover and net profit of $770.3 million and $12.9 million respectively for the financial year ended 31 December 2011 (FY2011). For FY2012, net cash of $42.6 million was generated from operating activities as compared to a cash outflow of $20.6 million in FY2011. Positive cash flow from operations and better inventory management with the Group's suppliers and customers contributed to the significant improvement. The Group's cash and cash equivalents as at 31 December 2012 was $45.4 million and bank borrowings reduced to $114.7 million from $127.3 million as at 31 December 2011. Net gearing ratio reduced to 0.54 times from 0.71 times as at 31 December 2011.
Based on the issued share capital as at the end of 2012, net assets backing per ordinary share as at 31 December 2012 were 14.44 cents as compared with 14.31 cents the previous year. On a fully diluted basis, net earnings per ordinary share were 1.02 cents as compared to 1.53 cents the previous year.
North Asia (comprising Greater China, South Korea and Taiwan) continued to be the Group's significant revenue contributor, accounting for 81% of the Group's total sales for FY2012 with Greater China covering 56%, South Korea covering 18% and Taiwan covering 7%. North Asia posted a 4% increase in revenue when compared to FY2011 mainly due to growth of newer product lines and addition of new customers.
Serial Microelectronics (HK) Limited, a 91% Hong Kong subsidiary and its wholly owned subsidiary, Serial Microelectronics (Shenzhen) Co., Ltd (SMHK Group) improved its revenue by 7% due to higher contribution from newer product lines and increased sales to its home appliances and telecommunication customers. Greater China will remain a key market and focus of the Group and currently, the Group has an extensive distribution network of 24 offices in key cities of China.
Serial Microelectronics Korea Co., Limited (SMKR), a 98.2% South Korean subsidiary and, its wholly owned subsidiary, Taein System Inc. and 74.02% subsidiary, Bona Technology Inc. posted a 17% increase in revenue due to higher contribution from newer product lines. If we were to include the revenue contribution from a 83% subsidiary, Unitron Tech Co., Ltd which the Group disposed of 68% in April 2011, the South Korean market would have declined by 9% when compared with FY2011.
Serial Microelectronics Inc. (SMTW), a 94.3% Taiwan subsidiary and its wholly owned subsidiaries, TeamPal Enterprise Corp. and Bridge Electronics (Shenzhen) Co., Ltd posted a 19% jump in revenue due to strong demand from two of its newer product lines and increase in new customer base. The Group increased its interest in SMTW from 82.5% to 94.3% as at the end of 31 December 2012 via a subscription of an additional 3,960,000 new SMTW shares at NT$15 ($0.65) each for a total cash consideration of NT$59.4 million ($2.56 million). Taiwan continues to be the Group's important market due to its large market share of the electronic and semiconductor industry in Asia. SMTW currently operates 3 offices in Taiwan.