Group Performance

On behalf of the Board of Directors, I am pleased to present the annual report for the financial year ended 31 December 2009 (FY2009).

Despite the challenging and difficult operating and financial market conditions, I am glad to report another year of improving revenue figure and strong profitability growth.

Amidst a global financial and economic crisis, Serial System posted a strong FY2009 result with turnover of about $556.5 million and net profit of about $7.5 million. Turnover and net profit increased by about $46.0 million and $1.5 million or 9% and 24% respectively when compared to the financial year ended 31 December 2008 (FY2008).

For FY2009, net cash of $3.2 million was used in operating activities as compared to cash of $16.8 million generated from operating activities in FY2008. The negative cash flow from operating activities was mainly due to higher working capital requirements to finance increased volume of businesses for the semiconductors/components distribution business. The Group’s cash and cash equivalents as at 31 December 2009 was about $20.7 million and bank borrowings increased to about $46.4 million from about $30.4 million as at 31 December 2008. Net gearing ratio remained at a healthy level of 0.27 times as at 31 December 2009.

Based on the issued share capital as at the end of 2009, net assets backing per ordinary share as at 31 December 2009 was 12.92 cents as compared with 13.42 cents the previous year. On a fully diluted basis, net earnings per ordinary share grew 11% on a year-on-year basis from 1.0 cent to 1.11 cents.


Semiconductors/Components Distribution

Semiconductors/components distribution remains the Group’s core business.

The Group’s semiconductor/components distribution business recorded a commendable increase of 9% in revenue to $556.5 million due to strong demand for electronic products in the second half of FY2009 in majority of the Asian markets it operates. Turnover for second half of FY2009 was $327.5 million, 30% and 43% higher than that achieved for second half of FY2008 and first half of FY2009 respectively.

North Asia (comprising Greater China, South Korea and Taiwan) continued to be the Group’s significant revenue contributor, accounting for 89% of the Group’s total sales for FY2009 with Greater China covering 57%. North Asia posted a 14% increase in revenue mainly due to strong domestic demand of the China market and contribution by new customers and higher sales to certain existing customers of the Korean subsidiaries.

South and South East Asia posted a 21% decline in revenue, mainly due to its heavy reliance on export to United States of America and Europe where demand for electronic products were most affected by the financial and economic crisis. There were however encouraging signs that these markets are stabilizing and recovering as revenue improved by 27% in the second half of FY2009 when compared to first half of the year.

Net profit after tax improved from $6.6 million in FY2008 to S$7.1 million due to higher gross profit dollar from higher revenue and the Group’s continued focus on cost efficiency. Gross profit margin however declined from 9.1% in FY2008 to 8.7% as a result of the continued highly competitive nature of the electronic industry coupled with the negative effects of the financial and economic crisis. The declining gross profit margin was negated by the Group’s continued focus on cost efficiency with total expenses as a percentage of revenue declining from 8.5% in FY2008 to 8.0% in FY2009. The semiconductors/components distribution business performed well in the second half of FY2009 registering a net profit after tax of $5.8 million, buoyant by strong sales achieved. This was an increase of 66% and 346% when compared to net profit after tax of $3.5 million and $1.3 million for the second half of FY2008 and first half of FY2009 respectively.

Serial Microelectronics Pte Ltd (SMPL), a wholly owned subsidiary posted a 10% increase in turnover to $149.6 million. The increase was mainly attributable to a strong 52% growth in the transferred businesses from its South Korean entities due to sales contributed by new customers and higher orders by certain existing customers. South and South East Asia however suffered a 21% decline in turnover due to lower sales in export-oriented countries like Singapore, Thailand and Malaysia. SMPL recorded a lower net profit attributable to shareholders of $2.7 million as compared to a profit of $3.0 million in FY2008 due to lower profit achieved by its South and South East Asia division. SMPL continued to expand its presence in India with plan to open two more offices, bringing total offices in India to seven. Turnover in India improved by 12% to about $8.0 million when compared to FY2008.

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