QUESTION & ANSWER
WITH THE CEO
Q1:
Avi-Tech has managed to turn around its performance
in FY15 registering net profit of S$6.6 million. Is this
performance sustainable?
A:
We are confident that the Group is on the right path to
sustainable and quality growth. There are indications that
our Burn-In Services business segment will contribute to
further growth, given the rebound in the semiconductor
industry and the potential upside presented by the buoyant
automotive sector with its increasing use of electronics.
With other opportunities presented in growth sectors
such as consumer wearables and info-communications
technology, our Burn-In Services and Burn-In Boards and
Board Manufacturing business segments will look for
ways to increase their value-add and relevance to these
sectors. Our competencies and knowledge gained from
our foray into the imaging equipment and energy efficient
products industries has garnered new customers for our
Engineering Services business segment which is now
exploring opportunities in other fields and geographical
markets.
Q2:
What is the Group’s overall strategy for sustainable
long-term growth?
A:
We will leverage on our core competencies to find new
revenue streams and expand our customer base for all
our business segments by increasing our capabilities
and service offerings. Additionally, we plan to seek new
opportunities through mergers and acquisitions or any
other structured transactions or business which will add
value to the Group and benefit shareholders. We will
proceed cautiously in this respect, with a preference for
new businesses that will integrate well into our existing
Group structure. We will continue to pursue excellence in
all areas of our operations by maintaining stringent cost
control measures, raising productivity and maintaining a
robust financial position so as to be able to support any
potential initiatives for growth.
Q3:
What is your strategy for getting out of SGX’s watch-
list?
A:
We will continue to drive our core business and leverage
on our capabilities to expand our customer base and
increase revenues. At the same time, we will explore new
growth opportunities which could be an extension of
our capabilities, mergers and acquisitions, or any other
structured transactions or business which will bring value
to our Group.
Q4:
How long do you think it will take the Group to be
taken off SGX’s watchlist?
A:
We have to fulfil the two requirements under Rule 1314 (1)
of the listing manual of the SGX-ST to apply to be taken off
SGX’s watchlist. The Group has to record a “consolidated
pre-tax profit for the most recently completed financial
year (based on the latest full year consolidated audited
accounts, excluding exceptional or non-recurring income
and extraordinary items)” and have “an average daily
market capitalisation of $40 million or more over the last
120 market days on which trading was not suspended
or halted.” We cannot put a definitive timeframe on this
although we are working hard towards this goal.
Q5:
How do you intend to increase your share price to
meet this market capitalisation requirement?
A:
There are many factors that contribute to a stock’s
performance, some of which are due to macroeconomic
factors which are beyond our control. We believe that we
are a fundamentally strong company with good prospects.
We have a sound strategy for moving forward into our next
growth phase and we are positive about the long-term
prospects of our company which should be reflected in our
share price. Additionally, we will further explore the option
of share buybacks. Share purchases may be considered
a means by which the Return on Equity of the company
may be enhanced. It will provide the Board with greater
flexibility in managing capital and maximising shareholder
returns, enabling the return of excess cash and surplus
funds to shareholders in an expedient and cost-efficient
manner. The Board will,
inter alia
, weigh all competing
needs for the use of cash such as payment of dividends,
operational requirements and expansion plans as against
the use of cash for share buybacks.
Q6:
What has happened to the assets of theUS subsidiaries?
A:
We had started the process of winding down the operations
of the two subsidiaries during the last quarter of FY14. The
liquidation of one of the subsidiaries, Aplegen, Inc. was
completed in 4Q15. The liquidation of the other subsidiary,
Verde Designs, Inc. is expected to be completed within the
first quarter of FY16. The assets had been classified as a
disposal group held for sale and/or distribution and are
separately presented in the statement of financial position.
We do not expect any significant impact on the overall
profit and loss of the Group for the winding down process
by Verde Designs, Inc..
Q7:
Given your recent unsuccessful venture into the US,
will you still continue to look for acquisitions of new
business going forward as a strategy for growth?
A:
We are always on the lookout for such opportunities. The
strategy to find new avenues of growth, given the limited
upside to our existing businesses, is a sound one. Although
our ventures in the US did not work out due to several
factors, the knowledge we have gained from our foray into
the life sciences and medical imaging industries serve us
well. They have increased our range of engineering and
manufacturing capabilities which has turned into added
sources of revenue. Going forward, we will, nonetheless,
streamline our search for potential business opportunities
to those which will integrate and synergise with our existing
core businesses and our Group structure, while remaining
open to new business opportunities which will benefit the
shareholders.
Q8:
The Board has recommended a final dividend and
special dividend given the Group’s performance. Is this
your dividend policy going forward?
A:
We have always sought to maximise value and returns
for all shareholders. As such, the Company has over the
years since its listing, declared dividends whenever it was
feasible and this philosophy will continue while taking into
consideration factors such as its cash balance and retained
earnings, forecasted working capital requirements,
expected capital expenditure and future investment
needs. The payment of the special dividend this year was
exceptional, in recognition of the Group’s performance
and to show our appreciation to our shareholders for their
belief in and loyalty to the Group during the difficult years
from FY12-FY14.
07
AVI-TECH ELECTRONICS LIMITED
| ANNUAL REPORT 2015
