Operations Review
We are delighted to report another set of record-breaking results. The Group has beaten the odds of tough operating conditions to deliver exceptional performance. We benefitted from the acceleration of global chip demand and the sustained strong growth in capex investments by global foundries. Our growth is also a testament to the Group's timely diversification and acquisition of JEP as well as the effectiveness of our team in managing production challenges brought about by tighter national COVID-19 measures imposed to safeguard public health and well-being.
The Singapore operation stepped up to overcome many challenges when our Penang operation was affected during Malaysia's Movement Control Order ("MCO"). The Group was able to tap on JEP for assistance. After JEP becoming a Group subsidiary, we intensified our integration efforts to maximize operational synergies to enhance our manufacturing resilience.
Review of Business Segments
Semiconductor
The Group's semiconductor business remains the core activity of the Group. Our main strategic thrusts were all focused on this segment which continued to enjoy good growth potential.
The semiconductor business comprises of two key segments - component parts and integrated systems.
Semiconductor revenue leapt 59% to S$242.6 million compared to S$153.0 million in FY2020, as the Group continued to benefit from the global wafer fabs' robust capex during the year. Semiconductor Integrated System revenue jumped 34% from S$77.6 million in 2020 to S$104.2 million in FY2021 while component sales clocked a record 84% surge from S$75.5 million in FY2020 to S$138.5 million in FY2021. The sharp rise in component sales is attributed to the growth of UMS' semicon component business, higher capacity utilization of the enlarged group's facilities as well as consolidation of JEP's semicon component business.
With the current ramp up in demand from semiconductor equipment makers globally, we were able to boost our capacity utilization to meet the demand of equipment makers. In order to bolster our customers' confidence in our manufacturing execution capability, we have made further investment on new production equipment and purchased the adjoining land to our Penang manufacturing hub.
The Group's new Penang factory is scheduled for completion by end 2022. This will increase current production capacity substantially and position the Group well to take on new orders from potential new customers which are expanding in Southeast Asia.
Aerospace
We have added aerospace as a new business segment to account for JEP's core business segment after we commence consolidation of JEP's financial results.
The Covid-19 pandemic severely hit the aerospace industry across the globe. JEP's aerospace segment business was not spared from this phenomenon. Business volume in 2021 remained low. Available resources were redirected towards the semiconductor segment, whilst awaiting the recovery of its core aerospace component manufacturing business.
The Group expects more noticeable recovery of the aerospace business in the second half of this year, supported by volume production of new complex and high value added parts from our strategic customers.
Others
The Group's "Others" segment comprises Starke Singapore's ("Starke") material distribution, Kalf Engineering and JEP Industrades' tooling distribution business.
Both Starke and JEP Industrades continue to grow both revenue and profits in FY2021. Requirement for raw material and tooling within the Group's component manufacturing operations created demand for their services. Both businesses also benefitted from the vibrant equipment manufacturing sector.
Kalf Engineering Pte Ltd ("Kalf"), our water and chemical engineering-solution company, managed to deliver fabricated systems of two projects, one within FY2021 and one in January 2022. After much deliberation, the Board has decided to wind down the business after completing installation and commissioning of current on-hand projects.
Financial Review
The Group achieved a record-breaking revenue of S$271.2 million and net profit attributable to shareholders of S$53.1 million during the year, despite an unprecedented global pandemic environment.
Revenue
Sales in all of the Group's core business segments grew substantially - as it logged its biggest-ever annual revenue - surpassing S$250 million for the very first time.
Group revenue soared 65% to hit another record in FY2021 - reaching S$271.2 million - driven mainly by the sustained semiconductor boom worldwide and the Group's successful integration of Catalist-listed JEP Holdings Ltd.
Compared to FY2020, semicon sales went up 59% while revenue in Others segment leapt 63%. The newly created Aerospace segment contributed about S$10 million in sales.
Semiconductor Integrated System sales grew to S$104.2 million in FY2021 - up 34% from S$77.6 million in FY2020. Component sales also shot up 84% to S$138.5 million in FY2021 from S$75.5 million in FY2020.
All of the Groups key geographical markets grew significantly in FY2021.
Malaysia and the "Others" market reported the strongest growth - clocking in triple-digit sales increases. Compared to FY2020, revenue in Malaysia grew 181% and revenue in Others markets vaulted 480% in FY2021.
Sales in Singapore, US and Taiwan rose 69%, 44% and 16% respectively.
Profitability
The Group's net profit attributable to shareholders soared 46% to an all-time high of S$53.1 million compared to S$36.5 million in FY2020. Group net profit shot up 59% to S$57.6 million while pretax profit surged 104% to S$79.4 million from S$38.9 million in FY2020.
Gross material margins in FY2021 remained stable at 52.8% compared to 53.3% in FY2020.
The significant improvement in the Group's bottom line came on the back of record sales, sustained gross material margins and other credits of S$1.2 million. The other credits include a foreign exchange gain as well as a waiver of S$3.9 million debt. The gain was partially offset by a S$2.0 million accounting loss on acquisition of JEP, following its reclassification from investment in an associate and a S$2.0 million fair value adjustment on inventories arising from the acquisition of JEP.
The record profit performance was achieved despite higher expenses. Employee costs, depreciation and other expenses went up 82%, 61% and 46% respectively.
Income tax expense also jumped 739% in FY2021 as a result of higher profits as well as higher tax provisions for the Group's Malaysian entities which did not benefit from pioneer incentives enjoyed previously.
The pioneer tax incentives for one of its Malaysian companies had expired during the year while the other Malaysian subsidiary was unable to comply with the stipulated local employee criteria (due to ongoing labour crunch in Penang) to achieve the pioneer tax incentive. The Group is currently in discussion with the Malaysian authorities regarding this matter.
The Group's earnings per share ("EPS") for FY2021 improved to 7.96 cents from 5.46 cents in FY2020.
Balance Sheet
On 21 April 2021, the Group acquired 54,229,355 shares (or 13.10%) in JEP Holdings Ltd. ("JEP") for S$10.8 million from Mr Zee Hoong Huay. Subsequently, the Group acquired 72,851,511 more shares in JEP (or 17.6%) for S$14.6 million from the open market as well as under the mandatory unconditional cash offer in accordance with Rule 14.1(b) of the Singapore Code on Take-overs and Mergers. As a result, the Group commenced the consolidation of JEP as a 71.39% owned subsidiary from 2Q 2021. Most asset and liabilities categories increased as a result of the consolidation of JEP's balance sheet.
In 4Q 2021, the Group acquired additional 2,727,300 shares in JEP from the open market and increase its ownership of JEP to 72.21%.
Cash and Bank Balances / Bank borrowings
The net decrease in cash and cash equivalents by S$7.3 million (after netting-off bank borrowings) was mainly due to acquisition of JEP partially offset by the net cash generated from operating activities, and repayment of some bank borrowings during the year.
Trade and other receivables
Trade receivables and other current assets increased by S$43.7 million. This is mainly due to the acquisition of JEP.
Inventories
The increase in inventories by S$33.2 million was mainly attributed to the acquisition of JEP.
Trade and other payables
Trade and other payables increased by S$30.7 million. This is mainly due to the acquisition of JEP and higher productions.
Non-current loan from related party
The loan from related party was waived during the financial year.
Cash Flow
The Group generated record cash from operations in FY2021.
Net cash from operating activities surpassed S$60 million for the first time to reach S$66.1 million (vs S$56.4 million in FY2020).
Free cash flow also hit a new record of S$56.2 million (vs S$45.0 million in FY2020).
Net cash and cash equivalents (net of bank borrowings) remained healthy at S$30.8 million at 31 December 2021 compared to S$38 million as at 31 December 2020.
Dividend and Bonus Issue
In view of the Group's performance and in recognition of shareholders' support, the Board has proposed a final dividend of 2.0 Singapore cents per ordinary share tax-exempt one-tier) for FY2021. This brings the total dividend proposed and declared to 5.0 Singapore cents per share which includes dividends of 1.0 Singapore cent per ordinary share already paid out in each preceding quarters from 1Q2021, 2Q2021 and 3Q2021. This is 43% higher than the 3.5 Singapore cents per ordinary share for FY2020.
On top of the dividends, the Group had allotted and issued Bonus Shares in November 2021 on the basis of ONE (1) bonus share for every FOUR (4) existing ordinary shares. This epitomizes the strong fundamentals of UMS' business model as well as the management's commitment to reward the shareholders for their continuous support.
Investor Relations and Market Cap Increase
UMS's management places great importance on building good relationships with our local and overseas investors, analysts and media, and keeping them updated on our business strategies, financial performance and operations. Official announcements and press releases are filed on the Singapore Exchange (SGX), and updated on our website.
Despite the Covid pandemic, we continue to actively engage the investing community via virtual group meetings with local and international analysts and fund managers to keep them abreast of our financial performance and business operations.
The market capitalization of the Group exceeded S$1 billion for the very first time on several market days during the year.