Operations Review
The Group's results are driven primarily by semiconductor capital equipment spending and related services to support key technology transitions or to increase production volume to meet worldwide demand for semiconductors.
The semiconductor equipment sector has been showing tepid growth in recent years. The overhang from the U.S.-China trade war has also created constraints for our key customer's ability to ship its products to China. This has affected the Group's semiconductor business which recorded a lower revenue of S$204.6 million, as compared to S$260.0 million in FY2023.
The Group's strategy has always been to widen its customer base and seek opportunities to diversify its business portfolio. The lower off take by our key customer in 2024 underscores the importance of achieving this strategic goal.
Our diversification efforts have yielded good results. The Group's new 300,000 square feet production facility at Penang Science Park North has commenced volume production for its new customer and expects significant improvement in delivery, supported by strong order flow as production ramps up. The Group is also working on several NPIs (new product introductions) from its new customers as new product families are forecast to rise in the coming months.
Built at a cost of about RM250 million, the new plant is focused on medium and large format products, special processes and modular assembly of products for its new customer. Our strategic focus is on critical products which are difficult to fabricate, requires very high precision and quality standards, i.e. very high barrier of entry to lower competition.
To be successful, we need to overcome challenges in manpower. Our Malaysia operation faces severe talent shortage as there are many investments in Penang competing for talent. We are now working on strategies to improve staff retention and factory automation to overcome these challenges.
We have also continued to maximize the synergies arising from the combined production and engineering capabilities of UMS and our subsidiary, JEP. We are now in a better position to further entrench ourselves in the precision engineering industry and offer more integrated value-added engineering services for equipment manufacturers.
Performance of Group subsidiaries and associates
The Group's aerospace segment performed well in FY2024. Sales in this segment rose 16% to S$26.3 million in FY2024 compared to S$22.7 million in FY2023. Profit for this segment also improved substantially, mainly due to higher sales with better margins compared to the previous year.
Sales in the Others segment fell 35% mainly due to weaker material and tooling distribution business which was affected by the general business slowdown.
Kalf Engineering Pte Ltd ("Kalf"), our water and chemical engineering solutions company, did not manage to complete any project in FY2024. The decision to dispose or wind down the business after completing installation and commissioning of current on-hand projects remains unchanged.
Financial Review
UMS Group achieved a net attributable profit of S$40.6 million for the financial year ended 31 December 2024 ("FY2024"), a 32% decline from the net profit of S$60.0 million accomplished in the previous year ended 31 December 2023 ("FY2023").
Revenue
Revenue in FY2024 fell 19% to S$242.1 million from S$299.9 million in FY2023 as sales in the Group's Semiconductor segment and Others segment decreased 21% and 35% respectively. The drop was moderated by a 16% rise in Aerospace sales during the period under review.
Semiconductor Integrated System sales decreased 33% to S$94.4 million in FY2024 from S$140.0 million in FY2023. Revenue from component sales dipped 8% to S$110.2 from S$120.0 million during the same period. The Group's Semiconductor segment revenue fell to S$204.6 million in FY2024, compared to S$260.0 million in FY2023 amid a weakening economic environment.
Apart from Malaysia, sales declined in all the Group's key geographical markets.
Compared to FY2023, revenue in Malaysia surged 97% in FY2024 as orders from the new customer increased while sales in Singapore and US fell 23% and 6% respectively. Both Taiwan and Others reported sales declined 36%.
Profitability
The Group posted lower profit in FY2024.
Net profit before tax declined 32% to S$46.8 million in FY2024 from S$68.5 million in FY2023 while net profit and net attributable profit also fell 32% to S$41.6 million from S$61.2 million and S$40.6 million from S$60.0 million respectively.
The decrease in profit was due to lower revenue as well as higher expenses. Depreciation expenses increased 10% mainly due to fixed asset additions. Other expenses also rose 3% as a result of higher professional fees for the Group's secondary listing in Malaysia, as well as higher property and machinery maintenance costs.
The Group also recorded a reversal from S$0.9 million of Other charges to a credit of $2.6 million. Its bottom line benefitted from higher foreign exchange gain as well as gain on disposal of quoted investments, partially offset by lower gain on disposal of fixed assets and higher inventory provision.
Gross material margin in FY2024 grew to 51.0% from 50.1% in FY2023.
Group Earnings per Share (EPS) softened to 5.74 cents in FY2024 from 8.95 cents in FY2023.
Balance Sheet
Cash and Bank Balances / Bank borrowings
The net increase in cash and cash equivalents by S$34.3 million (after netting-off bank borrowings) was mainly due to proceeds from the Group's share placement in 1Q2024 which raised net cash of $49.9 million and net cash generated from operating activities partially offset by purchase of property, plant and equipment and payment of dividends during the period.
Trade and other receivables
Trade receivables and other current assets increased slightly by S$0.5 million mainly due to higher advance payment to suppliers offset by lower sales in the current year.
Inventories
The decrease in inventories by S$1.6 million was mainly due to lower material purchases as compared to prior year.
Trade and other payables
Trade and other payables decreased by S$10.0 million mainly due to lower purchases as compared to prior year.
Cash Flow and Dividend
The Group continued to generate positive net cash from operating activities in FY2024 although its net cash from operating activities eased to S$56.4 million from S$79.8 million in FY2023 due to lower profits. Free cash flow also fell to S$24.1 million down from S$51.1 million in FY2023 - attributed mainly to increased investment in capex to cater to the needs of its new major customer in FY2024.
During the year, the Group also raised net cash of S$49.9 million via a share placement exercise. The Group also repaid $22.0 million of bank borrowings and paid out $38.4 million in dividends during the period.
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 FY2024. This brings the total dividend proposed and declared to 5.2 Singapore cents per share which includes dividends already paid out in each preceding quarter from 1Q2024 to 3Q2024.
Proposed Secondary listing in Bursa Malaysia
The Group has submitted an application to the Securities Commission Malaysia on 31 December 2024 to seek its approval for, amongst others, the Proposed Secondary Listing.
The secondary listing will allow the Group to broaden UMS' investor reach and widen its investor base; potentially improve the liquidity of the Company's shares through separate trading platforms; and enable UMS to tap into additional platforms for future fund raising and provide it with the flexibility to access different equity markets to raise funds to support the Group's growth.
Investor Relations
The UMS management places great importance on building good relationships with both 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.
Throughout the year, we actively engaged the investment community by participating in investor days with securities firms, group meetings with local and international analysts and fund managers to keep them abreast of our financial performance and business operations.
UMS was named in the Forbes Best under a Billion list for 2022 and 2023 - as one of the top-performing public companies with less than US$1 billion (S$1.38 billion) in yearly sales in the Asia-Pacific region.
UMS was also a named winner of the prestigious Centurion Club Award 2023.
UMS was added to the MSCI Global Small Cap Index in February 2023.