Operation Reviews

FY2018 has been a year testing the resilience of the Group. The Group has reported a turnover of $72.8 million, down 13.4% (or $11.3 million) from FY2017. The lower turnover was attributable to a decrease in sales in both the Hard Disk Drive ("HDD") and Precision Metal Stamping (PMS) components segments.

Cost of sales in FY2018 has increased by 4.0% (or $2.9 million) compared to the previous financial year despite a decrease in turnover. Customer's tightened specification on Baseplates led to inventory being written off and extra sorting and rework activities. This contributed to higher materials, labour and overhead costs incurred during the year. In addition, the devastating effect of Typhoon Hato had adversely affected the operations in the Zhuhai subsidiaries. Inventories that were damaged by the heavy rainstorm were written off. Included in overhead costs was a one-time amortization expense arising from a change in useful life of toolings and fixtures in FY2018. In view of the above, the Group reported a gross loss in FY2018.

Other operating income in FY2018 increased by 55.9% (or $2.1 million). The increase was mainly due to foreign exchange gain and an increase in the sales of scrap metal. The increase was partially offset by a reduction in rental income. Distribution and selling expenses increased by 20.4% (or $0.6 million) as a result of higher carriage outward costs incurred by the sales of Baseplates.

General and administrative expenses increased by 45.9% (or $4.2 million) in FY2018. This increase is mainly accounted for by an allowance for impairment on property, plant and equipment, as well as a write off on tools and equipment and renovation that were damaged by the typhoon.

On 31 January 2018, the Company has completed its disposal of 31.34% equity interest in Jiangsu Tysan Precision Engineering Co., Ltd group of companies ("TP Group"). For the financial periods of March 2017 to January 2018, TP Group has recorded lower revenue and higher costs resulting in lower gross and net profit. This led to a decline in the share of results of associate companies compared to FY2017. Following the disposal of TP Group, there was a loss on disposal of $0.5 million.

During the year, the Group recorded an increase in income tax expense of 17.4% (or $ 0.2 million). The increase was due to higher deferred tax expenses provided during the financial year. To conclude the financial performance of FY2018, the Group’s loss for the financial year was $16. 8 million (FY2017: Profit of $3.6 million).