Second Quarter Financial Statement and Dividend Announcement for the period ended 31 March 2012

Financials Archive

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Profit & Loss

Consolidated Statement of Comprehensive Income

Balance Sheet

Review of Performance

Highlights of 1H FY12

For the six months ended 31 March 2012 ("1HFY12"), Group revenue increased 9.5% year-on-year ("yoy") from S$1.15 billion to S$1.26 billion. Net attributable profit ("PATMI") was S$43.7 million. Operational PATMI for 1HFY12 was S$38.8 million.

Quarterly Performance - 2Q FY12 vs 2Q FY11

The Group recorded a 10.2% year-on-year ("yoy") increase in revenue to S$598.5 million for the second quarter ended 31 March 2012 ("2QFY12"). Profit attributable to shareholders ("PATMI") was S$20.1 million. Operational PATMI for 2QFY12 was S$14.4 million.

Performance by Division

Technology Division

Net sales for MFLEX in the second quarter of fiscal 2012 were US$208.0 million, compared to net sales of US$207.1 million in the same quarter last year. Translated to Singapore dollars, sales were S$262.5 million, a year-on-year decrease of 0.6%, partly due to the translation impact from the weaker US dollar. The Group's operational PATMI from MFLEX was S$8.1 million, compared to S$8.4 million in 2QFY11.

Net sales for MFS in 2QFY12 declined 7.7% to S$34.6 million. The Group's operational PATMI from MFS improved to S$1.2 million, compared to an operational loss of S$2.0 million in 2QFY11. Contribution was mainly from MFS' FPC division.

Automotive Division

Revenue for the Automotive division in 2QFY12 increased 53.2% to S$230.1 million. The increase was mainly contributed by higher sales from Bentley, Jaguar, Land Rover, Volvo and pre-owned cars in Singapore, as well as from Volkswagen in Malaysia.

Operational PATMI declined by 45.5% to S$6.7 million, partly due to start-up costs of new dealerships in Singapore, Malaysia and China. Included in 2QFY11 was the recognition of deferred tax assets of S$4.8 million arising from unutilised tax losses. Excluding the recognition of this deferred tax assets in 2QFY11, operational PATMI in 2QFY12 would have declined by 10.7%.

Property Division

The Property division recorded a sales decrease of 83.7% to S$3.8 million and incurred an operational loss of S$2.3 million in 2QFY12. Except for Chengdu Orchard Villa, the properties under development are not ready for sale yet.

Engineering & Distribution Division

In 2QFY12, the Engineering & Distribution division recorded 13.4% increase in revenue to S$36.5 million while operational PATMI was flat at S$3.4 million. The increase in revenue was mainly due to higher sales of building materials from Welmate and contributions from LPG distribution business.

Balance Sheet and Cashflow Statement Position

Balance Sheet Review

Total assets decreased by S$34.9 million (1.5%) mainly due to lower cash and cash equivalents (by S$30.5 million), development properties (by S$21.1 million), trade and other receivables (by S$13.4 million) and other current assets (by S$8.9million). This was partially offset by higher inventories (by S$34.4 million), other receivables (by S$1.3 million) and available-for-sale financial assets (by S$16.5 million).

The decrease in development properties was a result of completion of units sold. The decrease in trade and other receivables was largely because of better receivables collection in the Technology division. Other current assets decreased due to a reduction in deposits, prepayments and advances to suppliers, while available-for-sale financial assets increased mainly due to the improvement in the share price of a quoted equity investment.

The increase in inventories was mainly due to higher inventories held in the Automotive division, while the increase in other receivables was mainly due to an additional loan of S$1.7 million provided to an associated company.

Total liabilities decreased by $79.2 million (7.4%), mainly due to lower trade and other payables (by $125.1 million). The decrease was partially offset by higher income tax provisions (by $7.1 million) and higher borrowings and long-term liabilities (by S$38.5 million).

The decrease in trade and other payables was mainly a result of a decrease of S$112.3 million in other payables, primarily due to a decline in advance payments received from customers of the Property division and the settlement of fixed assets purchases by the Technology division. Borrowings and long-term liabilities increased due to loans obtained for the development projects in China, as well as for the expansion of the Automotive business. This was offset by S$8.6 million from the conversion of convertible bonds to equity.

Cash Flow Review

2QFY12

The Group had a net operating cash inflow of S$31.9 million in 2QFY12. In 2QFY12, net cash of S$7.3 million was used in investing activities mainly relating to capital expenditures incurred by the Automotive division for its business expansion, offset by the proceeds from the sale of a property in Anaheim by MFLEX. In comparison, in 2QFY11, there was a major outflow of S$35.1 million, primarily due to capital expenditure incurred on the construction of MFLEX's manufacturing plants in Suzhou and Chengdu, China, as well as the Group's instalment payment for its investment in Suzhou Industrial Park Jian Wu Heng Ye Property Development Co. Ltd.

The net cash from financing activities was S$14.5 million. The net drawdown of loans of $33.2 million was S$23.5 million higher than that in 2QFY11.

Overall, cash and cash equivalents increased by S$39.1 million to S$365.6 million as at 31 March 2012.

1HFY12

The Group had a net operating cash inflow of S$30.0 million in 1HFY12. Net cash of S$80.0 million was used in investing activities, mainly attributable to capital expenditures incurred by MFLEX and the Automotive division. An additional S$12.6 million was also incurred in MFLEX in 1HFY12 for the purchase of MFLEX's own shares which were subsequently cancelled. This was offset by the proceeds of S$9.6 million from the sale of a property in Anaheim by MFLEX.

The net cash from financing activities was S$15.0 million. The net drawdown of loans of $37.4 million was S$29.1 million higher than that in 1HFY2011 mainly for development projects in China and business expansion in the Automotive division.

Overall, the net decrease in cash and cash equivalents was S$35.1 million compared with S$61.6 million in 1HFY11.

Commentary On Current Year Prospects

Technology

MFLEX has a significant number of new programmes in the start-up phase in the third fiscal quarter. MFLEX sees strong demand from its customers for the fiscal fourth quarter and into fiscal 2013, when these new programmes are expected to enter volume production. Accordingly, it has commenced a US$50 million capacity expansion project to position MFLEX for sustained long-term growth.

MFS will continue to sharpen its sales focus by securing new customers as well as enhancing its operational efficiency.

Automotive

Despite the continued rising COE premiums in Singapore, the Group is cautiously optimistic that the demand for luxury marques will continue in 2012, boosted by its expanded portfolio - exclusive dealerships for McLaren and Infiniti in Singapore, and dealerships for BMW in Kuala Lumpur, Malaysia and for Volvo in Changchun, China. The Automotive division will continue to focus on expanding its business by increasing market share and growing its geographical presence.

Property

While the Chinese government's cooling measures on property have impacted speculative trading activities, a hard landing appears to have been averted. In the longer term, China's urbanisation and population growth are expected to continue to drive demand for quality housing in China. Over the next few years, the Property division will focus on the development of its multi-phased projects - Shenyang Orchard Summer Palace, Suzhou Horizon Manor and Chengdu Orchard Villa. The division will also continue to consider land acquisition opportunities.

Engineering & Distribution

The Engineering and Distribution division will continue their efforts in the procurement of new contracts and cost management for its various businesses.