Executive Chairman’s Statement
FY2017 was a year of moderating growth as the economy began to stabilise amidst tapering challenges carried forward from the year before. Nevertheless, geopolitical uncertainty still remains in the global economy and growth is expected to ease. Singapore reported 3.5% GDP growth for the year of 2017 after a slowdown in Q4, although the year started on a strong note in Q1 2018.
In spite of continued challenges, the Group is pleased that it has managed to deliver a strong performance to record a 16% increase in total revenue to S$464 million for the financial year ended 31 December 2017 ("FY2017"). This was mainly due to stronger demand seen in our Packaging Business sector (Tat Seng Packaging Group Ltd) as contributed by the 35.9% surge from the China market but this rise was partially offset by the closure of all franchise outlets from our Consumer Business sector in Singapore.
In line with the higher revenue, gross profit hiked 10.0% to S$104.8 million in FY2017 as compared to S$95.3 million in FY2016 contributed by stronger growth in revenue from the Packaging Business sector. However, gross profit margin was lowered by 1.24% to 22.6% of total revenue mainly due to reduced margin from Packaging Business and Malaysia Consumer Business sectors. This was set off by the support from an improved margin delivered by Singapore Consumer Business sector.
As a result, the Group reported a higher profit before tax of S$26.5 million in FY2017 as compared to S$23.7 million in FY2016. Tax expense was S$5.5 million for the reporting year against S$6.2 million in the year before. Consequently, the Group's net profit after tax for FY2017 was S$20.9 million against S$17.4 million for the previous year, whilst net profit attributable to shareholders was S$11.1 million.
Where sector performance is concerned, our Consumer Business recorded a 14.1% gain in PBIT of S$7.5 million in FY2017 against S$6.6 million in FY2016, taking into account foreign currency exchange loss of S$3.5 million (FY2016 registered a gain of S$2.2 million). The increase was a reduction in losses resulting from closure of franchise outlets and improved margin benefitting from softer purchasing price advantage
At our Packaging Business forefront, PBIT was 28.0% higher at S$28.1 million in FY2017 as compared to S$22.0 million in FY2016. This was mainly contributed by higher sales growth, continuous effort in rationalising the workflow, investment in automated machines and machineries upgrading, which enhanced productivity.
As at 31 December 2017, the Group maintained a positive cash and cash equivalents position of S$135.0 million as compared to S$170.9 million in the year before.
DEVELOPMENTS IN FY2017
Given that modern FMCG consumer patterns are shifting towards online retail, we have taken steps to develop and grow our e-commerce presence to cater to the tech-savvy millennials. Through working with online retailers, we have further fuelled our business channel growth significantly. In line with our business model shift towards e-commerce, we also launched our social media campaign for our propriety brands to engage and connect with our consumers.
As part of our operational excellence plan, we have embarked on the redevelopment project of our factory located at 348 Jalan Boon Lay. Our new chilled facilities were completed in July 2017 and we successfully relocated our factory and chilled warehouse operations to the new site to enhance our chilled business capability.
During the year, we also implemented a series of sustainability efforts and rebranded some of our tissue paper products to increase brand visibility and awareness.
In line with our plans to expand our operations overseas, we have acquired a 5-storey building with an underground basement in Japan located at Osaka-shi Chuo-ku Dotonbori 1-chome with a total floor area of 427.78 sqm in September last year. Besides using this property as a stepping stone to expand our food business in Japan, we also view this as a redeployment of our capital into potentially higher yielding real estate opportunities.
In spite of the strong performance delivered in FY2017, we expect the trading environment for FMCG industry to be competitive and soft for the year. We foresee margins may be impacted as taking a price increase is lagging behind a hike in cost of commodities like rice and paper.
Meanwhile, the Group's Packaging Business expects the operating environment for both Singapore and China to remain challenging given the uncertainty in macro-economic conditions, volatility of raw materials prices and the competitive industrial environment. As such, the segment will continue to review and execute timely strategies to appropriately adapt and better capitalise on the available opportunities.
The China subsidiary of the Group’s Packaging Business, Nantong Tat Seng Packaging Co., Ltd. (“Nantong Tat Seng”) plans to build a new factory with a built-up area of 35,000 sqm on a newly acquired land with area of approximately 74,115 sqm situated in Tongzhou District, Nantong, Jiangsu Province in line with its objectives to expand existing business in the same geography area of Nantong and to support the continued growth.
Despite the Board’s busy schedule, they have made time and effort in building the Group’s business to greater heights and I would therefore like to extend my sincere appreciation of their invaluable contribution towards fostering growth for the Group in every possible way; developing strategies, mentoring our younger leaders and steering the Group through challenging times over the years. Furthermore, I wish to express my heartfelt thanks to our customers, business partners, management and staff for their dedication and hard work that has enabled the Group to grow and achieve better results. Last but certainly not least, I would like to put on record my gratitude to our shareholders for their unwavering support and trust in the Group. Thank you for the confidence you have in us and we will aim to work towards delivering greater shareholder value.
Dr. Allan Yap