Extracted from Annual Report 2011
Dear Shareholders,
With the persisting economic and financial woes in
Europe and the United States, the past year has
been challenging for businesses across the globe. Like
others, Equation Group, was affected by the difficult
external environment. However, we are pleased to
note that, despite the challenges, we ended the
financial year 30 June 2011 (“FY2011”) operationally
stronger than before and better positioned to tap on
the opportunities going forward.
FY2011 was a milestone year for Equation Group. We
spent the last five years reinventing the company by
focusing on businesses with greater potential.
Established 1975, the Group has been involved in
a diverse range of businesses including food and
beverage; garment manufacturing; the import, export
and wholesale of ready-made wearing apparel; the
retail of wine and wine related products; and property
investment and development. Since 2006, we have
progressively and effectively trimmed the business,
restructuring it to concentrate on businesses which
are able to create sustainable value in the longer term.
Today, we are encouraged as we begin to witness that
our hard work has brought about steady growth in our
core business segments.
It is, therefore, with pleasure that we present to you
our annual report for FY2011.
Financial Highlights
As testimony of our stabling business, Group
revenue climbed 4.5% to $30.7 million during the
year under review from $29.4 million in the previous
corresponding year. The better performance was due to
the improved performance from a majority of our core
business segments including Supply of Construction
Materials, Technology, E-waste/Recycling and Energy
Management Services, offset by the weaker results
from our Consumer Electronic Products segment in
FY2011..
For the full year, we registered net loss attributable
to Owners of the Company (“net loss”) of $12.4
million compared to $3.6 million in FY2010. However,
excluding a one-off gain of $16.3 million recorded in
FY2010 from the acquisition of Disa Digital Safety Pte
Ltd (“Disa P/L”), net loss for FY2011 would have been
less than FY2010 by $0.3 million.
During the year, a total of approximately $2.5 million
was successfully raised through share placement
exercises and $4.5 million through the issue of convertible loans. The Group has utilised the funds
for working capital purposes.
FY2011: A year of steady growth
We are beginning to see the value from our active
reinvention over the past five years.
In line with our plans to rationalise the business, we
signed an agreement to dispose a non-core asset, a
freehold property in Malaysia, during the year. After
the completion of the sale, we plan to cease operations
of our subsidiary, Hokuriku (Malaysia) Sdn. Bhd. in
view of the weak prospects of that company. The sales
proceeds of approximately $6.9 million will strengthen
our financial position as we continue to build the
business in our key focus areas.
As we continue to streamline our businesses, most of
our core businesses performed better during the year
under review.
Supply of Construction Materials
The performance from Supply of Construction Materials
was boosted by the recovery of the construction
industry in FY2011. As testimony to its credibility and
increasing acceptance by customers, our subsidiary,
Equation Resources Pte. Ltd. secured a contract for
the supply of construction materials worth a total of
$127.8 million in FY2011.
To efficiently manage the growing demand in this
segment, we purchased three additional vessels during
the year. The purchase will enable us to better manage
and control our costs and logistics arrangements,
thereby improving our performance going forward.
The industry is expected to continue its growth
trajectory as Singapore develops more infrastructure to
support its rapid growth. Our business in this segment
should be able to grow in tandem with the expansion
of the construction industry in Singapore.
Technology
We are encouraged that our Technology segment
continued to do well, with positive developments
recorded by Disa P/L in FY2011.
In February 2011, Disa P/L entered a joint agreement to
utilise the Loss Prevention Research Council’s (“LPRC”)
StoreLab program to conduct a proof-of-technology
pilot program with leading U.S. retailers that are
members of the LPRC. The proof-of-technology pilot
program will feature DiSa Digital Safety Technology embedded in consumer electronic products that will be sold
in active retailer locations with the LPRC partner retailers.
In June 2011, Disa P/L also collaborated with Hellmann
Worldwide Logistics GmbH & Co. KG, a German-based
global logistic provider, through a global cooperation
agreement. Using the DiSa Anti-Theft Locking Software,
the collaboration is expected to impact the world of
consumer electronics in a sustainable way while setting
a new benchmark of security for consumer electronics
products covering the entire supply chain. We are also
heartened by the warm responses received by A-Brand
suppliers and major retailers towards the use of the
innovative system.
We are confident that Disa P/L, with its revolutionary
technology, will be able to seize the business
opportunities arising from the increasing demand for more secure methods to manage supply chains.
Energy Management Services
Energy Management Services also shared promise
during the year as it began to recognise revenue upon
completion of its first Energy Performance project.
With the support and encouragement of the Singapore
government to evolve and embrace green services, we
see good prospects for this segment looking ahead. We
are optimistic that the highly experienced management
team will also be able to guide the business to greener
pastures in the coming year.
Consumer Electronic Products
Consumer Electronic Products was affected by weak
consumer sentiment in Europe. We also recognise that
it will likely continue to operate in a lacklustre consumer
climate in the near term. Despite the lower results, we
remain cautiously optimistic for this segment. Our
subsidiary, M3 Electronic GmbH, which holds the
license to Blaupunkt, a highly reputable brand of
audio products, should be able to ride on the strong
distributorship and brand advantage as it expands its
reach in the business. Most recently, it received strong
consumer affirmation at IFA, the world’s largest trade
fair for consumer electronics and household appliances
held in Berlin in September 2011.
Outlook
Externally, we expect challenges to persist. FY2012
should continue to be operationally tough not just for
us, but for all other businesses. Notwithstanding that,
we do see bright spots going forward. Asia remains
the most promising region globally and we are hopeful
that China will be able to lead economic growth in the
region. Singapore, in particular, is also expected to
perform well economically.
We are optimistic of the sectors which we operate
in and will continue to explore avenues to further
develop in each of our core business segments. We
will also continue to streamline and focus on key
business areas, to grow our business so as to enhance
shareholders’ value. We will ensure, however, that we
will not be complacent, but instead remain cautious
of the challenges of the external environment as we
tread ahead.
Appointments and Departures
In September 2011, Mr. Lee Teck Leng resigned as
Independent Non-Executive Director of the Company.
On behalf of the Board, we would like to thank Mr.
Lee for his invaluable contributions as a member of
the Board.
During the same period, we welcomed Mr. Lau Kay
Heng as Independent Non-Executive Director of the
Company. He has over 20 years of experience in
corporate management and corporate advisory. Mr. Lau
will also serve as the Chairman of the Remuneration
Committee and Member of the Audit and Nominating
Committees.
Word of Thanks
We have invested much hard work over the past five
years to reinvent Equation Group. Coupled with the
continually uncertain global economic environment,
it is indeed a milestone that we have emerged from
the five years better placed than we have ever been.
We recognise, nevertheless, that the encouraging
performance would not have been possible without
the support and faith of our clients, business partners,
dedicated staff, and loyal shareholders.
At this point, we would like to extend our heartfelt
appreciation to everyone for your trust and patience.
We ask for your continued confidence in Equation
Group’s potential. Together, we look forward to
bringing the Group to new heights.
Thanks you,
On behalf of the Board of Directors
| Ambassador Toh Hock Ghim |
Chng Weng Wah (Eddie) |
| Chairman |
Chief Executive Officer |
30 September 2011
