It is with great pleasure that I present to you the results for the financial year ended 31 December 2020 (“FY2020”). It is the year of great significance: we faced the challenges of the COVID-19 impact and also unveiled and began executing corporate recovery strategies to propel us to the next stage of growth. The early fruits of this strategic review, first unveiled on 21 December 2020, have already been harvested as outlined in the results here before you.
Allow me now to outline the full-year results in some detail.
FY2020 was clearly a year of two halves. In 1H 2020, we felt the full impact of the initial outbreak of the pandemic which slowed economic growth and affected operations of our partners as well as supply chains, particularly in China. However, in a clear reflection of its growth and potential, China was the first of the major global economies to recover from the pandemic.
Serial System generated US$731.4 million in revenue for FY2020, compared to US$791.6 million in FY2019. This reflected i) the ongoing impact of the termination of the distribution agreement with Texas Instruments (“TI”) since the end of 2018; ii) the disruptions caused by the pandemic, particularly in 1H 2020 as well as iii) the initial success of our business recovery strategies which I will elaborate on later. Revenue in 2H 2020 recovered from the initial disruption in China, increasing 33% compared to 1H 2020 but also rising 16% year-on-year. Net profit in 2H2020 also increased to US$4.7 million, reversing sharply from 1H 2020’s net loss of US$4.5 million.
In line with lower revenue for the year, gross profit in FY2020 declined 15% to US$45.9 million, while gross profit margin stood at 6.3%.
Against the backdrop of the pandemic and the loss in 1H 2020, net profit after tax totalled $0.3 million compared to US$8.0 million a year ago. (Net profit after tax for FY2019 included a US$25.4 million received/receivable in relation to the transfer of TI distribution business). Correspondingly, earnings per share also declined to 0.03 US cent compared to 0.90 US cent in FY2019.
We deeply appreciate the faith and support of shareholders throughout this challenging period and have proposed a first and final cash dividend of 0.11 Singapore cent per ordinary share.
What Lies Ahead for Serial System
COVID-19 was in fact the second major crisis that Serial System has faced in recent years. As you are all aware, the first was the cessation of the distribution agreement with TI announced at the end of 2018. Barely had the dust settled from our recovery efforts, the pandemic dealt a sharp blow to many business activities globally. It affected operations and revenue in 1H 2020.
Every crisis offers an opportunity. So, the management undertook a major review of both crises and implemented decisive actions to pivot Serial System to a new paradigm of recovery and long-term growth. The key elements of the strategy are as follows:
- Expanding our supplier relationships/product portfolio. Learning from the past dependence on TI, Serial has expanded supplier relationships as well as product portfolio. We have added new semiconductor supplier relationships with the likes of Micron, Allegro MicroSystems, Monolithic Power Systems and Renesas as well as Chinese manufacturers while strengthening partnership with existing suppliers. We will continue to focus on high growth areas in 5G, Electric Vehicles and data centres.
On this note, I wish to highlight that the ‘trade-war’ tensions and geopolitical developments surrounding the semiconductor industry should be viewed favourably by Serial System as they underscore both the need for strong distribution networks for components as well as the imminent emergence of China as a significant chip manufacturer in the years to come.
- Expanding computer peripherals and 3D print services in Southeast Asia. Since acquiring this business in 2014, we have been quietly building up a supplier base, to which we recently added Gigabyte, MSI, Philips and AOC. Our core market for peripherals is Malaysia, where we benefited from the surge in demand for equipment in FY2020 as most of the country was forced to stay at home to comply with COVID-19- related Movement Control Orders. We are also expanding our managed print service beyond Singapore and Indonesia to the Thailand market. Marking our foray into 3D printing, we have signed up an Asia-wide franchise with Ultimaker of the Netherlands.
- Resetting the Cost Structure After COVID-19. The pandemic has forced many businesses including Serial System to review their entire cost structures. Over the past few months, we have delayered more processes, shifted functions to the cloud and re-examined supply chain processes. Not only were workflow and back-end operations reviewed, but we have also been able to eke out significant cost-savings from reduced air travel, relying more on video-conferencing.
These three initiatives, coinciding with the economic recovery in China in recent months, contributed to a stronger performance in 2H 2020 compared to 1H 2020.
It has been a tough two years. We have laboured to recover and to transform. The Serial System you now see is much leaner, agile and has a clear growth strategy that has already yielded the first fruits of its restructuring.
We will build on the momentum achieved in 2H 2020 to pursue growth and shareholder value. In the years ahead we will see more revenue from new component suppliers, expansion of consumer products distribution and managed print services, as well as improved cost efficiencies.
Appreciation & Acknowledgements
On behalf of the board of directors, I would like to express our gratitude to our customers, business partners and staff for their support, hard work and trust in Serial System’s long-term vision. Most importantly, I would like to extend my appreciation to you, our shareholders, for your patience and support through the recent challenges that Serial System faced. We remain committed to our efforts in building a stronger company, and continue adding value to our shareholders.
Dato’ Seri Dr. Derek Goh Bak Heng BBM
Executive Chairman & Group CEO