Full Year Financial Statements And Dividend Announcement for the year ended 30/06/2007

Transcription

1 MICRO-MECHANICS (HOLDINGS) LTD Full Year Financial Statements And Dividend Announcement for the year ended 30/06/2007 PART I INFORMATION REQUIRED FOR ANNOUNCEMENTS OF FULL YEAR RESULTS 1(a) An income statement (for the group) together with a comparative statement for the corresponding period of the immediately preceding financial year. Note Group FY2007 S Group FY2006 S Change Revenue (1) 34,695,608 31,702, % Cost of sales (2) (14,552,341) (12,223,738) 19.0% Gross profit 20,143,267 19,478, % Other income (3) 339, , % Distribution costs (4) (3,182,244) (2,885,290) 10.3% Administrative expenses (5,933,786) (5,936,798) (0.1%) Other operating expenses (1,150,727) (1,166,774) (1.4%) Profit from operations 10,215,901 9,720, % Finance costs Profit before taxation (5) 10,215,901 9,720, % Taxation (6) (1,914,142) (1,988,435) (3.7%) Profit after tax 8,301,759 7,731, % Minority interests Net profit for the year 8,301,759 7,731, % NM: Not meaningful Notes: (1) Our group revenue rose by 9.4% or an increase of S3.0 million to S34.7 million for FY2007, mainly due to increased sales in Taiwan, Malaysia and USA. (2) The cost of sales rose due to higher revenue. In addition, during FY2007, the production headcount increased to 340 from 279 in FY2006 and depreciation of plant and equipment increased S332k during the period. 1

2 (3) Other income consists of: FY2007 FY2006 Change S S Interest income from banks and others 278, , % Exchange gain 3,403 - NM Others 57,306 32, % (4) The higher distribution costs were mainly due to an increase in headcount of sales personnel in United States as well as increase in travelling related expenses for our operations in Singapore, Thailand, United States, Switzerland and China. (5) Profit before taxation includes the following expenses: FY2007 FY2006 Change S S Trade receivables written off Loss on disposal of property, plant and equipment 19,366 26,295 (26.3%) - NM Depreciation of property, plant and equipment 2,951,273 2,610, % Exchange loss - 97,588 (100%) Inventories written off 21,868 32,929 (33.6%) (6) The effective tax rate decreased from 20.5% to 18.7% due to lower tax rate in Singapore for the current financial year. The taxation charge includes withholding tax of S270k on the dividend payment from our Philippine and Thai subsidiaries to the Company. 2

3 1(b)(i) A balance sheet (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year. Note Group 30 Jun 07 S Group 30 Jun 06 S Company 30 Jun 07 S Company 30 Jun 06 S Non-current assets Property, plant and equipment (1) 21,981,612 19,272, Investment in subsidiaries ,183,324 12,183,324 21,981,612 19,272,433 12,183,324 12,183,324 Current assets Inventories 1,033, , Trade and other receivables 5,990,778 6,050,360 4,407,614 3,111,102 Cash and cash equivalents 13,635,776 12,864,638 5,888,890 7,015,039 20,659,808 19,897,928 10,296,504 10,126,141 Total assets 42,641,420 39,170,361 22,479,828 22,309,465 Shareholders equity Share capital 14,569,466 14,569,466 14,569,466 14,569,466 Foreign currency translation reserve (2) (706,318) (1,164,157) - - Accumulated profits 23,523,617 20,761,293 7,686,346 7,491,822 37,386,765 34,166,602 22,255,812 22,061,288 Non-current liabilities Deferred tax liabilities 996, , , , Current liabilities Trade and other payables 3,010,524 2,902, , ,677 Employee benefits 327, , Provision for taxation 920,332 1,011,805 18,000 15,500 4,257,872 4,233, , ,177 Total liabilities 5,254,655 5,003, , ,177 Total equity and liabilities 42,641,420 39,170,361 22,479,828 22,309,465 Notes: (1) The Group invested approximately S4.6 million in plant and machinery mainly for our operations in Malaysia, the Philippines and Singapore. The Group also invested S0.9 million in office equipment, furniture, fixtures and set up of our second factory in Singapore. (2) The movement in foreign currency translation reserve was mainly due to the appreciation of Malaysian Ringgit, Peso and Thai Baht against the Singapore Dollar. 3

4 1(b)(ii) Aggregate amount of group s borrowings and debt securities. Amount repayable in one year or less, or on demand As at 30 Jun 07 As at 30 Jun 06 Secured Unsecured Secured Unsecured Nil Nil Nil Nil Amount repayable after one year As at 30 Jun 07 As at 30 Jun 06 Secured Unsecured Secured Unsecured Nil Nil Nil Nil Details of any collateral The banking facilities are unsecured. 4

5 1(c) A cash flow statement (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year. Note Group FY2007 S Group FY2006 S Operating activities Profit before taxation 10,215,901 9,720,361 Adjustments for: Depreciation of property, plant and equipment 2,951,273 2,610,092 Loss on disposal of property, plant and equipment 19,366 26,295 Interest income (278,682) (198,485) Operating profit before changes in working capital 12,907,858 12,158,263 Inventories 92,539 (275,420) Trade and other receivables 212,754 (414,697) Trade and other payables (176,655) 42,875 Cash generated from operations 13,036,496 11,511,021 Interest received 272, ,773 Income tax paid (1,489,952) (1,044,036) Cash flows from operating activities 11,819,275 10,667,758 Investing activities Purchase of property, plant and equipment (5,532,447) (4,400,979) Proceeds from disposal of property, plant and equipment 23,745 83,741 Other financial assets- repayments - - Cash flows from investing activities (5,508,702) (4,317,238) Financing activities Dividends paid (1) (5,539,435) (3,600,633) Cash flows from financing activities (5,539,435) (3,600,633) Net increase/(decrease) in cash and cash equivalents 771,138 2,749,887 Cash and cash equivalents at beginning of the year 12,864,638 10,114,751 Cash and cash equivalents at end of the year 13,635,776 12,864,638 Notes: (1) The Company paid a final dividend of 2.5 cents per ordinary share (tax-exempt) on 13 November 2006 in respect of the financial year ended 30 June The Company also paid an interim dividend of 1.5 cent per ordinary share (tax-exempt) on 8 March 2007 in respect of the financial year ended 30 June

6 1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii)changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year. The Group Share Capital Share Premium Foreign Currency Translation Reserve Accumulated Profits Total S S S S S As at 1 July ,078,871 3,490,595 (688,600) 16,630,000 30,510,866 Translation differences arising on translation of net assets of foreign subsidiaries - - (546,486) - (546,486) Exchange differences on monetary items forming part of net investment in a foreign operation ,929-70,929 Net losses recognized directly in equity - - (475,557) - (475,557) Net profit for the year ,731,926 7,731,926 Total recognised income and expense for the year - - (475,557) 7,731,926 7,256,369 Issue of bonus shares 2,769,717 (2,769,717) Transfer from share premium account to share capital upon implementation of the Companies (Amendment) Act ,878 (720,878) Final dividend paid of 2 cents per share (tax exempt) in respect of (2,215,774) (2,215,774) Interim dividend paid of 1 cent per share (tax exempt) in respect of (1,384,859) (1,384,859) As at 30 June ,569,466 - (1,164,157) 20,761,293 34,166,602 6

7 Share Capital Share Premium Foreign Currency Translation Reserve Accumulated Profits S S S S S The Group As at 1 July ,569,466 - (1,164,157) 20,761,293 34,166,602 Translation differences arising on translation of net assets of foreign subsidiaries , ,839 Total Net gain recognized directly in equity , ,839 Net profit for the year ,301,759 8,301,759 Total recognised income and expenses for the year ,939 8,301,759 8,759,598 Final dividend paid of 2.5 cents per share (tax exempt) in respect of (3,462,147) (3,462,147) Interim dividend paid of 1.5 cent per share (tax exempt) in respect of (2,077,288) (2,077,288) As at 30 June ,569,466 - (706,318) 23,523,617 37,386,765 The Company Share Capital Share Premium Foreign Currency Translation Reserve Accumulated Profits Total S S S S S As at 1 July ,078,871 3,490,595-6,085,717 20,655,183 Issue of bonus shares 2,769,717 (2,769,717) Transfer from share premium account to share capital in accordance with the Companies (Amendment) Act ,878 (720,878) Net profit for the year ,006,738 5,006,738 Final dividend paid of 2 cents per share (tax exempt) in respect of (2,215,774) (2,215,774) Interim dividend paid of 1 cent per share (tax exempt) in respect of (1,384,859) (1,385,859) As at 30 June ,569, ,491,822 22,061,288 As at 1 July ,569, ,491,822 22,061,288 Net profit for the year ,733,959 5,733,959 Final dividend paid of 2.5 cents per share (tax exempt) in respect of (3,462,147) (3,462,147) Interim dividend paid of 1.5 cent per share (tax exempt) in respect of (2,077,288) (2,077,288) As at 30 June ,569, ,686,346 22,255,812 7

8 1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year. Not applicable. 2. Whether the figures have been audited or reviewed and in accordance with which auditing standard or practice. The figures have not been audited or reviewed by the auditors. 3. Where the figures have been audited or reviewed, the auditors report (including any qualifications or emphasis of a matter). Not applicable. 4. Whether the same accounting policies and methods of computation as in the issuer s most recently audited annual financial statements have been applied. The Group applied the same accounting policies in the current reporting period as those applied for the financial year ended 30 June The Group reviewed and changed the estimate of the useful lives and the residual values of the major machines and equipments in accordance with SFRS 16 Property, Plant and Equipment (see paragraph 5 below for details). 5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change. At the financial year-end, the Group reviewed and changed the estimate of useful life of certain plant and equipment from 5 years to 10 years and their estimated residual values to reflect higher expected amounts than what the Group had historically estimated. Both the change in useful life and residual values are changes in accounting estimates that were effected in the fourth quarter of FY2007. Based on independent valuation of the affected plant and equipment, the impact on the financial statements of FY2007 arising from the changes in estimates is to increase the profit before income tax by S256,000. 8

9 6. Earnings per ordinary share of the group for the current financial period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends. Earnings per ordinary share for the period based on net profit after tax and minority interest:- (i) Based on weighted average number of ordinary shares in issue Group FY2007 Group FY cents 5.58 cents (ii) On a fully diluted basis 5.99 cents 5.58 cents The calculation is based on the weighted average number of shares in issue during the period. The weighted average number of shares outstanding during the year was 138,485,881 (30 June 2006: 138,485,881) 7. Net asset value (for the issuer and group) per ordinary share based on issued share capital of the issuer at the end of the:- (a) current financial period reported on; and (b) immediately preceding financial year. Group Group Company Company 30 Jun Jun Jun Jun 06 Net Asset Value per ordinary share (cents) The net asset value per ordinary share is calculated based on net assets of S37.4 million (30 June 2006: S34.2 million) and 138,485,881 (30 June 2006: 138,485,881) shares in issue. 8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the group s business. It must include a discussion of the following:- (a)any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and (b)any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on. REVIEW OF PROFIT AND LOSS Steady Revenue Growth REVENUE Q1 Q2 Q3 Q4 Full Year FY07 S8,925,586 S8,777,405 S8,056,126 S8,936,491 S34,695,608 FY06 S7,582,820 S7,786,603 S7,949,050 S8,383,703 S31,702,176 % growth 17.7% 12.7% 1.3% 6.6% 9.4% For the year ended 30 June 2007 (FY2007), Group revenue increased 9.4% to S34.7 million, from S31.7 million in the previous financial year. After a record first quarter of S8.93 million, revenue slowed over the next two quarters reflecting both seasonal and slower industry conditions. In the last three months of FY2007, Group revenue recovered to reach its highest quarterly level ever of S8.94 million. 9

10 Country FY2007 FY2006 % change S m % S m % Singapore 2.5 7% 2.9 9% -13% Malaysia % % 15% Philippines % % -2% Thailand 1.8 5% 2.2 7% -18% China % % 8% USA % % 21% Europe 3.3 9% 2.9 9% 13% Japan 2.1 6% 1.9 6% 11% Taiwan % 2.5 8% 42% Rest of world 1.8 6% 1.5 4% 17% % % 9% While building a business in China can be challenging for a foreign-owned company, we believe our focus on the fundamentals, such as customer satisfaction and personnel development, should ensure the Group s long term success in the expanding semiconductor market in China. With a growing list of customers, sales in China increased 8.2% to S4.8 million, making it the Group s second largest geographical market. In Taiwan, where we established a sales office several years ago to provide better support for customers there, revenue increased 41.7% to S3.5 million. Sales to Malaysia increased 14.6% to S6.9 million to remain as the Group s largest country market. In FY2007, we completed an investment of S1.8 million to strengthen our Custom Machining and Assembly (CMA) division in Penang, Malaysia. With most of our marketing efforts for CMA focused on customers in Europe and the United States, sales to these markets increased 13.3% and 20.8% to S3.3 million and S4.1 million, respectively. Product Segment FY2007 FY2006 % change S m % S m % Semiconductor % % 6% CMA 3.1 9% 2.0 6% 58% % % 9% Our long-term strategy is to offer customers in the semiconductor industry a one-stop solution for consumable tools and parts. During FY2007, sales of tools to assemble and test semiconductors increased 6.4% to S31.6 million from S29.7 million in FY2006. While the growth in our semiconductor-tooling business was hampered by slower industry conditions and intensified price pressure throughout the supply chain, our strategy of building a business that goes beyond consumable tools is beginning to bear fruit. Based on our expertise in precision manufacturing, we formed our CMA division a few years ago to explore opportunities in other fields where precision manufacturing is similarly required, such as medical, instrumentation and high-tech equipment. During FY2007, CMA sales increased 58.1% to S3.1 million to account for 9% of Group revenue, compared to the contribution of 6% in FY2006. Besides being a means for the Group to diversify our revenue from the cyclicality of the semiconductor industry, our CMA division s focus on customers in Europe and the United States also provides a good balance to our semiconductor tooling business, which is increasingly centered on customers in Asia. 10

11 Sustainable Gross Profit Margin Gross Profit Margin 1Q 2Q 3Q 4Q Full Year FY % 58.0% 56.1% 58.1% 58.1% FY % 60.1% 61.5% 61.6% 61.4% % change -1.5% -2.1% -5.4% -3.5% -3.3% During FY2007, our gross profit margin declined slightly to 58.1%, from 61.4% previously. This was attributable mainly to increased personnel costs from our higher production headcount and an increase in depreciation expense from additional investments in plant and equipment made during the year. In addition, we experienced price increases for some raw materials and more intense price pressures across the semiconductor supply chain. Despite these cost pressures, we believe our performance in this area underscores the strength of our competitive position in the market place and the benefit of our continual efforts to constantly improve operational performance. Profitable Growth 1Q 2Q 3Q 4Q Full Year Admin, FY07 S2,451,541 S2,481,797 S2,508,504 S2,485,524 S9,927,366 Distribution and Other % of sales 27.5% 28.3% 31.1% 27.8% 28.6% Operating FY06 S2,263,332 S2,496,668 S2,454,746 S2,543,331 S9,758,077 Expenses % of sales 29.8% 32.1% 30.9% 30.3% 30.8% While Group revenue rose 9.4% in FY2007, our total administrative, distribution and other operating expenses (inclusive of other income) increased only 1.7% to S9.9 million (S9.8 million in FY2006). As a percentage of sales, these overhead costs declined to 28.6%, from 30.8% in FY2006 and 34.5% in FY2005. During FY2007, the Group had a foreign exchange gain of S3,403 compared with a loss of S98,000 in FY2006. Net Profit 1Q 2Q 3Q 4Q Full Year ROE (ex-cash) FY07 S2,309,196 S2,119,843 S1,708,335 S2,164,385 S8,301, % FY06 S1,904,439 S1,759,472 S2,042,162 S2,025,853 S7,731, % % growth +21.3% +20.5% -16.3% +6.8% +7.4% Profit before tax increased 5.1% to S10.2 million from S9.7 million in FY2006. After deducting tax expenses of S1.9 million (S2.0 million in FY2006), we recorded a net profit increase of 7.4% to S8.3 million in FY2007. The Group s net profit margin remained steady at 23.9% (24.4% in FY2006 and 20.5% in FY2005). Return on equity (ex-cash) also remained steady at 35.0% (36.3% in FY2006). 11

12 Solid Balance Sheet The Group continued to generate healthy cash flow from operating activities of S11.8 million in FY2007 (S10.7 million in FY2006). After deducting capital expenditures of S5.5 million and a dividend distribution of S5.5 million to shareholders, we closed the period with S13.6 million in cash and no bank borrowings. With customers constantly demanding faster delivery cycles, our management of inventory (to avoid overstocking and write-offs) plays a key role in our daily work processes. During the year, inventory increased 5.1% to S1.0 million, from S983,000 in FY2006. However, as a percentage of annual sales, inventory remained steady at about 3.0% (3.1% in FY2006). Inventory written off totaled S22,000, down from S33,000 in FY2006. Accounts Receivable As at end of Q1 As at end of Q2 As at end of Q3 As at end of Q4 FY07 S5,762,241 S5,486,708 S5,113,875 S5,456,865 > 90 days 3.1% 1.1% 1.5% 1.1% Write-off Nil Nil Nil Nil FY06 S5,205,849 S5,005,615 S5,208,843 S5,397,990 > 90 days 3.1% 2.3% 2.4% 1.5% Write-off Nil Nil Nil Nil As at 30 June 2007, we had total trade receivables of S5.5 million. Of this, S60,000 or 1.1% were outstanding for 90 days or more. For the second year running, we had zero bad debt expense in FY2007. Our trade payables totaled S265,000, of which no monies were outstanding for 30 days or more. Reliable and quality suppliers are critical to our success. By paying our suppliers promptly, we hope to set the tone for a strong sense of mutual commitment and cooperation. Investing For Our Future Growth Capital Expenditure Q1 Q2 Q3 Q4 Full Year FY07 S1,186,362 S1,636,241 S1,687,238 S1,022,606 S5,532,447 % of sales 15.9% FY06 S1,489,449 S1,269,290 S995,935 S646,305 S4,400,979 % of sales 13.9% Capacity Utilisation Q1 Q2 Q3 Q4 Full Year FY07 68% 64% 56% 57% 61% FY06 62% 63% 62% 69% 64% During FY2007, we invested S5.5 million in plant and equipment, of which S1.8 million was used to strengthen our CMA division. As a result, production capacity for this division increased 43% while manufacturing capacity for our core products increased 11%. Including these new investments, our average capacity utilisation rate for FY2007 was 61%, compared to 64% in FY2006. Fixed asset utilization (Sales / Fixed Assets) remained steady at 1.6 times, the same as in FY2006. We believe these capital investments have placed the Group in a stronger position to tap future growth opportunities. As such, we foresee a lower need for capital spending in FY2008, with the present budget of S2 million targeted mainly for enhancing capability and improving overall plant utilization. 12

13 Building a Strong Team People their skills, experience, creativity and commitment are fundamental to the long-term success of Micro-Mechanics. As the company grows, our aim is to build an organisational structure that emphasises shop-floor personnel, minimises bureaucracy and focuses on clear, fair and bottomline-oriented measures of performance. During FY2007, we added 67 people, bringing our year-end headcount to 473. Of these additions, 61 were production and quality personnel, primarily at our lower-cost locations in Asia. We believe attendance and retention rates are useful indicators of how well we manage human capital. Based on our year-end headcount, our attendance and retention rates during FY2007 were 99.1% and 84.4%, respectively (99.0% and 85% during FY2006). Retention is based on the number of confirmed employees leaving. Improving personnel systems, communication and development programs will continue to be key factors in the Group s corporate development. We also recognize that motivation and reward are important facets to personnel management, and we are working to improve our pay-for-performance compensation systems. Under the Group s Performance Bonus Incentive (PBI) program, a portion of pretax earnings is distributed to employees based on specific targets for growth, profitability, liquidity, personnel management, cycle time and quality. Under the program, bonus amounts are paid based on an employee s position, base salary and overall responsibility. However, the total pay-out under the PBI program may not exceed 15% of pretax/pre-bonus earnings. Based on the Group s FY2007 results, PBI monies totaling S1.8 million (S1.7 million for FY2006) were distributed to our employees. At the same time, total Directors remuneration declined by 2.7% to S1.78 million in FY2007 (S1.83 million in FY2006). Dividend Payment The Board of Directors is recommending a final dividend of 2.5 cents per ordinary share (taxexempt). Given the Group's healthy cash balances as at end-june 2007 and lower expected capital expenditure for FY2008, the Directors are also recommending a special dividend of 1.0 cent per ordinary share (tax-exempt). Together with the interim dividend of 1.5 cents per ordinary share (tax-exempt) paid on 8 March 2007, the Group s total dividend for FY2007 would be 5.0 cents per ordinary share (tax-exempt), an increase of 43% over the 3.5 cents a share in FY2006. The total payout for FY2007 will amount to S6.9 million (S4.8 million in FY2006). 9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results. Not applicable. 13

14 10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months. Business Outlook and Plans For the year ended 30 June 2007 (FY2007), Group sales increased 9.4% to S34.7 million. After a record first quarter of S8.93 million, revenue slowed over the next two quarters reflecting both seasonal and slower industry conditions. In the last three months of FY2007, however, Group revenue recovered to reach its highest quarterly level ever of S8.94 million. Although industry watchers have recently lowered their growth projections for the semiconductor industry (Gartner s latest forecast for worldwide chip sales growth is about 2% for calendar year 2007), the Group s strategy is to maintain our focus on steady, sustainable and profitable growth. During FY2007, we continued to experience cost pressures from raw materials and annual wage increases, as well as intensifying selling-price pressure throughout the semiconductor supply chain. Despite these and higher production headcount and depreciation expenses due to recent investments in plant and equipment, we managed to maintain a healthy gross profit margin of 58.1%, above the Group s target of 50%. While we expect these costs and selling-price pressures, which are typical of the semiconductor industry to continue, we plan to keep a steady focus on quality, cost and operational improvements to mitigate the effects of these factors. With a lower capital spending budget of S2 million for FY2008, the Group s current emphasis is to optimise our capacity utilisation and improve operational efficiency. We also plan to continue keeping a steady hand on overhead expenses. While Group revenue rose 9.4% in FY2007, our total administrative, distribution and other operating expenses (inclusive of other income) increased only 1.7% to S9.9 million (S9.8 million in FY2006). As a percentage of sales, these overhead expenses declined to 28.6%, from 30.8% in FY2006 and 34.5% in FY2005. Our longer-term aim is to continue improving on this benchmark to achieve better operating leverage. Industry and competitive trends Based on data from the Semiconductor Industry Association, Asia accounted for 51% of global semiconductor sales during the 12 month period from July 2006 to June In the coming years, we expect chip manufacturing activities to continue re-locating to and expanding in Asia, especially the lowercost regions within Asia. Although this trend may affect some of our worldwide operations negatively, we propose to remain flexible and restructure continuously to adapt to the trends of industry movement. Although China has absorbed a tremendous amount of industry investments over the last few years, we believe the chip industry has begun considering other low-cost locations in Asia, such as Vietnam. With our existing plants in Singapore and Penang just a short flight away, we are in a strong position to capture emerging opportunties in Vietnam. In addition, with factories in China, Thailand and the Philippines, a sales office in Taiwan and a newly established direct presence in Indonesia and the growth strategies outlined below we aim to continue strengthening our operations and improve local support to our global customers. 14

15 With regard to competition, at present the landscape of the last few years remains relatively unchanged. There are meagre reliable independent statistics available, but we believe the segment of the semiconductor industry in which we operate is still highly fragmented. Our strategy of offering a full range of products, combined with a global approach to manufacturing and technical support, places us in a strong competitive position now and should competition become more intense. Growth strategies We intend to continue implementing growth strategies that are clear, practical and based on our core competencies and competitive strengths, underpinned by our insights and understanding of the industry and trends noted above. With five factories in Asia, an office in Taiwan and a newly-established direct presence in Indonesia and an intensification of our sales efforts to reach out to customers in the region, we feel Micro-Mechanics is strongly positioned to participate in, and take advantage of, the semiconductor industry s ongoing shift to and the new trends emerging in Asia. The Company also has offices in Switzerland and the United States so as to provide our global customers with fast, effective and local support. We also propose to continue with our efforts to improve our existing products and our range of products to include new consumable tools used in other chip-packaging and testing processes. During FY2007, sales for our Custom Machining and Assembly (CMA) division increased 58.1% to S3.1 million which accounted for 9% of Group revenue (6% in FY2006). Besides the advantages of diversifying our revenue to protect it from the cyclicality of the semiconductor industry, our CMA division s focus on customers in Europe and the United States also provides a good balance to our semiconductor tooling business, which is increasingly centered on customers in Asia. To support the encouraging growth in our CMA business, we have added new production personnel and invested an additional S1.8 million in FY2007 to equip the division for customer acquisition and growth. Personnel Review More than ever, we believe our future depends on our people their skills, experience, creativity and commitment. While these factors can be difficult to measure, we believe attendance and retention rates are useful indicators of how well we manage our human capital. Based on our year-end headcount of 473, our attendance and retention rates during FY2007 were 99.1% and 84.4%, respectively (retention is based on the number of confirmed employees who have remained with the Group). While the majority of people who left were non-management, and in many cases recently hired, we feel our biggest challenge is to attract, develop, and retain people that are able to work as a team, communicate and appreciate how their roles relate to the Group s as well as their personal growth and success. To create opportunities for staff development, we began an employee exchange program between subsidiaries (that allows shop-floor and technical people to work in another facility for periods of up to one month). During FY2007, we also initiated an executive development program for mid-level managers who meet quarterly. To progressively involve our people as shareholders and better align individual and organisational goals, we introduced an employee share-gift program which was completed in the third quarter of FY

16 During FY2007, Micro-Mechanics also continued to gain wider public recognition. In November 2006, we were included in the Forbes Top 200 Companies in Asia (with sales under one billion U.S. dollars) list based on a three-year snapshot of growth and profitability. Our approach of steady, sustainable and profitable growth has led to a strong balance sheet and it is satisfying to know that the Group ranks well compared to other companies in Asia and to be recognized as such. In addition, we are gratified and encouraged that our continous efforts to improve the Group s level of corporate disclosure and transparency have been recognised by the local investing community. In the latest release of the Business Times Corporate Transparency Index 2006 (Issue 3; December 2006), Micro- Mechanics was ranked 24 th out of over 700 companies listed on the SGX with an overall score that placed us among Singapore s best blue chip companies. In September 2006 and for the second year in a row, we also received an acknowledgement from the Securities Investors Association (Singapore) (SIAS) of our high level of disclosure and sound corporate governance practices. They presented us with their Most Transparent Company (Sesdaq) award. With a strong balance sheet that includes S13.6 million in cash and no borrowings, we are ready not only for opportunities, but also for such set-backs as may arise. Continued strife in the Middle East, high energy prices, volatile financial and foreign exchange markets, possible economic slowdown and global competition for raw materials underscore the importance of emphasizing persistence and practical strategies. The Board of Directors is optimistic that our current business strategy positions the Group to further enhance value for shareholders over the coming years. Barring an unexpected slowdown in the semiconductor industry, the Directors expect the Group to achieve steady growth and progress in FY Dividend (a) Current Financial Period Reported On Any dividend declared for the current financial period reported on? Yes Name Dividend of Interim Dividend paid on 8 March 2007 Final Dividend Recommended by Directors on 18 August 2007 Special Dividend Recommended by Directors on 18 August 2007 Dividend Cash Cash Cash Type Dividend Amount 1.5 cent per ordinary share (tax-exempt) 2.5 cents per ordinary share (tax-exempt) Tax rate 0% (tax-exempt) 0% (tax-exempt) 0% (tax-exempt) 1.0 cents per ordinary share (tax-exempt) The directors have recommended a final dividend and a special dividend of 2.5 cents and 1.0 cent per ordinary share (tax-exempt) respectively amounting to S4.8 million. 16

17 (b) Corresponding Period of the Immediately Preceding Financial Year A final dividend of 2.5 cents per ordinary share (tax-exempt) in respect of FY2006 was approved during the Annual General Meeting held on 20 October 2006 and paid on 13 November An interim dividend of 1.0 cent per ordinary share (tax-exempt) was paid on 9 March 2006 in respect of FY2006. (c) Date payable Payment of the dividend, if approved by the members at the Annual General Meeting to be held on 8 October 2007, will be made on 30 October (d) Books closure date Notice is hereby given that the Register of Members and the Share Transfer Books of the Company will be closed on 18 October 2007 for the preparation of dividend warrants. Duly completed registrable transfers received by the Company s Share Registrar, M&C Services Private Limited, 138 Robinson Road, #17-00, The Corporate Office, Singapore up to 5:00 p.m. on 17 October 2007 will be registered to determine shareholders entitlements to the said dividend. Members whose Securities Accounts with the Central Depository (Pte) Limited are credited with shares at 5:00 p.m. on 17 October 2007 will be entitled to the proposed dividend. 12. If no dividend has been declared/recommended, a statement to that effect. Not applicable. 17

18 PART II ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT (This part is not applicable to Q1, Q2, Q3 or Half Year Results) 13. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuer s most recently audited annual financial statements, with comparative information for the immediately preceding year. Geographical Segments 2007 Revenue by geographical location of manufacturing facilities/ assets Total revenue Singapore Malaysia Philippines Thailand USA China Switzerland Elimination Consolidated from external customers 10,173,241 9,201,845 3,922,386 1,764,107 3,993,502 2,760,576 2,879,951-34,695,608 Inter-segment revenue 5,330,358 5,012, , ,227 80, ,998 (11,468,548) - Total revenue 15,503,599 14,214,111 4,512,961 2,050,334 4,073,626 2,760,576 3,048,949 (11,468,548) 34,695,608 Segment results 3,396,422 4,167,994 1,673, ,440 41, , ,479 (24,159) 10,335,285 Unallocated expenses (119,384) Profit from operations 10,215,901 Taxation (1,914,142) Net profit for the year 8,301,759 Segment assets 14,398,890 13,975,971 2,585,456 1,165,590 1,949,090 2,893, ,216 (1,184,872) 36,711,264 Unallocated assets: Tax recoverable 10,651 Others 5,919,505 Total assets 42,641,420 Segment liabilities 4,668, ,239 1,927, , , , ,945 (5,295,274) 3,131,524 Unallocated liabilities: Income tax 1,917,115 Others 206,016 Total liabilities 5,254,655 Other segment information: Capital 1,212,194 2,687,667 1,145, ,337 5, ,880 3,919 (4,709) 5,532,447 expenditure Depreciation 960,389 1,151, , ,381 61, ,865 9,393-2,951,273 18

19 Geographical Segments 2006 Revenue by geographical location of manufacturing facilities/ assets Total revenue Singapore Malaysia Philippines Thailand USA China Switzerland Elimination Consolidated from external customers 9,344,446 8,674,136 3,994,462 2,158,145 3,369,830 1,999,250 2,161,907-31,702,176 Inter-segment revenue 5,363,565 3,913, , , , ,705 (10,600,301) - Total revenue 14,708,011 12,587,968 4,480,227 2,415,728 3,727,681 1,999,250 2,383,612 (10,600,301) 31,702,176 Segment results 3,474,124 3,729,802 1,462, ,496 (62,115) 379, ,688 (75,899) 9,935,775 Unallocated expenses (215,414) Profit from operations 9,720,361 Taxation (1,988,435) Net profit for the year 7,731,926 Segment assets 13,654,835 11,264,708 2,089,460 1,312,770 2,111,831 2,439, ,237 (4,452,936) 28,965,269 Unallocated assets: Tax recoverable 78,951 Others 10,126,141 Total assets 39,170,361 Segment liabilities 3,687, ,412 1,510, , , , ,369 (4,202,106) 2,989,072 Unallocated liabilities: Income tax 1,782,014 Others 232,675 Total liabilities 5,003,761 Other segment information: Capital 947,531 2,761, ,544 92,937 2, ,523 14,513 (113,810) 4,400,979 expenditure Depreciation 919,216 1,003, , ,241 66, ,973 8,429-2,610, In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments. Please refer to paragraph 8. 19

20 15. A breakdown of sales. Group Group Increase/ FY2007 FY2006 (decrease) S S Sales reported for first half year 17,702,991 15,369, % Operating profit after tax before deducting minority interest reported for first half year 4,429,039 3,663, % Sales reported for second half year 16,992,617 16,332, % Operating profit after tax before deducting minority interest reported for second half year 3,872,720 4,068,015 (4.8%) 16. A breakdown of the total annual dividend (in dollar value) for the issuer s latest full year and its previous full year. Total Annual Dividend Latest Full Year (FY2007) Previous Full Year (FY2006) S S Ordinary 6,924,294 4,847,006 Preference - - Total: 6,924,294 4,847,006 Note: The total annual dividend comprises the interim dividend of S2,077,288 paid on 8 March 2007 and the proposed final and special dividend of S4,847,006. BY ORDER OF THE BOARD CHOW KAM WING Company Secretary (18/08/2007) 20