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I am pleased to present the annual report for the financial year ended 31 March 2021 (“FY2021”), a year that presented unprecedented challenges as well as fresh opportunities due to the COVID-19 pandemic. As I write this message, the situation remains uncertain amid reports of fresh variants and mutations of the virus, continued lockdowns or restrictions worldwide and ongoing vaccination programmes.
The supply chain disruptions caused by the pandemic, recovery of economic activity in the People’s Republic of China (“PRC”) since the early days of the outbreak, along with the Singapore Government’s economic support schemes have contributed to a commendable performance despite the challenges. We recorded a sharp swing from losses in FY2020 to profit in FY2021. In the process, we have taken actions to lower our costs in response to the challenges and continue to build a stronger foundation in the Group.
As manufacturing activity in the PRC began recovering, Specialist Relocation projects held back earlier by the outbreak of the pandemic were restarted. We also secured several other fresh high-value orders during the year. Electronic manufacturing activity in the PRC, including the production of display screens, remains vibrant due to worldwide demand for 4K and 8K displays and the increasing adoption of OLED, having reached attractive cost and performance at scale and better yield.
For the Third Party Logistics (“3PL”) sector, we have benefited from the disruptions to air and sea cargo transport caused by the pandemic. These disruptions persist even now, leading to unprecedented delays or cost increases due to labour or Customs clearance issues aggravated by the pandemic. By contrast, the trucking of goods overland has emerged as a more cost-effective and reliable option. At the same time, the stay-home restrictions due to the pandemic have increased e-commerce activity, which in turn led to higher utilisation of our warehouse capacity in Malaysia within the integrated 3PL and cross-border
The Group recorded a revenue of S$130.7 million in FY2021, an increase of 29% from S$101.0 million in FY2020, driven largely by our Specialist Relocation and 3PL business segments. The third segment – Technical
& Engineering (“T&E”) – experienced project delays and shortage of labour in Singapore in the early days of the pandemic. However, this was largely offset by strong orders from the segment’s component and parts manufacturing operations located in Singapore and the PRC.
Gross profit more than doubled to S$24.2 million from S$12.0 million a year ago. The recovery was more significant in 2HFY2021, with gross profit growing more than six-fold to S$12.6 million from S$1.9 million in 2HFY2020.
Due to the recent challenges, we have reviewed our cost structure and streamlined operations selectively. These efforts have yielded positive results in the year under review in conjunction with grants received from the Job Support Scheme and other financial support provided by the Singapore Government to cushion the impact of the pandemic.
The Group recorded a net profit after tax of S$3.4 million, reversing the loss of S$15.2 million a year ago, underscoring the resilience of Chasen’s diversified business and strong execution ability of its management.
Anticipating further volatility in the market, we have strengthened our balance sheet. Chasen’s cash and cash
equivalents stood at S$13.9 million as of 31 March 2021, more than double that of S$5.8 million as of 31 March 2020. The Group’s property, plant and equipment recorded an increase of S$22 million following our acquisition of a warehouse in Penang, and we recorded a revaluation gain in accordance with the Singapore Financial Reporting Standards.
The Specialist Relocation segment, the leading contributor, recorded revenue of S$60.8 million, a 22.8% increase from S$49.5 million in FY2020. FY2021 gross profit for this segment rose to S$13.6 million (FY2020: S$9.3 million) on resumption of backlogged projects as well as new order wins in Changsha and Guangzhou in 2HFY2021.
Revenue and gross profit for 3PL rose to S$43.9 million (FY2020: S$28.1 million) and S$7.1 million (FY2020: S$3.2 million) respectively. We continue to see higher demand for land transportation services amid signs of manufacturing activity relocating outward from the PRC to various parts of Southeast Asia for cost and strategic reasons. Our marketing slogan, ‘Cheaper than Air, Faster than Sea’ resonates well with these customers amid the ongoing disruptions. In March 2021, the Group successfully completed the acquisition of a warehouse to provide non-bonded and bonded services in the Bayan Lepas industrial zone in Penang, expanding our 3PL capacity and capturing the strong growth in demand for warehousing. The Group
continues to look out for warehouse assets in strategic locations preferred by our major customers.
Revenue for T&E increased to S$26.0 million (FY2020: S$23.3 million) while gross profit of S$3.6 million reversed from a loss of S$0.4 million a year ago despite delays in onsite construction activity, which have led to cost increases. Nonetheless, this segment recorded higher sales for the component and parts manufacturing operations.
As businesses adapt to work around the COVID-related restrictions, we are cautiously optimistic that the worst is behind us as the economies in our countries of operation gradually re-open. We have gained valuable experience and reviewed operations to become more agile, resilient and opportunistic in a post-COVID world. Specifically for each segment, our assessment are as follows:
This segment is expected to continue to be the maincontributor to our financial performance. The PRC hasposted the strongest recovery from the pandemic among major economies back to pre-pandemic levels, and themomentum continues. We see opportunities arisingfrom the growth of the OLED/AMOLED display panelmanufacturing market. We are currently the only relocationspecialist with a track record of moving the next generationOLED production line equipment of a leading South Koreanmanufacturer. This was achieved in November 2020 whenour subsidiary in the PRC, Chasen (Chuzhou) Hi-TechMachinery Services Pte Ltd, secured a contract to relocateequipment for a 6th Generation OLED module panelassembly factory in Guangdong Province. Worth RMB5million, the project was completed in February 2021.
In February 2021, Chasen Logistics Services Limited secured a month-long project to manage the relocation of a U.S.-owned Taiwan-based semiconductor plant from Hsinchu City to Zhubei. The project was worth approximately S$0.6 million.
Just entering FY2022, we secured two more move-in projects for two TFT LCD manufacturers; the first is to support a 6th Generation AMOLED TFT LCD manufacturer in Fujian Province valued at RMB40 million (S$8.2 million), while the second is a RMB14.3 million (S$2.9 million) project for a 10.5th Generation TFT LCD manufacturer in Guangdong. The first project is due to begin in July 2021 while the second project would commence in September 2021. Both projects are scheduled for completion in March 2022 and May 2022 respectively.
As the growth rate for the PRC’s TFT LCD sector begins to plateau, we intend to diversify to other electronic manufacturing sectors such as semiconductor manufacturing. As more manufacturers relocate either within the PRC or outbound to Southeast Asia, we will seek to move up the value chain by offering turnkey services creating adjacent opportunities for our 3PL segment.
The Group continues to strengthen its foothold within Malaysia, Thailand and Vietnam, as countries continue to relocate their supply chain operations out of the PRC.
Chasen’s Penang-based subsidiary, City Zone Express Sdn Bhd, secured three significant contracts worth RM20 million (S$6.6 million) to deliver electronic and semiconductor parts for two U.S. MNCs with manufacturing plants spanning Singapore, Malaysia and the PRC. Cross-border operations have started for the first two contracts in Q32021 while the third contract has commenced in Q4FY2021.
Subsequently, towards the end of FY2021, City Zone won another cross-border contract worth RM3.5 million (S$1.1 million) to truck power tools and related equipment for a German engineering and technology MNC from different locations in the PRC to Penang. The contract, which commenced in June 2021 will run till December 2021.
Even with recent orders we continue to sharpen our competitive edge and will increase our fleet of trucks by between 15-20% by the end of FY2022, with more fuelefficient and environment-friendly vehicles in addition to digitalization and GPS-enabled tracking and monitoring systems to enhance security and operational efficiency.
We are working on pilot projects with the Royal Malaysian Customs Department to deliver a seamless cross-border land transportation service through the implementation of the ASEAN Customs Transit System (ACTS). These trials would connect Malaysia with our customers’ destinations in Thailand and Cambodia. We have also commenced our warehouse operations under the AEO (Authorized Economic Operator) Program, whereby Customs clearance would be carried out in-house in our newly acquired nonbonded and bonded warehouse facility in the Bayan Lepas industrial zone in Penang
As the COVID-19 situation continues to restrict the entry to foreign workers, the outlook for the construction industry remains challenged due to continuing labour shortages and increased costs. Even as we hope for improvement in labour supply in the medium term, the immediate focus is to re-engineer workflows and re-organise current teams to achieve higher productivity per team as well as more teams formation with current resources.
We have re-aligned business strategies in the T&E segment to tap opportunities in solar panel installation, interior space and exterior façade cladding works using specialised industrial-grade glass and aluminium in the Singapore market.
Demand for green energy continues to grow, with the Singapore Government announcing a budget of S$1 billion directed at renewable energy. We have and intend to continue tapping on the Government’s plans to install solar panels in HDB rooftops, having completed solar panel installations on roofs for more than 10 HDB blocks in the initial phase. We are solidly positioned to start on the next phase with more than 32 HDB blocks and will explore the potential of solar panel installations in the region as countries pivot to be carbon-neutral in the long term.
Similarly, leveraging on the technical know-how and capability through a joint venture business two years back, we will continue to participate in interior decorations and façade cladding as Singapore extends and expands its domestic rail network including the new Woodlands MRT project. We also expect the segment’s components and parts manufacturing capability to continue capturing opportunities in emerging core technologies such as 5G, Internet of Things and electric and autonomous vehicles.
In summary, the Group has confidently navigated the challenges brought on by the health pandemic in the last year and is well positioned to capitalize on business opportunities in the path ahead with the re-opening of economies in our countries of operations. The geographically diversified sources of revenue and growth in the three business segments serve as a solid foundation to underpin the theme of this annual report, and decisively boost the resilience and agility of the Group to capture opportunities. In driving the future of work, our business strategies re-alignment would commensurate with emerging growth trends and continuing digitalization efforts to overcome labour constraints and boost productivity, and competitive edge, will be the key focus going forward.
On behalf of the Group, I would like to thank our customers, business partners for their support throughout the year. I would also like to extend my gratitude to the Board, management staff and our employees for their hard work and dedication; without their contribution, Chasen would not have surmounted the challenges posed by COVID-19. Our special thanks to the Singapore Government for aiding our SMEs to stay afloat during this pandemic in which Chasen owes its gratitute as well.
Last but not least, I would like to thank our shareholders for their loyalty and unwavering support during this challenging period. Together, we look forward to growing each of our business segments and adding value for our shareholders.
LOW WENG FATT
Managing Director & Chief Executive Officer