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FY2013 has truly been a year of ups and downs. Chasen celebrated the most significant event of the year when we were transferred from Catalist to the Mainboard of SGX. The Group further extended our service capability with our maiden purified water and waste water treatment project in China.
The Group’s solid track record of winning contracts and steady approach to grow our various business segments have helped us come through relatively unscathed in a challenging global environment, even though this was ultimately tempered by the Group’s first full year bottomline loss resulting from an arbitration settlement with a customer. This was further aggravated by the change in accounting treatment to expensing off marketing costs prior to receipt of revenue from projects secured through those marketing expenses and certain provision in assets value.
The experience of the past year would serve the Group well and we are confident that our fortunes would be revived as seen from the success in projects secured as announced by the Group since the last quarter of FY2013. We are committed to enhancing our foothold in the region by capitalizing on the growth opportunities especially in newly emerging economies of Timor-Leste and Myanmar and we look forward to your continued support in our journey as we advance with optimism!
Our growth strategy and evolving business model
The Group continues its transition from a turnkey relocation specialist into an integrated service provider in the establishment of new manufacturing facilities outside the home country of our customers.
In 2007, Chasen was listed as a provider of Specialist Relocation Solutions with annual revenue of $16 million. Our business growth strategy was to move up the supply chain by acquiring capability in Third Party Logistics Services and Technical & Engineering capabilities to complement our Specialist Relocation business. It had resulted in the annual Group revenue grossing nearly $100 million in FY2012 and the cumulative profit growth in excess of 30% annually since our listing, derived from diversified revenue sources that enabled the Group to successfully weather cyclical industry downturns.
The evolution into an integrated service provider business model is spearheaded by the Specialist Relocation business segment with its global service capability and regional market leadership. We have strong track records with leading multinational product manufacturers and Original Equipment Manufacturers (OEM) with our ability to relocate their equipment to as far away as Puerto Rico and the Czech Republic from our Asian base as well as from the US to Malaysia. Each operating subsidiary in the other business segments would aim to be substantial players in their respective industry in order to
position themselves as preferred vendors in a combined Group turnkey project capability.
Two subsidiaries in the Technical & Engineering business segment established themselves as regional players during the financial year reported on when Hup Lian Engineering secured two residential construction projects in Malaysia worth a total of RM54.6 million (SGD21.9 million). Global Technology Synergy, our waste-water treatment specialist secured its maiden water treatment project in Jilin province, China. Jilin province is a water catchment area situated along the Songhua River Basin, the third largest river basin in China and one of the best possible locales for Chasen to embark on this new service offering. It would result in substantial increase in recurring revenue to the Group in the new financial year achieving one of our goals to enlarge the share of recurring revenue to total revenue of the Group.
This new service capability further extend our well diversified revenue source to include local government and industrial estate occupants to our current customer base of clients in the electronics sectors of thin-film transistor liquid crystal display (“TFT LCD”), wafer fabrication, semi-conductor and consumer electronics, telecommunications, renewable energy, oil & gas, facility maintenance, marine and construction industries.
As Chasen continues to expand its scope of business, it would derive greater operational efficiencies by consolidating our operations into one large facility. To this end, we are still looking for the opportunity to realize our plans to secure a facility which will allow us to house the bulk of our operations under one roof.
Since our listing in 2007, Chasen has grown rapidly and is on track to achieve even greater success. To sustain our growth momentum, we will need to strengthen our Group Human Resource framework. A strong HR framework will allow us to compete for quality talent in the economies we operate in
to be able to better compete on the global stage. Chasen’s rapid growth was fueled by acquisitions, joint ventures as well as startups. As a result we inherited a variety of HR practices prevalent in different industries that these companies operate in.
To harmonize and strengthen the HR framework within the Group, the Company appointed a leading multinational HR consultancy to undertake this challenging HR project, which would provide us with the opportunity to align ourselves with sound, effective and competitive HR policies and practices Group-wide that is consistent with our status as a publicly listed local SME. The harmonizing of HR policies and applying best practices across all subsidiaries will enable the Group to manage and deploy our human resources more efficiently. A more engaged workforce that is cohesive and highly motivated would ultimately impact the company’s performance positively as well as enable management succession.
Through a generous SPRING grant, Chasen appointed Hay Group as the consultant in helping us to execute this HR Harmonization Project. In compliance with the terms and conditions of the SPRING grant, the project covered only the eight Singapore operating subsidiaries across the three business segments of the Group.
The project aims to achieve the following objectives for the Singapore operations:
The project kicked-off in mid-November 2012 and is expected to be completed by end August 2013. Among the key deliverables would be a standardized employee handbook, which would serve as the basis and guide or SOP (Standard Operating Procedures) in the implementation of the Group HR policies and practices.
Another component is the harmonization of the different jobs/positions across all subsidiaries through a job grading system that is benchmarked across the different industries. This would provide Management with a clearer view on how and where to emplace the right people in critical jobs with the right compensation and benefits. At the same time, Management would be better equipped with a macro view in the talent management of our human capital. As part of the project, all HR personnel and heads of subsidiaries would be trained and sufficiently equipped with the necessary skills so as to assist them to understand the complexity of HR functions and how to manage their respective human capital, the key to enhancing their operational productivity.
Upon completion of the Singapore project, a similar exercise would be undertaken at the overseas subsidiaries replicating the appropriate HR policies and practices subject to local employment regulations and market competition to achieve similar objectives in recruiting and retaining the desired human talent in each country where the Group operates.
The Group achieved revenue of S$79.4 million in FY2013, a decline of 20% compared to FY2012 due mainly to a 58% reduction in revenue contribution from the Relocation business segment as compared to the last financial year. The decline in gross profit was in line with the decline in revenue but the Group’s net loss was mainly due to other operating expenses being significantly higher than the previous year. These were mainly due to the write-off of trade debts of $1.0 million and a further $5.1 million following the settlement of a trade dispute through arbitration as well as a provision for write-off of other debts of $2.0 million. However, after recording its first bottomline loss as a Group this financial year, we are pleased to report that several major relocation projects in the People’s Republic of China (PRC) would be coming on line in FY2014. Since early 2013, the Group has made several announcements of contracts awarded or Purchase Orders received for such projects by its subsidiaries in this business segment. The Group expects that the remaining projects for which commencement was held back in 2012 would also come on stream this year.
Prospects and Outlook
Chasen continues to be affected by uncertainties in the global macroeconomic environment and these have resulted in some project delays on the customers’ end for our Relocation services business. The prospects for the Technical & Engineering business in Singapore and PRC are also bright with a few million dollar deals expected. However, we expect most of these projects to come on stream in latter part of FY2014. The challenging business conditions will also continue to add pressure on pricing and margins but as a Group, we constantly look for ways to grow the business and increase shareholders’ value. Notwithstanding the challenging economic conditions, there are still growth opportunities in each business segment to enable us to grow and diversify our revenue base further, in particular the newly emerging economies such as Timor-Leste and Myanmar.
There are also acquisition opportunities within the supply chain to achieve our corporate growth objective to provide an integrated service to our multinational customer base.
The Group remains dedicated to improving communications with stakeholders through a series of investor friendly measures, with the aim of achieving greater corporate transparency, better awareness and enhanced brand equity.
We have announced our financial results well within 45 days and 60 days for our quarterly and annual results respectively. Results briefings were arranged on a regular basis where the Group’s key management shared with investors and market analysts the Group’s corporate updates, financial review and their views on market outlook.
Chasen also participates actively in media interviews and supplements by mainstream media like Straits Times, Lianhe Zaobao, Business Times and The Edge, as well as online media portals like NextInsight.
Chasen’s Board of Directors engage and update shareholders at the Annual General Meeting by encouraging robust discussions during the meeting.
Despite our first bottomline loss, the Board intends to continue its dividend payment as a reward to shareholders for their loyalty and support. The proposed dividend is subject to the approval of our shareholders during the upcoming Annual General Meeting and shareholders would be informed in the Notice of Meeting.
On behalf of the Group, I would also like to take this opportunity to thank our clients, advisors, suppliers and business associates who have contributed to the Group in FY2013 and I look forward to many more years of working alongside you.
To our valued shareholders, I would like to convey my sincerest appreciation for your continued support in our Group, especially in FY2013 when we suffered our first bottomline loss. We will work even harder to ensure that your patience and support is reflected in our upcoming financial performance.
I am also grateful to the dedication of our staff and Board of Directors without which the Group would not have come this far is such a short time.
LOW WENG FATT
Managing Director and CEO