Report to Shareholders

Dear Shareholders,

After hovering around the S$100 million annual revenue a number of times, the Group finally breached this landmark topline achievement in the financial year ended 31 March 2014. Management focus for the financial year under review was therefore on bottomline growth. However, the rippling effects of continuing economic headwinds in Europe and China constrained demand growth in the electronic manufacturing industries with consequential effect on the local and regional supporting economies that the Group businesses operate in.

The business environment continues to be very competitive and margins take the first hit in a slow or non-growing economic pie. The Group’s operating result closely reflect these challenging global economic conditions. While our annual revenue remained constant at the S$100 million mark, several of the operating subsidiaries were able to report increased profits. As a result the total Group bottomline was a third lower than that reported a year earlier.

In China, where our specialist relocation business had successfully secured several large scale projects their commencement were delayed in line with the slow market demand growth for their products. Nonetheless, we are hopeful on the outlook for this business segment as our China entity continues to be successful in bidding for new projects as existing customers expand their production capacity spurred by technological breakthroughs in their products and manufacturing techniques. We also expect to secure more projects in the Vietnamese market as the country continues to attract more foreign investments. 

In the new financial year the Group will project our global capability by marketing our integrated service business directly to the US and European head offices of multinational (“MNC”) companies that operate or intend to operate in our region. The Group will also seek business opportunities in Myanmar.

The Third Party Logistics business segment reflects more closely the economic growth of the country they operate in. Our Malaysian entity grew steadily in both top and bottom lines and will explore opportunities for a regional logistics venture to support increased cross-border trade into Thailand and beyond.

In the new financial year the Group hopes to see better results from revamped business models of various companies in the Technical & Engineering business segment that did not do well in the year under review. Some of them have successfully secured projects that would commence in the new financial year and with improved project management they are expected to contribute substantially to group top and bottom lines.

The Group has adopted the following Shared Values as part of its growth strategy and as the basis to develop our corporate culture and these Shared Values would be promoted to the rank and file in the new financial year:

• Profit-mindedness – recognizing and maximizing the effective use of resources
• Management Excellence – art in achieving all stakeholders’ needs from outside-in to inside-out to attain a competitive edge
• Teamwork – to work with utmost co-operation to complete tasks promptly and efficiently
• Integrity – possessing strong moral values and principles to differentiate between right and wrong
• Respect – positive feeling of esteem or deference for a person or entity
• Commitment – responsibility of individual/entity to put in extra efforts in the completion/achievement of common goals/tasks

Management expects that a strong corporate culture will enable greater synergistic efforts from the resources and business expertise that is available within our diversified business segments and customer base.

Whatever the global economic conditions, management shall endeavor and be ever-ready to seize any opportunity that comes along to up our growth ante. In this regard we shall strive for:

• continued innovation of and good operational practices in our integrated services
• presence in new key markets
• leveraging the Chasen brand spearheaded by its niche global specialist relocation services, and
• emphasis on our Shared Values in motivating our workforce and development of group think.

In this report, I shall further outline to our stakeholders the developments in each business segment, the challenges and opportunities driving our business processes and how we will continue to improve and grow a sustainable business for the future with good corporate governance as our guiding principle.

FINANCIAL PERFORMANCE

Briefly, in the year under review, our revenue experienced a 3% contraction year-on-year from S$101.5 million to S$98.8 million. The shortfall was attributed largely to reduction in revenue from the Technical & Engineering (S$6.9 million) and Third Party Logistics (S$2.2 million) business segments. However, the Specialist Relocation business segment recorded a S$6.5 million increase to the Group’s topline.

Profit After Tax for FY2015 was S$2.2 million, which was S$1.2 million or 34% less than the previous financial year of S$3.4 million.

SPECIALIST RELOCATION BUSINESS SEGMENT

Since the inception of the Company, the Specialist Relocation business has been consistent in contributing positively each year as we grew our regional capability into a global one. In the absence of larger projects/contracts, the operating companies within this business segment have recurring business in the form of ‘maintenance contracts’ that customers find our services more economical than establishing their own workforce. 

We extend our service offering by incorporating relevant technical and engineering expertise to value add to the logistics elements in an integrated service capability. This is particularly attractive in the Singapore and Vietnam markets while providing niche logistics solutions and aided with specialized equipment that are not readily available in the market was the key in clinching certain projects in China and Malaysia . 

Shanghai-based Chasen (Shanghai) Hi-Tech Machinery Services Pte Ltd (“Hi-Tech”) is in the final execution phase of the 8.5-Generation thinned-film transistor liquid crystal diode (TFT LCD) manufacturing plant for a Chinese government-owned company in Nanjing. In addition, it is also busy with other projects in Chongqing, Hebei and Shenzhen. 

Due to the expanding volume of current projects and expected increase in warehouse contracts, Penang-based Chasen Logistics Sdn Bhd (“CLSB”) has acquired a larger premise to accommodate this requirement. This larger facility located in Bukit Minyak is strategically located between the first and second Penang bridges. The shift is expected to be completed by end August 2015.

Singapore-based Chasen Logistics Services Limited (“CLSG”) has successfully secured three prized customers that were strongly coveted by our competitors. One involved a major relocation operation from SciencePark 2 to Fusionopolis for a local research institute while the other is a million-dollar warehousing contract for a MNC semi-conductor OEM (original equipment manufacturer), and thirdly, as the appointed preferred relocation and installation contractor in Singapore and the region for a Holland-based OEM for the semi-conductor
industry.

There was also another major project relocating manufacturing plant equipment from Ireland to Penang secured by this business segment. In summary, the Specialist Relocation business segment had performed well all these years as the standard bearer of the Chasen brand.

THIRD PARTY LOGISTICS (3PL) BUSINESS SEGMENT

This business segment as a whole suffered a drop of S$2.2 million or 8% in its annual revenue. This was attributed largely to several customers not renewing their warehousing contracts with Singapore-based DNKH Logistics Pte Ltd. On the other hand, Penang-based subsidiary, City Zone Express Sdn Bhd (“CZE”) continued its steady business growth in both revenue and profitability.

CZE is working to secure more inland and cross-border contracts to continue growing their top and bottom lines. In this regard, it has purchased several new trucks adding to its current fleet to meet the anticipated demand for their services.

TECHNICAL & ENGINEERING BUSINESS SEGMENT

Business in this segment contracted in line with the reduction in activities within the construction industry amidst stronger competition among the bigger players in the market from whom our subsidiaries derive their projects. In the year under review, the Technical & Engineering business segment had experienced a 17% or S$6.9 million drop in revenue from S$40.1 million to S$33.1 million. Nevertheless, there are still smaller scale projects involving steel structural designing, which Hup Lian Engineering Pte Ltd (“HLE”) has secured to date for the new financial year.

The new management team helming REI Technologies Pte Ltd (“REI”) is diligently working hard to secure projects in line with its revamped business model, which we hope will bear fruit in the new financial year.

While REI Promax Technologies Pte Ltd (“Promax”) is among the few contract manufacturers in Singapore serving the ordnance equipment industry, not many orders were received in the year under review.

As such, it had to look to other industries in order to sustain its business operations. On the other hand, its China-based subsidiary, Suzhou Promax Communication Technology Co., Ltd (“SZPMX”) is experiencing a resurgence in orders from its telecommunication customers. With the current wave of technology advancement in the industry, SZPMX is confident of getting a consistent supply of contracts to sustain its business operation in the medium term. It plans to relocate to new premises to house its growing operational capacity.

Goh Kwang Heng Scaffolding Pte Ltd and its twin entity Goh Kwang Heng Pte Ltd (“GKH Group”), which turned around under new management in the previous financial year, recorded yet another successful year in both top and bottomline growth with its new business model. It has secured several major projects and if executed according to schedule would contribute significantly to Group results in the new financial year.

The Group’s China-based wastewater treatment entity, Eons Global Water (Jilin) Co., Ltd (“EGW”) continues to encounter bureaucratic issues with the local authorities pertaining to its operations in the Jilin Economic & Technological Development Zone (“ETDZ”). As such, this has affected its capability in supplying industrial filtered water to the factories within the EDTZ. The General Manager is working energetically and closely with some local officials to help EGW to achieve its desired optimum level. The anticipated commissioning of the wastewater treatment plant last August was again held in abeyance due to the slow progress in the completion of the upgrading of the plant to meet new national environmental standards. Nevertheless, EGW remains optimistic that it can overcome these issues in the new financial year and hope to increase its revenue by the end of FY2016.

CHALLENGES

As mentioned in the beginning of my report, the lethargic economic landscape continued to pose challenges to our business operations that faced increasing costs without corresponding consideration from our customers who are themselves caught in a similar situation. However, our resilient spirit and well diversified revenue sources will enable us to face this current not so buoyant economic climate without dampening our commitment to customers. Our service quality and market-proven integrated service solutions will help ensure that we maintain our market share in the various industries we serve. With the Shared Values corporate culture we hope to reap higher rewards for our endeavors.

In this respect, I would like to assure all our stakeholders that we are committed to delivering higher shareholder value and I hope you will continue to give us your support

OPPORTUNITIES 

Though the semi-conductor manufacturing industry is no longer fast growing in Singapore, we still continue to service our MNC customers through our maintenance contracts and grow as a supporting player in the industry by moving up the supply chain whenever opportunities avail.

The Group through its wholly-owned subsidiary, CLSG is also set to project its niche specialist relocation services beyond Singapore by establishing a marketing presence in the USA. With the US government making known its initiatives in encouraging strategic alliances to help kick-start the enlargement of the manufacturing sector in the US and coupled with news from industry sources that some (US) homegrown semi-conductor and electronic manufacturing companies with current overseas operations are making plans to move some of their production facilities back to the US, the Group hopes to take advantage of this ‘reverse’ plant relocation movement.

The objective of this global marketing office is to source for new markets such as in the aviation and power plant industries. These industries also require the same set of specialized skills that Chasen is known for in Singapore and the region. At the same time, this office will also be able to enhance its business relationship with the US-headquartered offices of its Singapore-based MNC customers with the hope of securing more relocation projects whether out of the US or back into the country.

This global marketing office can also act as a conduit for other Chasen operating subsidiaries to synergize the business mix of the three business segments and secure a bigger share of the international trade between USA and Asia. At the same time, it can be the vehicle for the Group to realize its vision of becoming a global integrated service provider. 

Shanghai-based Hi-Tech already a major player in the China relocation logistics market is confident of securing more large scale projects as they come into the market and is exploring to extend its expertise to Myanmar as more foreign investments flow into this emerging ASEAN economy, particularly from early mover Japanese investors.

Similarly, for the Third Party Logistics business segment, CZE, in particular, has set its sights on attaining a larger share of the local and cross-border logistics pie as part of its current business development plans. On the plate, CZE is poised to secure a substantial revenue churner from an international courier company for cross-border transportation.

While the challenge is hardest for the Technical & Engineering business segment, there remain enough opportunities in the construction and manufacturing industries for the different subsidiaries to leverage their strengths on. 

HUMAN CAPITAL DEVELOPMENT

Following the completion of our HR harmonization consultancy project, the Group HR personnel are collaborating with their colleagues in the Singapore operating subsidiaries to implement an updated and more comprehensive set of Group HR policies and practices. Thereafter the Group HR policies would be extended to all overseas operations subject to local employment laws and practices.

In October 2014, the Board of Directors had organized a one-day workshop on Shared Values during the Group’s biannual business meeting in Chiang Rai, Thailand. Together with the heads of business units, the group leaders brainstormed and discussed on how to move the group into the next phase of growth. The workshop yielded a set of Shared Values (highlighted in the earlier part of this report), which we have agreed to adopt as part of the Chasen corporate culture. We hope that these Shared Values will also help motivate, guide and sustain our continued business growth.


Subsequently, the Group’s training team went on a road show and conducted a series of Shared Values workshops targeting at all personnel from senior management down to the administrative staff level of the operating subsidiaries in Singapore, Malaysia, Vietnam and China. These workshops were aimed at inculcating the Shared Values as the guiding ethos for all our valuable employees so that we can achieve performance excellence in the day-to-day operations, which we hope will become deeply rooted as part of Chasen culture in the years to come. In the next phase, these Shared Values will be further cascaded down to the rank and file of the workforce, and all new employees will have to undergo an induction session on these values. 

APPRECIATION 

On behalf of the Group, I would like to thank our customers, vendors, advisors, bankers, partners and business associates whose support have been most invaluable in this challenging year. My heartfelt appreciation also goes out to our shareholders who had patiently and trustingly stayed with us throughout this period. Last but not least, I would like to thank my directors, management team and employees who have worked closely with me on this journey. Let us focus, commit ourselves, and build an even stronger business with our Shared Values in the next phase of our growth.

Barring any unforeseen circumstances, with the guidance of our Shared Values, we will march valiantly in our quest to build a stronger and sustainable Chasen.

LOW WENG FATT
Managing Director and CEO