Vicplas International has achieved a profit after tax of S$10.4 million for FY2021 ended 31 July 2021, an increase of 112.5% from S$4.9 million for FY2020.
Mr Cheng Liang, Chief Executive Officer of Vicplas commented: “In FY2021, Vicplas achieved its best results ever with the medical devices segment’s positive growth trajectory and the pipes and pipe fittings segment recovering in tandem with the construction industry. With a challenging operating environment due to the ongoing Covid-19 pandemic and uncertainties in the wider macro environment, the Group remains cautiously optimistic for the year ahead.”
Mr Walter Tarca, President of Medical Devices, commenting on the medical devices segment said: “In order to sustain our growth momentum, we will continue to improve our operational efficiencies and expand our capabilities to provide customers with very effective solutions for their product innovation and manufacturing requirements. We are evolving from a contract manufacturer to becoming a full collaboration partner with strong capabilities serving our global customer base which includes some of the top 30 medical device companies in the world. We are also looking to expand our manufacturing operations to better serve customer demand as we are optimistic about the long-term growth trend of medical device outsourcing.”
Financial Highlights
The Group’s revenue increased by 28.2% to S$113.9 million in FY2021 from S$88.8 million in FY2020, driven by higher revenue from both medical devices and pipes and pipe fittings segments.
Segmental Revenue
The revenue for the medical devices segment was S$80.2 million in FY2021, an increase of 30.6% from FY2020 due to increased orders from its customers. The pipes and pipe fittings segment also recorded an increase of 22.9% in revenue from FY2020 to S$33.8 million in FY2021, due to the gradual recovery in the construction industry from the disruptions caused by the Covid-19 pandemic.
Other income increased by 32.4% in FY2021 due to more tools built for customers in the medical devices segment and foreign exchange gain, despite a S$0.9 million reduction in Covid-19 related government subsidies in FY2021 as compared to FY2020. Raw materials and consumables used by the Group increased by 29.4% in line with the increase in revenue. Employee benefits expense (including salary) also rose by 26.4% due to increased headcount and overtime, especially in the medical devices segment, to meet the higher revenue. Depreciation and amortisation expenses increased by 11.5% mainly due to the increase in property, plant and equipment used in the medical devices segment.
Other operating expenses increased by 15.6% mainly due to the increase in marketing expenses, factory consumables, laboratory and testing, tooling expenses, repairs and maintenance and other operational costs to support the increase in revenue. Income tax expense decreased by 16.4% in FY2021 despite the increase in profit before tax due partly to the utilisation of past years’ tax losses brought forward. The income tax expense in FY2020 also included the effects of utilising the deferred tax asset related to a subsidiary in China, which was lower in FY2021.
As a result of the abovementioned, the Group recorded a profit before tax of S$12.3 million and a profit after tax of S$10.4 million for FY2021, which is an increase of 71.6% and 112.5% from FY2020 respectively.
Financial Position
As of 31 July 2021, the Group has a net asset value per share (excluding treasury shares) of 14.03 Singapore cents (31 July 2020: 12.17 Singapore cents) and shareholders’ equity of S$71.6 million (31 July 2020: S$61.7 million).
Proposed Final Dividend
The Board of Directors of Vicplas is recommending a final dividend of S$0.0045 per ordinary share for FY2021 (FY2020 final dividend: S$0.00375 per share), which is subject to approval by shareholders at the AGM on 25 November 2021.
The recommended dividend in respect of FY2021 amounting to S$2.3 million represents a 20% increase from the dividend paid in respect of FY2020, which is a substantial uplift in recognition of significantly higher profit after tax in FY2021. In view of opportunities to keep growing the Group’s medical devices segment, more capital has been retained in the business to support such growth in the long term interest of shareholders.
In addition, the Group is mindful of the uncertainties in the macro environment as well as the Group’s working capital, cashflow and capital expenditure requirements. The Group continues to take all of these considerations into account in striving for a balance between rewarding shareholders and maintaining sufficient capital to grow the business.
Business Outlook
The Group grew its revenue and profit after tax in FY2021 by 28.2% and 112.5% respectively as compared to FY2020. The Group expects its revenue to continue growing into the next reporting period, although it is noted that over time its rate of growth can be expected to moderate given the effect of increasingly higher base. The Group’s profit after tax in the next reporting period may also be impacted by increasing operating costs, disruptions in logistics/supply chain, higher development and expansion costs and reductions/cessations of Covid-19 related government subsidies.
While the Group remains cautiously optimistic for the next reporting period, it is keeping a vigilant watch on the challenges that may arise from the ongoing Covid-19 pandemic and uncertainties in the wider macro environment. The Group will continue to exercise prudent cost management, while developing new business opportunities and strengthening its base for future growth.
Medical Devices Segment
The medical devices segment continued its strong revenue growth over the last three financial years resulting in robust segmental result of S$12.1 million in FY2021, a 53.7% increase over FY2020. During FY2021, the segment has further expanded its global customer base and commercialised new projects whilst continuing its strong focus on efficiency improvements in its manufacturing plants. It continues to prioritise building expert capabilities to improve collaboration with its customers as well as improving its global manufacturing footprint to meet increasing demand.
The Group expects the positive revenue momentum for the medical devices segment to continue and for the segment to further grow its customer base and revenue, coupled with planned improvements in product mix, plant efficiency and utilisation. Nonetheless, this optimism must be tempered by caution in the face of a macro environment of some uncertainty due to current international trading conditions.
Pipes and Pipe Fittings Segment
The pipes and pipe fittings segment delivered improved segmental result of S$3.2 million in FY2021, 23% increase over FY2020 despite operating in a highly competitive environment which has resulted in declining margins over the years. Although the construction industry in Singapore is gradually recovering from the impact of Covid-19, labour shortages and supply chain disruptions have caused delays in construction projects which affected revenue for the segment in FY2021. Increased operating costs and higher raw materials prices also impacted earnings in FY2021 and are likely to continue in the next reporting period.
In view of increased competition and longer completion time required for building construction projects, the segment will continue to focus its growth on civil engineering projects and product expansion.
