Vicplas International FY2022 revenue for its financial year ended 31 July 2022, increased 14.8% to S$130.8 million from S$113.9 million in FY2021.
Profit after tax for FY2022 decreased by 15.0% to S$8.8 million as the medical devices segment was impacted by rising supply chain costs and other Covid-19 pandemic, as well as higher business expansion costs through increasing manufacturing facility capacity and bringing onboard additional technical and business development resources to meet current and future demand.
Commenting on the FY2022 results, Mr Walter Tarca, Group Chief Executive Officer of Vicplas said: “Vicplas has achieved a respectable set of results for FY2022 given the backdrop of an uncertain and more costly operating environment. Our medical devices segment has maintained its revenue growth momentum but was affected by rising supply chain costs and other disruptions brought on by the Covid19 pandemic. Despite this, it continues to expand its manufacturing footprint and dedicate resources to other technical and business development areas to meet increasing demand from the long-term trend of medical device outsourcing. To this end the segment is actively negotiating for a suitable site in Juarez, Mexico, to initiate its fifth manufacturing location to provide greater flexibility and choice for its customers. Our pipes and pipe fittings segment recovered in FY2022, alongside the recovery of Singapore’s construction sector. The segment will continue to support the local construction industry and will continue to grow its civil engineering projects, as well as product expansion beyond the built environment.”
“We are cautiously optimistic for the next financial year as we need to keep a close watch on the challenges that may arise from the ongoing Covid-19 pandemic, current inflationary pressures, and uncertainties in the wider macro environment. Besides continuing to exercise prudent cost management, we will also continue to develop new business opportunities and strengthen our capabilities for future growth.”, Mr Tarca added.
Financial Highlights
In FY2022, the Group’s revenue increased to S$130.8 million as compared to S$113.9 million for FY2021, driven by higher revenue from both the medical devices and pipes and pipe fittings segments.
Revenue for the medical devices segment was S$92.6 million in FY2022, an increase of 15.5% due to increased orders from its customers as it continued its growth momentum of recent years. This was achieved even through disruptions and delays arising from the Covid-19 pandemic. The segment also faced increased costs mainly due to the effects of rising supply chain costs and other disruptions caused by the Covid-19 pandemic, as well as higher costs associated with business expansion through increasing manufacturing facility capacity and bringing onboard additional technical and business development resources to meet demand. Given these circumstances, the segmental result of S$10.2 million was commendable, albeit a decrease of 15.3% over FY2021.
The pipes and pipe fittings segment also recorded a 13.1% increase in revenue to S$38.2 million in FY2022, alongside the recovery of the construction industry in Singapore. A segmental result of S$4.5 million was posted, which was a 42.0% improvement from FY2021, despite higher material and overheads cost.
Other income decreased by 15.1% in FY2022 mainly due to the absence of Covid-19 related government subsidies in FY2022 as compared to S$0.6 million of such subsidies that were received in FY2021 and a S$0.3 million decrease in income from tooling, mould and maintenance services as compared to FY2021. Raw materials and consumables used increased by 22.1%, which was greater than the rate of increase in revenue, mainly due to the increase in raw materials cost. Employee benefits expense (including salary) increased by 17.9% due to increased headcount and overtime, especially in the medical devices segment, to meet the higher revenue and investment in medtech talents to meet future demand.
In FY2022, other operating expenses increased by 4.5% mainly due to the rise in electricity tariffs and higher cost of repairs and maintenance to support the increase in revenue. Finance costs increased by S$0.3 million due to an increase in bank borrowings to finance a higher amount of working capital to support a greater scale of business and the rising interest rate environment. Income tax expense increased by 14.0% in FY2022 despite the lower profit after tax as the Group had utilised most of its past years’ tax losses brought forward in FY2021.
Overall, the Group recorded a profit before tax of S$11.0 million, a decrease of 10.5% over FY2021, and a profit after tax of S$8.8 million for FY2022, a decrease of 15.0% compared to FY2021. Adjusted EBITDA for FY2022 was S$18.3 million, a small decrease of 1.5% compared to FY2021.
The Group, in particular the medical devices segment, continues to invest intensively to scale up its global manufacturing footprint to meet both current and future customer demand, as indicated by the continuing high depreciation and amortisation expenses. The Group has initiated disclosure of adjusted EBITDA as it could serve as an additional metric for evaluating the Group’s operating performance.
As Vicplas grows, albeit at a lower but still encouraging level of profitability in view of the macro environment, the Board of Directors is recommending maintaining the same dividend rate as FY2021 – a final dividend of S$0.0045 per ordinary share for FY2022 (FY2021 final dividend: S$0.0045 per share), subject to approval by shareholders at the AGM to be held on 24 November 2022.
Financial Position
As of 31 July 2022, the Group has a net asset value per share (excluding treasury shares) of 15.32 Singapore cents (31 July 2021: 14.03 Singapore cents), shareholders’ equity of S$78.3 million (31 July 2021: S$71.6 million) and cash and cash equivalents of S$8.9 million (31 July 2021: S$9.9 million).
Business Outlook
The Group expects revenue to continue growing into the next reporting period with the continued expansion of the medical device segment and the improved outlook for the pipes and pipe fittings segment as the construction sector in Singapore improves.
However, profit after tax in the next reporting period may be impacted by increasing operating costs due to inflationary pressures, continued disruptions in logistics and supply chains, and higher development and expansion costs.
While the Group remains cautiously optimistic, it is keeping a vigilant watch on the challenges that may arise from the ongoing Covid-19 pandemic, inflationary pressures, 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
In FY2022, the segment further expanded its global customer base, commercialised new projects, and expanded its manufacturing footprint with the completion of a sizeable extension to its Changzhou manufacturing plant to meet increasing demand. The Changzhou plant extension is expected to start contributing to revenue in 1H2023. The segment is also actively negotiating for a suitable site in Juarez, Mexico, to initiate its fifth manufacturing location for greater flexibility and choice for its customers.
The segment continues to build specialised capabilities to improve its collaboration and offerings to its global customer base, and prioritising efficiency improvements at its manufacturing plants. The medical devices segment is expected to continue its positive revenue momentum, further grow its customer base, and improve product mix, plant efficiency and utilisation. Nonetheless, any optimism must be tempered in the face of an uncertain macro environment due to current international trading conditions and inflationary concerns.
Pipes and Pipe Fittings Segment
In FY2022, the segment focused on the pipeline of civil engineering projects relating to building of new townships as more public housing units should be released over the next few years. With a manufacturing presence in Singapore, the segment is well positioned to support customers as the domestic construction industry continues its growth momentum. The segment will focus on civil engineering projects and product expansion beyond the built environment. Whilst the segment expects higher revenue from the brightened outlook, it also continues to face increasing competition and cost pressures.
