3 Things Investors Should Know About Spindex Industries Ltd’s FY2018 Earnings
Spindex Industries Ltd (SGX: 564), founded in 1981, is an integrated solution provider of precision-machined components and assemblies. The company’s end-products are used in machinery and automotive systems, imaging and printing equipment, consumer lifestyle and healthcare products.
On Tuesday, Spindex released its financial results for the full year ended 30 June 2018 (FY2018). Let’s look at three main aspects of the announcement here.
Show me the money
Revenue for FY2018 rose to S$153.3 million from S$141.8 million a year ago, increasing 8.2%. All three business segments – machinery and automotive systems, imaging and printing, and others – saw revenue improvements for the year. The machinery and automotive systems segment was the biggest contributor to sales at 47.6% of overall revenue.
Even though revenue was higher for the year, gross profit fell 10.9% year-on-year to S$28.7 million on the back of “higher production costs associated with certain new projects during the financial year which had low yields”. As a result, gross profit margin declined from 22.7% to 18.7%.
Net profit for FY2018 inched down slightly by 0.2% to S$14.1 million. The fall was despite the group’s sale of a factory at Neythal Road in June 2018, which resulted in a one-off gain of S$3.7 million. Consequently, earnings per share rose from 12.17 Singapore cents to 12.18 Singapore cents.
Spindex’s balance sheet was pristine. As of 30 June 2018, the group had S$29.2 million in cash and cash equivalents with no debt.
Cash flow from operations for the year plummeted 49.7% to S$12.1 million. With capital expenditure surging from S$11 million to S$20.9 million, free cash flow was negative S$8.8 million in FY2018, compared to S$13.1 million a year ago. The amount of S$20.9 million was used to pay for production and metrology replacements. Additional machines were also added to enhance Spindex’s capabilities and manufacturing efficiency.
The board proposed a final dividend of 3.0 Singapore cents per share, unchanged from the previous year. It did not pay out an interim dividend in both FY2017 and FY2018. The latest dividend translates to a conservative payout ratio of 24.7%.
What the future holds?
Looking ahead, Spindex said:
“The prevailing political and economic uncertainties affecting the global economy are likely to persist in FY2019. The recent introduction of trade tariffs by global trading blocs has adversely affected business confidence. The Group remain concerned with the possible escalation of such trade conflicts as they can disrupt global trade and serve as a catalyst for significant volatility in customers’ demand in the markets that the Group serves, such as North America, Europe and Asia. This can negatively affect the Group’s performance.
The Group will continue to monitor market developments closely and implement the necessary measures in a timely manner to minimize any adverse impact. The investment in equipment and machineries has strengthened the Group’s position as a manufacturing partner as it continues to actively market its services to potential customers while striving to improve its share of business allocation with key customers.”