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HOME | THE YEAR IN REVIEW FOR VENTURE, 2004 REPRESENTED A YEAR OF CONSOLIDATION FOLLOWING TWO VERY STRONG YEARS OF GROWTH IN A RELATIVELY SOFT ENVIRONMENT. WHILE END MARKET DEMAND FOR THE YEAR WAS SOMEWHAT SOFT, THE GROUP IS NOW WELL POSITIONED FOR A RETURN TO HEALTHY GROWTH IN 2005 AND BEYOND.
PERFORMANCE REVIEW The Group reported a full-year net profit of S$206.8m on revenue of S$3.19b for the financial year ended 31 December 2004, compared with a net profit of S$240.4m on revenue of S$3.17b a year ago. Earnings per share on a fully-diluted basis was 77.3 Singapore cents, compared with 93 cents for the same period last year. The flat revenue figure was reflective of relatively weak end-demand for high-volume products in the printing & imaging, and computer peripherals & data storage segments, which offset revenue growth from the networking & communications segment, and the test & measurement/automotive/medical category. The decline in net after-tax profits may be attributed to several factors. In particular, there was a shift in product mix towards high-volume and relatively lower-margin business. Expenses incurred in preparation for new-business introductions and transfers that were not recovered in time due to customer delays also contributed to the decline. These factors were compounded by a S$9m foreign-exchange loss resulting from the weakening US dollar, a S$6m allowance for doubtful debt and inventory obsolescence, and a higher effective tax rate of 2.8% compared to 1.5% in 2003.
DIVIDEND
OPERATIONS REVIEW Several new business relationships were forged with companies that are leaders in their respective fields. These comprised global OEMs engaged in the data storage, networking & communications, test & measurement, automotive and medical business segments. Venture's existing relationships were also strengthened through our timely and consistent delivery of good-quality products. A few new and strategic customers were added to our mid-volume portfolio. These new businesses presented opportunities for us to enter fast-growing market segments such as network switches and host bus adapters. We expect this part of our business to grow and make positive contributions to the Gr oup's performance in the months ahead. The Group made some strategic investments in advanced planning tools and selective business process re-engineering activity in the high-mix low-volume business segment. This not only contributed to industry-leading operational excellence but also enhanced our customers' ability to make seamless transfers of new high-end products directly from their prototype laboratories to our factories. On the ODM front, the Group saw several programmes completed and released for manufacturing towards the end of 2004. These included a versatile B-sized printer targeted at the SOHO market, a B-sized photo printer and a new-generation mobile printer. In the pipeline is a new robust, shockproof portable thermal printer for receipt printing. The Group has also made applications for design patents for products in the printing & imaging, and the medical domains. Geographically, the Group strengthened its clusters of excellence, particularly in the USA and China. To cater to increasing demand for high value-added services in the USA, a new facility totaling 75,000 square feet was added in Southern California. The scope of activities there was also enlarged to include repair services, systems integration and box-build. In China, our manufacturing operations were expanded to include a second facility, while a new 40,000 squarefoot facility in the Shanghai Free Trade Zone was added to support the growth of our e-fulfillment activities. A further expansion of 30,000 square feet was made in Singapore to accommodate the establishment of our high-end test & measurement business. In Malaysia, the Group made the decision to purchase a 400,000 square-foot facility that it had been leasing since the end of 2002. Univac Precision Engineering Pte Ltd, a whollyowned subsidiary and a leading company that provides tooling, plastic injection and precision mechanical assembly solutions, also expanded its footprint in China, where a new 30,000 square-foot facility was established in Suzhou. Univac is also looking beyond its traditional computer and engineering segment to new markets such as automotive, industrial, medical and packaging, as well as digital consumer electronics. New business units have been set up for this purpose. In an effort to rationalize the precision engineering business, the Group disposed of its 28.2% stake in Avaplas Ltd for S$18.9m, and increased its shareholding in Univac Design & Engineering Pte Ltd by 30.2% to 80.5% for a consideration of S$4m.
NEW CAPABILITIES The Group also invested in equipment that fully deploys technology and automated process controls that meet the EU's Restriction of Hazardous Substances (RoHS) regulatory standards. This lets us provide our customers with the ability to ramp up volumes ahead of the stipulated deadline of 2006. Meanwhile, our Penang facility is in the process of attaining ISO 13485 and GMP/FDA certification, empowering us further to support our customers in the development of RoHS-compliant products and medical electronics. To address the fast expanding high-mix business segment, the Group added a suite of software tools that allows for more efficient planning, materials management capability and improved response time with respect to customers' demands. We have successfully integrated these new tools with existing equipment, linking them through our ERP system to create a comprehensive IT backbone for high-mix operations. Other specialized equipment such as large form factor SMT machines, automated selective wave soldering machines, highly accelerated stress screen machines, and flip-chip processes have also been added to fill out our range of service offerings. Venture's ODM team is continuously diversifying and deepening its technical capabilities to cater to the varied and constantly changing needs of its global customer base. Our world-class expertise in printing and imaging, handheld devices, medical devices and high-speed digital designs helped enlarge our ODM customer base in 2004. We continue to add key technical personnel across all geographies as we become increasingly involved in advanced product architectural designs for and with our major customers. The Group has also developed a core technology base for storage, networking, test & measurement, optical, microwave, and radio frequency (RF) communication systems and subsystems, as well as for thermal transfer printing. Central to our widening spread of capabilities is an ongoing commitment to help our people develop themselves by extending their knowledge and skills. Extensive training in RoHS, quality tools, management skills and specific technical or engineering processes elevated staff skills and capability levels significantly in 2004.
OUTLOOK The Group is now tightly focused on leveraging technology to enhance our existing customer base. We have been able to build a healthy pipeline of new customers and new products by boosting the technological and other resources that allow us to participate in larger portions of the value chain. This in turn enables us to enter into closer, deeper and more rewarding collaboration with customers. In terms of specific technologies, our focus in 2005 will be to strengthen our position in RF/microwave/ optical communication and instrumentation, while leveraging existing strengths to grow our business in networking and large-scale storage systems. In the longer term, Venture is putting in place processes and systems that will transform the Group into a yet more cost-effective, more diversified technology development and manufacturing outfit. The emphasis will be on high-mix, low-volume products with synergistic technologies supporting high volume manufacture as well. We also expect to greatly expand our e-fulfillment capabilities, primarily with respect to the computer peripherals industry. It is our plan to continue to develop new customers beyond the traditional geographic sphere and industrial segments. We will also continue to improve our cost-to-capability ratio by enhancing our processes and systems to complement growth. Overall, the Group has devoted considerable effort towards strengthening its fundamentals and developing new capabilities in 2004. As we go on improving our cost structure, we shall also continue to build on existing capabilities to work with OEM leaders in every market segment. More importantly, we have taken steps to achieve better balance in revenue contribution from our various product segments, which should enable us to continue growing steadily in the long term.
APPRECIATION We also thank the management and staff of the Group for their commitment and dedication. Their team effort and resilience have made the achievements of the past year possible. I would like to extend my personal gratitude to my fellow Board members for the value and expertise they have provided, and for the meticulous manner in which they have discharged their duties over the past year. We approach the year ahead with determination as we continue adapting and becoming more competitive in a fast-changing environment.
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