Mencast
Chairman's Statement
(Extracted from Annual Report 2011)
Dear Valued Shareholders,
ANOTHER RECORD YEAR
On behalf of the Board of Directors of Mencast Holdings Ltd and our subsidiaries ("Mencast" or the "Group"), it is my honour and privilege to present our Annual Report for the year ended 31 December 2011 ("FY2011").
Amidst a challenging environment, I am delighted to report that Mencast once again achieved record revenue and net profit. In FY2011, Group's turnover surged 75.9% to S$56.4 million, while net profit attributable to equity holders grew 20.5% to S$10.2 million.
These results mark seven consecutive years of double-digit growth. Despite the deep economic contraction in the intervening years, our revenue and net profit attributable to shareholders have grown at compounded annual rates of 27.1% p.a. and 29.4% p.a. respectively from FY2006 to FY2011.
A YEAR OF TRANSFORMATION
Beyond the financial numbers, FY2011 was a pivotal year in which we completed our transformation into a fundamentally stronger company with greater profit potential and improved earnings quality.
Since our last annual report, Mencast has made several important acquisitions. Successful integration from these acquisitions has transformed us into a complete maintenance, repair and overhaul ("MRO") solutions provider. The acquired companies are the Top Great group of companies ("Top Great"), Unidive group of companies ("Unidive") and the assets of Team International Development and Team Precision Engineering ("Team Assets").
During the year, we also transferred our listing from Catalist to the Mainboard, becoming the first Catalist sponsored company to receive approval from SGX to make this transfer.
A "PARTNER PERFECT" MENCAST
Our growth and transformation during the turbulent environment of the last three years have been rapid. As we look to the future, it is appropriate to share a perspective on what drives us, and what you as shareholders can expect from us in the future.
When we announced our listing in 2008, more than a few of our friends were surprised that after operating successfully for 27 years as a private company, we would choose to subject ourselves under the spotlight of the public markets.
The reason behind our choice was simple: the public markets offered a robust platform to lift our business to a new level by allowing us to access the capital and credibility needed to build Mencast into a much larger and stronger organization. Growth is best sustained where value is created for all stakeholders – our shareholders, customers, staff, suppliers and other business partners.
This philosophy has been formalised in our new slogan "Partner Perfect", which embodies the mindset and core values that have guided our business for the past three decades.
"Partner Perfect" is a long term way of thinking that requires every business relationship and transaction to benefit every stakeholder involved. Through aligning our business model with our customer's needs, we harness the enormous power that is generated when all stakeholders work in unison towards a common goal. Even as we continue to position our business towards attractive new opportunities, Mencast will be guided by the same principles that we were founded upon. We will resolutely strengthen our capabilities and seek to drive synergy and productivity across our businesses. Above all, we shall adhere to the principle of financial prudence, which includes measuring the attractiveness of every business opportunity by the time tested yardsticks of profit, margins, cash flow and value creation for shareholders.
"TRIPLE PLAY" DELIVERY
Over the past year, we achieved three significant internal targets, namely the transformation of our business into a complete MRO service provider, to surpass S$10 million in net profit and attain S$100 million in market capitalization. The achievement of these targets is the result of the successful execution of the "Triple Play" strategy outlined in last year's Annual Report. This strategy comprises three primary components:
- Capacity Expansion
The combined built up area of our premises would increase from approximately 9,644 sqm at the time of our IPO to 51,353 sqm by the end of 2012. The bulk of this increase is from "Mencast Central", our new state-of-the-art waterfront facilities at 42E Penjuru Road.
Construction of "Mencast Central" is progressing well, with our factory building already obtaining a temporary occupation permit ("TOP"), and construction of the quay wall is on track for completion in the second half of FY2012. Piling on the adjacent plot at 42E Penjuru Road has commenced and is expected to be completed in the first half of FY2012.
The economies of scale and improvements in workflow and logistics provided by "Mencast Central" are anticipated to bring substantially higher efficiency and productivity in 2012 and beyond.
- New Revenue Streams
As well as significantly increasing the Group's revenue potential from our waterfront facility, our expanded capacity in combination with the new skill sets from our acquisitions, allow us to provide a comprehensive range of MRO solutions to a broader base of clients in the Marine and Oil & Gas industries:
- Top Great allows us to perform full turnkey project management, including engineering design, procurement, fabrication and installation of structural and precision engineering systems and plants.
- Unidive allows us to provide a full range of topside (rope access) and subsea (diving) services for the offshore and onshore marine industry, particularly for inspections, repairs and maintenance.
- Team Assets has enhanced our capabilities in the manufacture of metal precision components.
- The waterfront access and new equipment at "Mencast Central" allow us to offer a much greater range of products and services.
This year, we are intending to establish a new Energy segment, focusing on high-tech engineering in the scope of air, water and power sciences and other environmentally sustainable initiatives sought by the Marine and Oil & Gas industries. Such initiatives are an integral part of the asset life cycle of our clients and the formation of an Energy segment aligns to our goal of being a leading MRO solutions provider by assisting our clients in optimizing the useful life and efficiency of their assets.
- Mergers and Acquisitions As well as boosting our capabilities, the acquisition of Top Great, Unidive and Team Assets have driven significant increases in Group's revenue and profit. Our "Partner Perfect" business model allowed for the rapid and successful integration of these companies and has captured the attention of other potential partners. We are continuing to explore opportunities for M&A using the same criteria as ever - companies with high margins, high ROE and with reputable and likeminded management that offers earnings accretion, synergy and long term creation of shareholder value.
DIVIDEND
Though we are in a rapid growth phase and the demands on our capital are high, we are committed to rewarding shareholders whenever we can. In recognition of our good results and to show our sincere gratitude to shareholders for their steadfast support, the Board is pleased to recommend a dividend of 1.2 cents per share for FY2011. This is a 9% increase over the prior year and the second consecutive year in which we have increased our dividend.
LOOKING AHEAD
Several days before writing this letter, Mencast was honoured by the entry of two highly respected investors as our shareholders, being Heliconia Capital Management Pte. Ltd. and Dymon Asia Special Opportunities Fund. Heliconia Capital Management Pte. Ltd. is an unit of Temasek Holdings, while Dymon Asia Special Opportunities Fund manages US$2.8 billion and is one of Asia's top performing funds. We are privileged and humbled to receive the endorsement of two such prestigious organisations.
The industry we serve is a cyclical one and there will undoubtedly be challenging years in the future. Nonetheless, the arduous work of transforming Mencast has largely been completed and we are confident that the fruits of these efforts will be harvested in the years ahead.
Our total assets have grown four fold since our IPO. Behind this number are enhanced capabilities and facilities that allow us to generate far more revenue than in previous years. Barring unforeseen circumstances such as a sharp industry contraction, we expect 2012 to be another good year for Mencast.
The entire team at Mencast is energised by the transformation that has been achieved in our business and the opportunity to create substantial value for all our partners in the years ahead. In many ways, this is the moment we have been working toward for many years. I am privileged to work with the talented and committed team at Mencast and look forward to delivering on our promise to be a "Perfect Partner" in the years ahead.
APPRECIATION
Finally, I wish to thank our directors, staff, customers and all Mencast Partners for their enormous contribution to what has been achieved. The sterling financial performance and remarkable accomplishments of the prior years are testaments to the strength, talent and commitment of all our Mencast Partners.
On behalf of the Board, I also extend a warm welcome to Mr Wong Boon Huat, who joined our Board as an Executive Director during the year. Mr Wong was the driving force behind the success of Top Great, and his decades of senior experience in the offshore, marine and environmental industry makes him a fine addition to our already accomplished Board.
Last and certainly not the least, I would like to thank you, our shareholders for your trust and confidence in Mencast and look forward to the opportunity to meet you at our Annual General Meeting.
Glenndle Sim
Executive Chairman & Chief Executive Officer