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Chairman's Message  

Dear Shareholders,

Our financial and business transformations continued through 2013.

Dragon Group International Limited (“DGI”) completed the disposal of all issued and paid up ordinary shares in the share capital of Dragon Technology Distribution Pte. Ltd. on 3 May 2013, un-encumbering ASTI of guarantees amounting to about $120 million to financial institutions and suppliers.

On 19 November 2013, DGI announced that it has entered into a non-binding memorandum of understanding (the “MOU”) with AMMS Group Pty Ltd (“AMMS”). This non-binding MOU is in relation to a proposed acquisition by the Company of AMMS’ Australian engineering and industrial maintenance business (the “Proposed Acquisition”), at an indicative consideration in the region of AUD12 million to 18 million. As announced by DGI on 27 February 2014, DGI no longer intends to pursue this Proposed Acquisition.

On 18 October 2013, the Company announced that it had entered into a share purchase agreement with Advanced Systems Automation Limited (“ASA”) for the proposed disposal by the Company of its entire shareholding interest in Emerald Precision Engineering Sdn. Bhd. (“Emerald”) to ASA. On 15 November 2013, Emerald ceased to be a wholly-owned subsidiary of the Company but will remain within the Group.

On 28 January 2014, ASA announced that it had entered into two Sales and Purchase Agreements to purchase an additional 35% equity interest in ASA Multiplate (M) Sdn. Bhd. (formerly known as Auramas Teknologi Sdn. Bhd.)(“ASA Multiplate”) bringing ASA’s equity interest to 90%.


Our collective strengthened balance sheets have allowed us to pursue strategic opportunities and directions which continue to transform our Group. In 2012, ASTI acquired the assets, technologies and know-how of EoPlex, Inc. (“EoPlex”), a Silicon Valley additivemanufacturing print-and-sinter technology company. The Group will apply this enabling and disruptive technology to build advanced packaging technologies and products for companies that manufacture semiconductors and beyond. EoPlex’s xLC carrier product may revolutionize wire bonding packages which can address the requirements of the mobility markets. We also increased our shareholding in APS Investment Pte Ltd (“APSI”) via an acquisition of 18.9% stake from our subsidiary, ASA. APSI develops proprietary technology and provides innovative and integrated flip chip solutions to companies that manufacture semiconductors. Both enterprises may contribute substantially to the advanced semiconductor packaging arena in the foreseeable future. Along the same route to address the advances in semiconductor packaging, our equipment subsidiary STI launched a new wafer inspection equipment in the 1st half of 2014. This may be our growth driver for our equipment business going forward.

We will focus on developing new and advanced packaging solutions. Our ambition to be in the driver’s seat in the backend semiconductor packaging technology may bode well for our inspection and manufacturing services businesses. The look-ahead may potentially allow our equipment and manufacturing services enterprises to leverage into other engagement or process points and customers, thus strengthening our overall enterprise value proposition.

INCOME STATEMENT

On 13 September 2012, the Group announced that its subsidiary, DGI has entered into a conditional Sale and Purchase Agreement with InflexionPoint Technologies Pte. Limited for the disposal of its equity interest in the share capital of Dragon Technology Distribution Pte. Ltd. (“Disposal Group” or “Discontinued Operations”).

In accordance with FRS 105, Non-current Assets Held for Sale and Discontinued Operations, the results of the Disposal Group have been presented separately on the Group’s Income Statement as Discontinued Operations for the financial years ended 31 December 2013 and 31 December 2012. On the Group’s Balance Sheet, the financial position of the Disposal Group as at 31 December 2012 was aggregated and presented as “Assets of disposal group classified as held for sale”, “Liabilities of disposal group classified as held for sale” and “Reserves of disposal group classified as held for sale”.

Continuing Operations

Revenue


The continuing operations reported a 5.0% or $5.1 million decrease in revenue from $101.9 million (FY2012) to $96.8 million (FY2013). BEST business recorded a 2.9% decline in revenue from $98.6 million (FY2012) to $95.8 million (FY2013). Distribution & Service business posted a decline of 69.2% in revenue from $3.3 million (FY2012) to $1.0 million (FY2013) due to decrease in demand from customers.

Gross Profit Margin

Gross profit margin for the continuing operations increased to 31.9% for FY2013 compared to 29.8% for FY2012.

Operating Expenses

Marketing & distribution, research & development and general administrative expenses increased 11.7% from $40.7 million (FY2012) to $45.5 million (FY2013). The increase in costs was mainly due to the higher research and development costs incurred for the development of semiconductor packaging technologies and the inclusion of full year expenses incurred by ASA Group for FY2013 compared to only eight months of expenses for FY2012.

Financing costs increased 87.4% from $0.4 million (FY2012) to $0.8 million (FY2013) arising from the consolidation of the interest costs from ASA Multiplate.

Net Losses

The continuing operations reported a net loss attributable to shareholders of $14.8 million for FY2013, compared to the net loss of $7.0 million in FY2012.

Discontinued Operations

With the completion of the disposal on 3 May 2013, the Group has recognised the results generated from discontinued operations for the period from January to April 2013.

BALANCE SHEET

As at 31 December 2013, total assets stood at $156.9 million comprising $63.4 million from non-current asset and $93.5 million from current assets. Total liabilities stood at $48.4 million comprising current liabilities of $44.6 million and non-current liabilities of $3.8 million. Shareholders’ equity including minority interests stood at $108.5 million.

The following are highlights of the Group’s balance sheet as at 31 December 2013.

Intangible assets

Intangible assets increased $1.0 million from $14.5 million to $15.5 million. The increment was mainly due to the provisional goodwill of $2.4 million that arose from the acquisition of the controlling interest in ASA Multiplate in September 2013 that offset a $1.3 million impairment of goodwill on consolidation.

Property, plant and equipment

Property, plant and equipment increased $9.6 million from $30.3 million to $39.9 million due to the acquisition of ASA Multiplate.

Other receivables (non-current)

The amount of $2.3 million related to a portion of the proceeds from the disposal of the discontinued operations to be collected after 12 months from the balance sheet date.

Inventories

The depletion of inventories during the period was offset by the additional inventories from ASA Multiplate.

Other receivables and prepayment

Included in the receivables was an amount of $2.3 million for a portion of the proceeds from the disposal of the discontinued operations to be collected within 12 months from the balance sheet date. Prepayment also increased due to down-payment for purchase of equipment.

Amounts due from associates

With the acquisition of ASA Multiplate by ASA Group in August 2013, ASA Multiplate became a subsidiary of the Group and ceased to be an associate. As such, there was no amount due from associates as at 31 December 2013.

Trade receivables

Trade receivables’ balance decreased $5.0 million from $30.7 million to $25.7 million which was in line with the lower revenue for the period.

Amounts due to financial institutions

Amounts due to financial institutions decreased $4.0 million from $20.1 million to $16.2 million. The consolidated borrowings from ASA Multiplate offset the repayment of bank borrowings during the year.

Payables and accruals


Payables and accruals decreased $4.3 million from $31.5 million to $27.3 million, mainly due to the capitalisation of the $4.0 million advance received for DGI’s share placement exercise.

Deferred tax liabilities

Deferred tax liabilities increased due to acquisition of ASA Multiplate.

CASHFLOW STATEMENT

The Group generated $2.7 million from its operations and utilised $1.4 million for the net payments of interest and tax. An amount of $2.6 million was used for the purchase of property, plant and equipment. The net proceeds of $5.2 million from the placement of shares to the noncontrolling shareholders of its subsidiaries were received during the year.

The Group repaid $8.0 million of borrowings to financial institutions and lease creditors while a net amount of $0.8 million was utilised to acquire the additional equity interests in ASA Multiplate.

The discontinued operation received $4.1 million from the drawdown of bank borrowings. The Group received $18.2 million from the disposal of distribution group while cash and cash equivalent of $32.5 million belonging to the distribution business was disposed along with the disposal.

OUTLOOK

The stronger transformed business entities are strategically poised to pursue their destinies unencumbered.

ASA’s acquisition of ASA Multiplate and Emerald has enlarged its geographical presence from Beijing and Singapore to include Penang and Johor respectively. The complementary and synergistic skill-sets can offer a better value proposition to ASA’s customers. ASA’s enhanced Precision Engineering and ECMS business position can lead to more customer acquisition and set ASA on a growth trajectory. Overall, ASA expects its performance to improve in the coming year.

Having divested the component distribution business and sitting on a cash-rich balance sheet, DGI continues to explore investment and business opportunities and will make the appropriate announcements in due course.

While the Group expects continuing improvement in its BEST business, visibility remains low while the Group continues to invest in its research and development activities.

Overall, the Group continues to remain cautious about its performance this year.

It is important to note that our business is prone to economic uncertainties and the cyclical nature of the electronics and semiconductor industries. Unforeseeable factors include but are not limited to foreign exchange volatility, intellectual property litigations, product and technology obsolescence, and inventory adjustments. In view of these factors, we will remain prudent and cautious in the management of our businesses.

IN APPRECIATION

This year we saw the departure of our Group Chief Executive Officer, Charles Cher, who left the Group after working with us for more than twenty years. On behalf of all my colleagues, I would like to express our thanks and appreciation to Charles for his contributions and guidance over the years and wish him all the best in his future endeavors.

In closing, I would like to thank all our customers, shareholders, business associates, and bankers for your trust and confidence in us, and I look forward to your support in the new financial year. To all our employees, I appreciate your perseverance and dedication, and I have confidence in your commitment to make our Group financially and technologically strong to ride the opportunities of this super-cycle.



Yours sincerely,


Dato' Michael Loh

Executive Chairman

 

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Blk 25 Kallang Avenue #06-01 Kallang Basin Industrial Estate Singapore 339416T (65) 6392 6922F (65) 6329 5522Company Registration No.: 199901514C
 
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