MESSAGE TO SHAREHOLDERS
In a year that was plagued with uncertainty and challenges posed by the continuing COVID-19 pandemic, KTMG has continued to hold steady by nimbly adjusting our business strategies to navigate around the volatile business landscape and to mitigate the adverse impact of the pandemic. During the year, our Group, like many other businesses, has had to contend with the pervasive effects of the ongoing COVID-19 pandemic, where we had experienced production interruptions, supply chain disruptions, and delivery deferments. Despite operating within a challenging environment, we achieved satisfactory performance in FY2021.
THE YEAR IN REVIEW
In 2021, we faced several operational disruptions due to the pandemic. We had to temporarily shut down our apparel manufacturing factory in Malaysia from 31 March 2021 to 9 April 2021 due to an outbreak of COVID-19 amongst some of the production workers, which resulted in the workers being placed under quarantine. Additionally, the Group’s operations in Malaysia were reduced to operating at 60% manpower capacity from 1 June 2021 to 23 September 2021 to comply with the Full Movement Control Order (FMCO) imposed by the Malaysian government to curb the spread of the COVID-19.
Fortunately, we experienced minimal operational disruptions in our two apparel manufacturing facilities in Cambodia during the year. Our operations in Cambodia were only temporarily suspended for two weeks in April 2021, following the implementation of the Cambodian government’s lockdown measures.
Whilst we have faced various challenges throughout the year, our people have shown resilience and strength, which enabled the Group to continue providing the highest quality products and services to our customers. The year 2021 has definitely brought about a sharper focus on our Group’s business agility and responsiveness. We have demonstrated our ability to support our customers, who themselves had to deal with the rapid changes in their operational environments, by working closely with them and responding swiftly to meet their ever-changing demands.
In FY2021, we upgraded our apparel manufacturing capabilities in Cambodia by investing approximately S$1.1 million in sewing machines and production unit hanger systems. With these new machines and hanger systems, our total annual apparel production output increased by approximately 30%. We also continued to upgrade our textile manufacturing facility to improve the efficiency of our fabric knitting and dyeing process, by investing approximately S$0.5 million in fabric knitting machines, fabric dyeing tanks, and fabric dryers. These enhancements are expected to further increase our textile finishing output from 8,000 kilogrammes per day to 10,000 kilogrammes per day.
Despite the challenging operating environment, the Group’s revenue rose by 37.8% to S$97.8 million in FY2021, boosted by increased orders from existing customers and new customers secured in the US and UK markets during the year.
Although gross profit was up 3.2% to S$13.6 million, gross profit margin dropped by 4.6 percentage points from 18.5% in FY2020 to 13.9% in FY2021 largely due to higher costs of raw material, transportation, and logistics. The Group’s performance was also moderated by higher administration, selling, and marketing expenses. Consequently, the Group recorded a decline in net profit attributable to shareholders of 31.8% to S$2.1 million.
In FY2021, the Group posted earnings per share of 1.25 Singapore cents, while net asset value per share as at 31 December 2021 increased to 12.04 Singapore cents from 10.87 Singapore cents in the previous financial year.
As the Group pursues business growth, we also strive to build a responsible business by contributing to sustainable development and global decarbonisation. During the year, we invested S$0.5 million in the installation of rooftop solar photovoltaic panels at our apparel and textile manufacturing facilities in Batu Pahat. We believe that the integration of solar power is the key to improving the Group’s energy efficiency. Other than reducing the operational costs for the Group, improving energy efficiency will also minimise the environmental impact of our business operations.
At KTMG, people are our most important assets. We are fully committed to developing the capabilities of our people to support our long-term strategic ambitions that will take the Group to our next level of growth.
To this end, in March 2022, we established KTMG Institute of Management, in partnership with Shanghai Action Education Technology Co. Ltd. (上海行动教育科技股份有限公司), a publicly listed management training institution based in Shanghai, to create a Leadership Development Programme for our employees to upgrade their skills and to develop their leadership and management capabilities. With the training programmes provided under the KTMG Institute of Management, we aim to build a more dynamic workforce, which we anticipate will lead to greater productivity in our operations.
We will maintain our focus on talent development and drive a culture of performance and operational excellence across the Group.
THE WAY AHEAD
We are mindful that the effect of the COVID-19 pandemic has yet to be fully played out, and we are operating in a new normal. Nevertheless, we are cautiously optimistic that consumer and business confidence will progressively improve in the year ahead with the gradual reopening of economies around the world. We will continue to focus on our strategic initiatives to build business resilience and position the Group for future growth.
Going forward, we will leverage on our established track record, strong reputation, and capabilities as a vertically integrated textile and apparel manufacturer to seek out new business opportunities and expand our customer base.
With the escalating US-China trade tensions and the US ban on products using cotton from Xinjiang, China, we observed that many retailers have moved their sourcing out of China and begun looking for alternative manufacturers in Southeast Asia. The closure of some garment factories during the pandemic has also led to retailers seeking alternative manufacturers. This provides the Group with opportunities to take over some contracts and capture some of these customers to grow our customer base. During the year, we have successfully secured a few international retailers to add to our client base, and this will, in turn, strengthen the Group’s revenue moving forward. Additionally, through referrals and recommendations from our existing customers and other industry contacts, the Group continues to seek new customers.
In the coming year, we also intend to continue upgrading our textile manufacturing facility by investing in new equipment for fabric knitting, dyeing, finishing, and storage, to further increase the overall production capacity of our textile manufacturing facility. We firmly believe that the progressive upgrading of our textile manufacturing facility is an ongoing priority as it will enhance the vertical integration of our business, and thus improving our operational efficiency.
We will continue to work hard to strengthen our business by developing new innovative products, and improving manufacturing processes and product quality to stay at the cutting edge of the apparel industry. As always, the Group will strive to deliver long-term value to our stakeholders.
Looking ahead, the operating environment is expected to remain challenging and we will focus our efforts on managing the costs of raw material and logistics, while adopting a prudent approach in exploring opportunities to further expand our operations and business through joint ventures, strategic collaborations, and/or acquisitions with parties who can provide synergistic value to the Group, and access to new customers and market.
We are grateful to our management team and employees for their unwavering commitment and hard work amidst a challenging business environment. We are also privileged to have our Board of Directors with varied and complementary expertise, who have provided invaluable guidance to the Group. We would also like to express our appreciation to our business partners, customers, and suppliers for working with us to get through these tough times together.
Finally, thank you to our shareholders for your continued confidence in KTMG. We are encouraged by your support and will continue working towards achieving sustainable growth in the year ahead.
Lim Siau Hing
Damien Lim Vhe Kai
Chief Executive Officer