Management Discussion
and Analysis
The Group achieved another record year with a total
revenue of RM1,497.4 million and Profit Before Tax
(“PBT”) of RM143.8 million in FY2024.
Aerospace
Revenue from the Aerospace business increased
significantly, by 31.1% to RM431.3 million from the
previous financial year. The increase was attributed to
the higher demand driven primarily by the recovery
of the Aviation industry which was affected by the
COVID-19 pandemic. The Aerospace business recorded
a PBT of RM14.1 million. The key contributor to the
improved performance over previous financial year is
higher sales. In addition, the Group has completed the
acquisition of the entire equity interest in Aviatron (M)
Sdn Bhd (“Aviatron”) in February 2024 and Aviatron
has contributed positively to the Aerospace business in
FY2024.
Equipment
The Equipment business recorded a revenue of
RM1,066.1 million, 4.5% lower than that for the previous
financial year. The lower revenue was mainly due to a
decrease in demand from data storage customers.
Despite the lower revenue, PBT increased by 11.0%,
to RM129.7 million as compared with previous financial
year mainly due to product mix.
Group
The Group’s total revenue of RM1,497.4 million is 3.6% higher than previous financial year’s. PBT increased by 25.0% year-on-year to RM143.8 million while Profit After Tax (“PAT”) increased by 22.2% to RM108.6 million.
The Group invested RM96.3 million in FY2024 mainly for the expansion in Thailand.
The Group ended the year with a projected order book of RM5.6 billion.
Revenue
(RM’million)
FY2024
Aerospace
Equipment
Group
FY2023
Aerospace
Equipment
Group
Profit Before Tax
(RM’million)
FY2024
Aerospace
Equipment
Group
FY2023
Aerospace
Equipment
Group
FINANCIAL POSITION
TOTAL ASSETS EMPLOYED
As at 31 March 2024, the Group’s total assets increased by 28.6% to RM2,067.2 million. The increase in total assets was
mainly due to acquisition of Aviatron and the Group’s expansion in Thailand.
CAPITAL EMPLOYED AND SOURCE OF FUNDS
The capital employed as at 31 March 2024 was RM1,494.1 million, an increase of RM566.1 million from RM928.0 million as
at 31 March 2023. This came mainly from the increases in share capital via rights issue, retained earnings from current year’s
profit and translation reserve arising from the weakened Malaysian Ringgit against United States Dollar but this was offset
by the decrease in borrowings.
CAPITAL EXPENDITURE
The Group continues to invest in tandem with its longterm growth needs, with a capital expenditure of RM96.3
million for FY2024.
BANKING FACILITIES
As at 31 March 2024, RM305.4 million or 29.7% of
facilities had been utilised.
DEBT RATIO
Net Gearing and Interest Coverage Ratio
The Group’s net gearing ratio was 0.18 time as at 31
March 2024 and interest coverage ratio was 6 times in
FY2024.
The Group’s total borrowings decreased to RM297.5
million as at 31 March 2024 (31 March 2023: RM479.5
million). The decrease in borrowings was mainly due to
the net cash generated from operations and proceeds
from the rights issue.
CASH FLOWS
Operating Activities
The Group generated net cash from operating activities of RM238.3 million in FY2024 resulted from higher profit generated
during the financial year.
| Operating Activities | 2023 | 2024 |
|---|---|---|
| Operating activities before changes in working capita | 189.9 | 250.2 |
| Changes in working capital | (193.1) | 28.3 |
| Income tax paid | (29.2) | (40.2) |
| Net Cash (used in)/generated from Operating Activities | (32.4) | 238.3 |
Investing Activities
Net cash used in investing activities of RM286.9 million was mainly for the acquisition of Aviatron of RM191.4 million (net of
cash and cash equivalents acquired) and the purchase of property, plant and equipment of RM93.9 million.
Financing Activities
Net inflow from financing activities of RM52.1 million was mainly attributed to proceeds from the rights issue of RM487.4
million partially offset by repayment of loan to the immediate holding company of RM197.8 million pursuant to the
conditional share sale agreement in relation to the acquisition of Aviatron and repayment of other bank borrowings of
RM176.0 million.
The Group ended the year with cash and cash equivalents of RM36.2 million, an increase of RM15.2 million from 31 March
2023.
DIVIDEND
An interim single-tier dividend of 3.30 sen
per ordinary share was declared in May
2024, representing 20% of the Group’s net
profit. Based on the average share price
for the month of June 2024 of RM6.42, the
dividend per share of 3.30 sen translates
to a dividend yield of 0.51%.
*Adjusted to reflect the bonus issue exercise on 3 March 2022
CUSTOMERS AND PROGRAMS
Aerospace
The recovery of the Aerospace segment seen in FY2023
gained momentum in FY2024, with customers increasing
demand schedules. The Group’s Aerospace business
revenue soared by 31.1% to RM431.3 million in FY2024.
This is underpinned by a broad-based surge in demand
across all aircraft segments, spanning from single aisle
and twin aisle commercial aircraft to business jets. Supply
chain constraints still limit the rate at which Airbus and
Boeing can increase their aircraft production. The Group
has sufficient production capacity to meet this challenge
and the financial strength to expand when the need
arises.
Equipment
In FY2024, our Equipment business achieved a
commendable revenue of RM1.07 billion, albeit a slight
decline of 4.5% compared to the record high attained in
FY2023. This dip primarily stemmed from a softening of
demand in the industry, particularly evident in the data-storage business segment. However, this setback was
mitigated by gains in the market shares for several of
the Semiconductor Front-end products. Despite these
short-term challenges, the Group is optimistic about the
business prospects, and continues to invest in building
capacity in Thailand to be ready for the recovery.
OPERATION INITIATIVES
Aerospace
FY2024 has proven to be a year of both adversity and opportunity for our Aerospace business. Challenges such as
heightened operating costs and supply chain disruptions, which surfaced in FY2023, persisted into the current financial
year. Despite these obstacles, we remained steadfast in our efforts to not only sustain but also expand our skilled workforce,
while simultaneously enhancing our productivity and competitive edge.
In a significant development, FY2024 marked the inception of a new chapter with the initiation of a new Aerospace facility
at our Ban Bueng site in Thailand. This facility, dedicated to the manufacture of engine cases, represents a strategic
investment aimed at fortifying our operational capabilities. The target is to finalise the establishment of the plant and attain
all requisite qualifications by early 2026. Notably, we achieved a significant milestone in FY2024 with the attainment of
AS9100 certification for our new facility, underscoring our unwavering commitment to excellence and quality standards.
In February 2024, we successfully completed the acquisition of Aviatron (M) Sdn Bhd. This strategic move not only brought
new capabilities in special processes but also significantly augmented our Aerospace portfolio, particularly in the domain
of nacelle beams. As a result, our expanded portfolio now encompasses both single and twin aisle commercial aircraft
programs, positioning us favourably for continued growth and market leadership.
Equipment
In FY2024, our expansion efforts in Thailand also achieved significant milestones. Building upon the success of our first
factory in Rojana, which is now in its third year of operation, we expanded our footprint with the establishment of two
additional factories – second factory in Rojana and another one in Ban Bueng. These new facilities commenced small
volume production during the financial year, with plans to scale up to mass production in the upcoming year. This represents
a pivotal achievement as we replicate our core manufacturing capabilities in Thailand, aligning closely with our strategic
objective of developing a robust Business Continuity Plan (BCP) to ensure the continuity of our operations and meet the
evolving needs of our customers.
In our commitment to environmental sustainability, we have implemented various initiatives notably the installation of solar
panels at two of our Penang sites and solar-cell powered street lights at several sites in Penang and Thailand. We are closely
monitoring the performance of these initiatives and prepared to extend them to other plants where possible. These efforts
demonstrate our dedication to reducing Green House Gas emission and fostering a more sustainable future.
Operationally, we have implemented several initiatives to enhance operational effectiveness and quality across our
organisation. With the increased capacity in Thailand and our ongoing efforts to improve operational efficiency, we are
well-positioned to explore new product lines that will support our ambitious growth plans. These initiatives underscore
our unwavering commitment to excellence and continuous improvement as we strive to meet the evolving needs of our
customers and drive sustainable growth in the years ahead.
OUTLOOK
Aerospace
Air passenger travel has exhibited a steady recovery trajectory over the past three years. The official declaration by the World
Health Organization (WHO) in May 2023, signalling the end of the COVID-19 global health emergency, served as a pivotal
moment in solidifying the resurgence of air passenger travel worldwide. Subsequently, the International Air Transport Association
(IATA1) reported in February 2024 that air travel levels had not only rebounded but had also exceeded pre-pandemic levels
observed in February 2019.
The year 2023 proved to be a milestone for Airbus and Boeing, with both companies experiencing record-breaking order intakes.
This surge was fuelled by heightened confidence among airliners, resulting in more-than-doubling of net order intake compared
to the previous year. As a result, the total order backlogs of Airbus and Boeing2
swelled to 14,885 aircraft by March 31, 2024,
representing 10.8
3
years and 7.8
3
years of new aircraft deliveries, respectively. In response to this demand, Airbus has announced
plans to ramp up its aircraft production rates, despite facing supply chain constraints. Boeing is expecting softer demand and
lower production rates in the coming year, as it works to enhance its manufacturing and quality control processes.
Ongoing regional conflicts, US sanctions, and persistent supply chain constraints pose additional challenges to the overall business
climate and outlook. In light of these uncertainties, we are proactively engaging with our customers to manage any changes to
their delivery plans and diligently preparing ourselves to meet the anticipated increases in production rates. Our commitment to
agility and responsiveness ensures that we remain resilient in navigating the evolving landscape of the aerospace industry.
- International Air Transport Association (IATA) represents some 330 airlines over 80% of global air traffic.
- Boeing’s order backlog figures refers to unfilled orders before ASC 606 adjustment.
- 2018 delivery rates were used for the comparison as it best reflects the delivery rates pre-pandemic.
Equipment
In its June 2024 report, Semiconductor Equipment and Materials International (SEMI) projected a notable increase in
investments for 300mm fab equipment, forecasting figures of USD 102 billion in 2024 (+6% YoY), USD 120 billion in 2025
(+17% YoY), USD 138 billion in 2026 (+16% YoY), with expectations of reaching a new record high of USD 144 billion in
2027 (+4% YoY).
With fab utilisation rates remaining below 70% despite the optimistic outlook and more installed wafer fab capacity coming
online, it is anticipated that full recovery of fab utilisation rates will take time. A higher utilisation rate would be essential for
fabs to start increasing their capital equipment expenditure.
Despite these short-term challenges, the fundamental drivers of the semiconductor industry remain robust. Mega-trends
such as digitalisation and electrification continue to drive growth in key sectors such as cloud computing, high-speed network
connectivity, artificial intelligence (AI), and electric vehicles, thereby sustaining long term demand for semiconductor chips.
Nevertheless, it is important to acknowledge the impact of ongoing regional conflicts, US sanctions, and supply chain
disruptions, which pose potential risks to the overall business climate and outlook. In response, we are actively collaborating
with our customers and suppliers to mitigate these risks and remain vigilant in identifying and pursuing new business
opportunities that align with our strategic objectives and business requirements. By fostering resilience and adaptability, we
aim to navigate through these challenges and capitalise on the long-term growth prospects offered by the semiconductor
industry.