Chairman's Statement
Extracted from Annual Report 2011
DEAR SHAREHOLDERS,
The past financial year has been characterised by much economic volatility. While world economic growth recovered from the depths of the 2008 and 2009 global financial crisis and ensuing global recession, the recovery has continued to be uneven. In the aftermath of the recent downturn, Asia rebounded relatively better than the developed economies such as the USA and Europe, but their huge sovereign debt issues and sputtering economic growth have recently weighed heavily on Asia's fortunes.
BUSINESS HIGHLIGHTS
During the year, we focused on enhancing our core operational base with the expansion of our quicklime plant and the construction of a hydrated lime plant, both of which added up to about $9.2 million for the year. Hydrated lime is essential to the water treatment and mining industries.
FINANCIAL HIGHLIGHTS
With operations in Malaysia, our Group was affected by prevailing macro-economic developments, registering a 45% decline in revenue from $43.3 million in financial year ended 30 June 2010 ("FY 2010") to $23.7 million in financial year ended 30 June 2011 ("FY 2011"). Net profits attributable to equity holders of the Company fell 96% from $75.1 million in FY 2010 to $2.8 million in FY 2011. This was due to the recognition of a net gain of $75.9 million arising from the disposal of an investment in China in the previous year.
Incorporating the higher earnings gained from the sale of a China investment in FY 2010, our income tax that year was accordingly much higher than in FY 2011. As such, we saw a large reduction in income tax from $13.6 million to $1.1 million over the year.
Other operating expenses fell 35% to $3.4 million, mainly attributable to a reduction in net currency exchange losses from $1.8 million to $0.9 million, as well as a decrease in professional fees to $0.1 million, from $1.3 million incurred in FY 2010 to evaluate several investment projects.
Our financial position remained healthy with working capital of $82.0 million as at 30 June 2011, down from $91.7 million as at 30 June 2010. In FY 2011, the group invested a total of $2.0 million, including shares placed out for a consideration of $0.3 million, in Mindax Limited ("Mindax"), an Australialisted minerals exploration company. The funds raised will be used by Mindax towards exploration and development of Mindax's Mount Forrest Iron Project.
An interim dividend of $40.6 million was paid by the Company in the first quarter after declaring it in FY 2010. As such, the Group's cash balances decreased from $125.3 million as at 30 June 2010 to $73.4 million as at 30 June 2011.
Trade and other payables reduced from $46.9 million as at 30 June 2010 to $6.0 million as at 30 June 2011, mainly due to the payment of an interim dividend declared in June 2010 and paid in July 2010. Total borrowings moved up from $54,000 to $259,000, given an increase in trade financing at financial year-end. Meanwhile, trade and other receivables decreased from $13.5 million to $13.0 million, and inventories increased from $2.2 million to $4.5 million with the replenishment of consumables at financial year-end. Factoring in the additional investment in Mindax and a fair value loss, available-for-sale financial assets went down by $0.6 million to $6.8 million as at 30 June 2011.
DIVIDEND
With our financial results, the Board is pleased to propose a first and final dividend of 0.5 cent per ordinary share (tax-exempt one-tier), subject to shareholder approval at the upcoming Annual General Meeting.
THE YEAR AHEAD
Looking forward, the uncertain business environment necessitates a greater nimbleness in our strategy and tactics. Already, as of August 2011, the US seems headed for a double-dip downturn while public debt overhang continues to weigh ominously on an anaemic, slow-growth Europe. Japan, meanwhile, is tepidly recovering from the March 2011 earthquake and tsunami. Events in these developed economies will no doubt impact the markets we operate in and the Group will be vigilant in treading these grounds. In Singapore, we see the government factoring in these developments, moderating its growth forecast for the country, as of August 2011, to between 5% and 6% for 2011.
In order to meet such challenges, our Group must be flexible and open to various growth avenues. With globalisation and intense competition, business cannot be as usual. The way to grow forward and secure long-term shareholder value is to be agile, open to change, and alternate growth strategies such as through business partnerships.
Nonetheless, as we explore synergistic acquisitions and other viable partnerships, we will also look for ways to organically expand our businesses. Concurrently, we will continue our group-wide review of operations, and trim our businesses if they do not add significant value going forward.
ACKNOWLEDGMENT
As we look back on an eventful year, gratitude must be extended to our management and staff, customers, business associates and shareholders. Your energy, advice and support have enabled us to reach so far. I am confident that, together, we will take Lion Asiapac Limited to the next level.