Megachem Limited
Annual Report
2014
36
Operating and Financial Review
Property, plant and equipment
Property, plant and equipment increased by S$2.1 million or 18.1%mainly due to capital expenditure of S$3.7 million,
out of which S$3.2 million related to progressive recognition on the purchase of industrial land in Malaysia. This was
offset by depreciation of S$1.5 million.
Associated companies
The increase in the carrying value of our investment by S$0.5 million or 8.4%was in line with net positive contribution
from our associated companies offset by dividend return.
Trade receivables
Net third party trade receivables jumped by S$4.0 million or 15.6% from S$25.5 million as at 31 December 2013
to S$29.4 million as at 31 December 2014. This was partially due to record sales achieved for the current year. The
second reason that led to the increase was the higher proportion of receivables outstanding from customers in South
America as at year end. This also resulted in the increase in turnover days from 85 days to 89 days.
Inventory
In order to support higher sales achieved in the current year, inventory increased moderately from S$19.8 million as
at 31 December 2013 to S$21.5 million at end of current year. Inventory turnover days remained stable at 90 days as
compared to previous year.
Other current assets
Other current assets of S$1.8 million, which consist mainly of advances to suppliers and prepayments, decreased
marginally by S$0.1 million as compared to S$1.9 million as at 31 December 2013 mainly due to timing of payments.
Financial assets and financial liabilities held for trading
Financial assets held for trading increased by S$14,000 as a result of upward market valuation of listed equity security
by S$60,000 offset by lower fair value of foreign exchange forward contracts of S$46,000 recognised in the current
year. Financial liabilities held for trading remained relatively unchanged as compared to last year.
Trade and other payables
Trade payables as at 31 December 2014 declined from S$7.6 million last year to S$7.4 million as at end of current year.
This was offset by an increase in amount due to related party of S$0.9 million which consist mainly of a short term
loan from a director for working capital requirement of a subsidiary.
Other payables increased by S$0.2 million mainly due to progressive payment for purchase of industrial land in
Malaysia. This was offset by higher advance payments from customers of S$1.3 million.
Borrowings
In order to finance capital expenditure on property, plant and equipment of S$2.8 million and higher inventory
purchases, bank borrowings increased by S$4.2 million from S$17.7 million to S$21.9 million. Consequentially, our
gearing ratio also went up to 0.52.
As at 31 December 2013, as the gearing ratio of one of the subsidiaries exceed the cap imposed by a bank, the long
term portion which amounted to S$3.45 million was classified as current. As at 31 December 2014, it was classified as
non-current as the bank conditions were met.
Net asset value
Net asset value per share increased from 30.24 cents as at 31 December 2013 to 31.45 cents as at 31 December 2014
primarily due to total comprehensive income for the current year of S$2.9 million offset by dividend payment to
shareholders of S$1.3 million.
3.
CASH FLOW
Overall cash and cash equivalents increased by S$0.6 million from S$8.4 million as at 31 December 2013 to S$9.0 million
as at 31 December 2014. Proceeds from bank borrowings of S$5.0 million were primarily to finance S$2.8 million of
capital expenditure on purchase of property, plant and equipment and higher working capital requirement. Other
major cash outflow include dividend payments to shareholders of S$1.3 million which was partially met by dividend
received of S$0.8 million.
