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Micro-Mechanics (Holdings) Ltd’s Latest Earnings: Dividends Grow by a Third for FY2017

Micro-Mechanics (Holdings) Ltd (SGX: 5DD), which manufactures high precision tools and parts used in the semiconductor industry, announced its financial results for the full year ended 30 June 2017 (FY2017) today.

Here’s a rundown on the latest financial figures:

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1. Revenue for the year came in at S$57.2 million, up 11.7% year-on-year. Gross profit margin increased from 56.9% in FY2016 to 57.4% in FY2017.

2. Net profit grew 24.2% year-on-year to S$14.8 million. This translated to a net profit margin of 25.8% in FY2017. In FY2016, the figure was lower at 23.2%.

3. Consequently, basic and diluted earnings per share for the year was at 10.62 Singapore cents, up from 8.55 cents in FY2016.

4. The firm’s balance sheet strengthened for the year. As at 30 June 2017, Micro-Mechanics had S$23.4 million in cash and cash equivalents with zero debt. Comparatively, a year ago, it had S$20.1 million in cash and cash equivalents, and no debt.

5. For FY2017, the firm’s return on equity (ROE) was 27%, a vast improvement from FY2016’s figure of 23.7%. The increase shows management’s effectiveness over the year, despite the higher cash hoard as seen above.

6. Cash flow from operations was at S$18.1 million and S$5.1 million was spent on capital expenditure. Therefore, the business brought in around S$13 million in free cash flow for FY2017, an improvement from S$12.2 million raked in a year ago.

All-in-all, it was a solid year for Micro-Mechanics. Revenue, gross profit margin, net profit, net profit margin, ROE and free cash flow all improved in FY2017.

Revenue for the year improved mainly due to higher sales achieved in all of its geographical markets, except Europe. The biggest improvement in revenue came from Singapore, which grew 58% year-on-year to S$4.7 million.

China accounted for 26% of the total revenue to remain as the firm’s largest market. Sales from its second largest market, Malaysia, rose 11.9% to S$11.9 million to account for 21% of total revenue. The third largest market in FY2017 was the USA, where sales increased by 16% to S$9.1 million.

Shareholders are set to receive a final dividend of 4.0 Singapore cents per share and a special dividend of 1.0 Singapore cent per share. This will bring total dividends for FY2017 to 8.0 Singapore cents, an improvement from 6.0 Singapore cents declared a year ago.

Chief Executive Officer of Micro-Mechanics, Mr Chris Borch, said:

“The Group benefited from the strong pick-up in the semiconductor industry during the past six months to achieve record revenue and net profit in FY2017. In line with our consistent practice of rewarding our shareholders for their continuous support, we are pleased to share the Group’s better performance with them by paying higher dividends for FY2017.

The World Semiconductor Trade Statistics recently raised its 2017 semiconductor sales growth forecast to 11.5% from its previous prediction of 6.5%. We believe the robust first-half start to the year may foreshadow a prolonged period of stronger industry growth as chips become increasingly used in nearly every aspect of modern life. With factories in China, Malaysia, the Philippines, Singapore, the USA and our sales office in Taiwan, Micro-Mechanics is well-positioned to provide fast, effective and local support to our customers in the world’s major semiconductor markets.”

Shares of the firm closed at S$1.44 on Monday. This translates to a trailing price-to-earnings ratio of 13.6 and a dividend yield of 5.6%, inclusive of the special dividend.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Micro-Mechanics (Holdings) Ltd. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.