Micro-Mechanics (Holdings) Ltd (SGX: 5DD) is involved in the designing, manufacturing, and marketing of consumables and precision tools that are used in the semiconductor industry. On Thursday, the company released its financial results for the full year ended 30 June 2019 (FY2019). Here are some key highlights from the announcement.
Show me the money
Revenue for FY2019 tumbled 7.3% to S$60.3 million due to a slowdown in the global semiconductor industry. Sales fell across Micro-Mechanics’ major geographical markets, including that of China, Malaysia, and Singapore.
This fall in the top line, together with higher depreciation costs from capital investments, caused the company’s earnings to contract by 24.5% to S$12.9 million. Consequently, earnings per share fell from 12.33 Singapore cents to 9.31 Singapore cents.
Operating cash flow for FY2019 also came down, falling 14.0% to S$19.3 million. With capital expenditure of S$3.4 million in FY2019, free cash flow improved to S$15.8 million, up from S$10.3 million a year back. In both FY2018 and FY2019, Micro-Mechanics spent S$15.5 million on new machines to improve the efficiency and productivity of its worldwide operations.
The company’s balance sheet remains rock-solid. As of 30 June 2019, Micro-Mechanics had S$21.9 million in cash and cash equivalents with no bank borrowings. This was an improvement from the end of June 2018, when it had S$21.1 million in cash and zero debt.
Despite the fall in earnings, shareholders of Micro-Mechanics would be delighted to note that the company did not cut its dividend for the year.
Instead, it declared a final dividend of S$0.05 per share and a special dividend of S$0.01 per share. Together with the interim dividend of S$0.04 per share already dished out, the total dividend for FY2019 comes to S$0.10 per share, the same as FY2018. Micro-Mechanics said the stable dividend payout is in the spirit of “keeping with its long-held practice of rewarding shareholders.”
Global chip sales fell 14.5% in the first half of 2019, according to the Semiconductor Industry Association. With that, the World Semiconductor Trade Statistics now forecasts worldwide chip sales to decrease by 12.1% to US$412 billion this year.
However, Micro-Mechanics is not worried as it’s focused on the long term. CEO Chris Borch said:
“Our philosophy is to stay focused on our long-term goals and not get overly distracted by short-term variations in the industry. We believe this is the correct approach for Micro-Mechanics to build sustainable growth and value for all stakeholders. Moving forward, we intend to continue automating our operations and building a flexible, capable and skilled work force.”
Micro-Mechanics has a capital expenditure budget of between S$6 million and S$7 million for FY2020.
The Foolish bottom line
Headwinds in the semiconductor industry and the global economy have rocked Micro-Mechanics in FY2019. However, those should be short-term nature; over the long term, the company is poised to take advantage of the increasing use of chips in our everyday lives. Shares in Micro-Mechanics closed at S$1.60 each on Thursday. The share price translates to a price-to-earnings ratio of 17 and a tasty dividend yield of 6.3%, including the special dividend.
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 owns shares in Micro-Mechanics (Holdings) Ltd.