Frontken Berhad Annual Report 2019

8 Frontken Corporation Berhad (651020-T) ANNUAL REPORT 2019 Chairman’s Message MANAGEMENT DISCUSSION AND ANALYSIS Review 2019 In 2019, the Group operated against a backdrop of macroeconomic and political disruption, including the uncertainty surrounding international trade policy. However, we are fortunate to have navigated the challenges of this evolving backdrop while continuing to execute our strategies successfully and managed to deliver a better set of results. One of the key priorities for the year was to further improve on the profitability of the Group. Gross and operating profit margins had to be improved so that the net profit as a percentage to sales will move in tandem with it. As a result, the Group achieved a gross profit margin of 44% this year with growth momentum across all its businesses. Against the same period last year, the Profit After Tax for the Group improved by 30% from RM57.0 million in FYE2018 to RM74.2 million this year. At the same time, we further strengthened our balance sheet, generated good cash flow, and increased our net cash to RM199.0 million, a reflection of our emphasis on cost and cash discipline. We continued to undertake rigorous evaluation of all businesses in order to allocate the appropriate resources according to individual business needs and funding requirements. The total capital expenditure for the year was at RM7.1 million, which was mainly incurred in the Group’s subsidiary in Taiwan to further improve its operations’ efficiency. In addition to fortifying our core businesses and growth opportunities, we remain focused on transforming underperforming businesses. For example, in 2019 we made changes to our operation in Indonesia where the division was restructured by putting in place a new management team. This change helped improve performance and narrowed its losses significantly. Looking beyond the financial performance, much of the progress we have made in recent years reflects not only our focus on cost but also on our amazing team of employees. We recognise that employees’ experience is one of the core elements of our success. We want to create the right culture and ensures that everyone feels engaged in our strategy in driving growth. We have taken steps to ensure that all our employees share in the success of our Group by providing them with the appropriate incentives and rewards. We also emphasised on continuous learning approach and tools, enabling everyone to stay on top of the technology trends and acquiring new knowledge skills. During the course of the year, we undertook a number of “deep dives” into different aspects of the Group and its strategies. Each August and December, we spend a few days with our executive team to discuss the integrated strategic business plan for the Group. This allows us to constantly evaluate our progress and refine aspects of our strategies. We also engaged with our stakeholders, including our customers, in order to provide us with their holistic views and feedbacks so that we may support them better. At the same time, we also use that knowledge to better understand the key risks we faced to enable us to mitigate and manage them; a key to ensuring good governance. Our efforts have not gone unnoticed as our share price and its market capitalisation hit its highest level in nearly fourteen years. It is encouraging for us to see the trust that the shareholders place in us as a company, the way we do Dear valued shareholders, Once again, it is time to recognise the accomplishments for last year and look forward for the next chapter in the coming year. The year 2019 enters history as a year of growth with several record achievements for the Group; both for our semiconductor and engineering businesses. The Group’s revenue and earnings as well as return on equity was also at its highest. While we still have a lot of work to do in pursuit of our long-term goals, I’m pleased with our business plan and strategies based on the progress we have made thus far as reflected in this report. On behalf of the Board of Directors, it is my great pleasure to present to you the Annual Report and Audited Financial Statements of the Group for the financial year 2019 (“FYE2019”). As part of this Annual Report, we have included the Management Discussion and Analysis to provide our shareholders with a more insightful and informative details of the Group’s performance and operations.