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Chairman's & CEO's Statement

Extracted from Annual Report 2013

Dear Shareholders,

We are pleased to present the results for the financial year ended 31 December 2013 ("FY2013"). This has been an exceptional year during which we crossed the $4-billion revenue mark. This healthy performance underscores our determination and ability to ride out uncertainties of the global economy and sweeping changes in the IT landscape. ECS has worked relentlessly to adapt to changing trends towards mobility, and increased focus on Enterprise Systems. We endeavour to continue to drive operational and financial efficiencies.

Financial and Operations Review

In the financial year under review, the Group's revenue increased 15.3% to $4.20 billion as compared to $3.64 billion in FY2012. In passing the $4-billion annual revenue mark, ECS has crossed a significant milestone just four years after we hit $3 billion in sales in FY2009.


Review by Geographical Markets:

Geographically, both North Asia and South East Asia performed well in FY2013.

  • North Asia:
    In FY2013, North Asia revenue increased by 14.9% to $2.51 billion, contributing 59.7% of the total Group revenue in FY2013. The growth was mainly from increased sales of servers, mobility devices, networking hardware and software products.
  • South East Asia:
    South East Asia revenue increased by 15.9% to $1.69 billion, contributing 40.3% of total Group revenue in FY2013. The growth was driven by higher sales of mobility devices, networking hardware and desktop PCs.

Review by Business Segments:

With the transformation in the IT landscape, we are expanding our product portfolio to adapt to these changes and offer a wider range of products to our customers. We are increasing our exposure to mobility devices, in line with the global shift towards adoption of such devices. We are also building our Enterprise Systems, which offers higher margins. Both strategies were reflected in our FY2013 results.

  • Distribution Segment:
    Revenue from the Distribution segment increased by 14.6% to $2.86 billion, contributing 68.2% of the total FY2013 revenue. The increase was mainly due to higher sales of mobility devices from both South East Asia and North Asia.
  • Enterprise Systems Segment:
    Revenue from the Enterprise Systems segment increased by 17.5% to $1.30 billion, contributing 31.0% of total revenue in FY2013. The increase was mainly driven by higher sales of servers, networking hardware and software products.

ECS' FY2013 net profit increased 16.1% to $34.4 million from $29.6 million for FY2012 with gross profit of $156.6 million compared to $143.8 million, respectively. Gross profit margin narrowed to 3.7% from 3.9% over the comparative periods due to pressure from price competition.

Cash and bank balances increased by $12.7 million to $120.9 million as at 31 December 2013, mainly due to the net positive cash generated from operations of $18.9 million. Bank borrowings increased by $16.2 million to $259.2 million, mainly due to higher utilisation of bank facilities to support the growth of our business in FY2013. Net gearing improved to 0.37 times as at 31 December 2013 from 0.40 times as at 31 December 2012.

Earnings per share ("EPS") improved to 9.41 cents in FY2013 from 8.10 cents in FY2012 while net asset value ("NAV") per share increased to 101.59 cents as at 31 December 2013 from 92.83 cents a year earlier.

Dividend

The Board of Directors has proposed a first and final dividend of 2.2 cents per ordinary share, representing 23.4% of the FY2013 profit attributable to shareholders.

Our Strategies To Stay Relevant In The IT Landscape

Traditional roles have changed in the IT landscape, brought about by the dynamic shift towards mobility, cloud computing and lifestyle trends. Technology is moving quickly, and in so many directions, changing the way we live and work.

While the earlier shifts were about creating efficiency and improvements in how products were manufactured, the current ICT revolution redefines critical business assets, creating new economic models and transforming businesses in the process.

With these in mind, ECS' business has adapted and remained relevant. In fact, we believe this offers opportunities for ECS, leveraging on our strong relationships with principals, our sizeable regional network, rigorous internal processes and strong management team. Even as the industry evolves, we intend to deepen our market share in emerging markets such Indonesia and China, as well as enhance our participation in Enterprise Systems.

Outlook

ECS will continue to play an important role as distributor and IT provider even as the IT ecosystem continues to undergo significant transformation.

Our strategy remains unwavering amidst the winds of change: We constantly redefine our value proposition as a trusted partner with strong relationships and deep understanding of our customers' needs. Strategically, we will continue to expand in China and Indonesia. At the same time, we work actively to improve internal operational and financial efficiencies to improve margins, an endeavour which will also see a growing emphasis on Enterprise Systems. We will also continue to expand our business into mobility and cloud computing.

With our experienced and dedicated management team, we are confident that we will be able to overcome any obstacles ahead.

Appreciation and Acknowledgement

On behalf of our fellow Directors, we wish to thank our customers, channel partners, vendors, technology partners, banks, business associates and shareholders for their constant support, and our management and staff for their hard work. We would not have achieved a new and significant revenue milestone without your support.

Mr Tay Eng Hoe
Chairman

Mr Ong Wei Hiam
Group Chief Executive Officer