PNE INDUSTRIES LTD

(Company registration no. 199905792R)

Full Year Financial Statement And Dividend Announcement

PART I - INFORMATION REQUIRED FOR ANNOUNCEMENTS OF QUARTERLY (Q1, Q2 & Q3), HALF-YEAR AND FULL YEAR RESULTS

• 1(a) An income statement and statement of comprehensive income, or a statement of comprehensive income, for the group, together with a comparative statement for the corresponding period of the immediately preceding financial year.

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER

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Note:

In addition to the charges and credits disclosed above, the following items have also been credited (charged) to the statement of comprehensive income:

n.m. denotes not meaningful

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• 1(b)(i) A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.

STATEMENTS OF FINANCIAL POSITION

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1(b)(ii) Aggregate amount of group’s borrowings and debt securities.

(a) Amount repayable in one year or less, or on demand

(b) Amount repayable after one year

• Being lease liabilities on right-of-use assets arising upon adoption of SFRS(I)16.

(c) Details of any collateral

Approximately $163,000 (2019: $164,000) of the Group’s fixed deposits is pledged to a bank in return for bank guarantees issued to third parties.

• 1(c) A statement of cash flows (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year.

CONSOLIDATED STATEMENT OF CASH FLOWS

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• 1(c) A statement of cash flows (for the group), together with a comparative statement for the corresponding period of the immediately preceding financial year.

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

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• 1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year.

STATEMENTS OF CHANGES IN EQUITY

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• 1(d)(i) A statement (for the issuer and group) showing either (i) all changes in equity or (ii) changes in equity other than those arising from capitalisation issues and distributions to shareholders, together with a comparative statement for the corresponding period of the immediately preceding financial year.

STATEMENTS OF CHANGES IN EQUITY (Continued)

• 1(d)(ii) Details of any changes in the company's share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles, as well as the number of shares held as treasury shares of the issuer, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year.

There were no changes in the Company’s share capital since the end of the previous period reported on.

There are no outstanding convertibles or treasury shares as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year.

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1(d)(iii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding financial year.

The Company did not have any treasury shares as at the end of the current financial period and as at the end of the immediately preceding financial year.

• 1(d)(iv) A statement showing all sales, transfers, disposals, cancellation and/or use of treasury shares as at the end of the current financial period reported on.

The Company did not have any treasury shares during or at the end of the current financial period reported on.

• 1(d)(v) A statement showing all sales, transfers, cancellation and/or use of subsidiary holdings as at the end of the current financial period reported on.

There were no sales, transfers, cancellation and/or use of subsidiary holdings as at the end of the current financial period reported on.

2. Whether the figures have been audited, or reviewed and in accordance with which auditing standard or practice.

The figures have not been audited or reviewed by our auditors.

3. Where the figures have been audited or reviewed, the auditors’ report (including any qualifications or emphasis of matter).

Not applicable.

• 3A. Where the latest financial statements are subject to an adverse opinion, qualified opinion or disclaimer of opinion:—

• (a) Updates on the efforts taken to resolve each outstanding audit issue. Not applicable.

• (b) Confirmation from the Board that the impact of all outstanding audit issues on the financial statements have been adequately disclosed. Not applicable.

4. Whether the same accounting policies and methods of computation as in the issuer’s most recently audited annual financial statements have been applied.

Save as disclosed in paragraph 5 below, the Group has applied the same accounting policies and methods of computation in the financial statements for the current period reported on as those used in the most recently audited financial statements for the financial year ended September 30, 2019.

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5. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change.

The Group has adopted SFRS(I) 16 Leases that is effective for annual periods beginning on or after 1 January 2019. The standard will affect primarily the accounting for the Group’s operating leases, as it requires most of such leases to be recognised on the Group’s statements of financial position as a right-of-use (“ROU”) asset together with the associated lease liabilities.

The Group has applied the modified retrospective approach and thus, the comparative information was not restated. The Group has further opted to measure the ROU asset at an amount equal to the lease liability, adjusted by the amount of prepaid or accrued lease payments as at October 1, 2019. As such, as at October 1, 2019, the Group recognised $1,274,000 of ROU assets and lease liabilities (excluding short-term leases and leases of low-value assets). The Group has also reclassified $1,180,000 of assets relating to leasehold land from property, plant and equipment to ROU asset as at October 1, 2019.

There is no significant impact to the Group’s net profit, net assets, or net cash flows arising from the adoption of SFRS(I) 16.

6. Earnings per ordinary share of the group for the current period reported on and the corresponding period of the immediately preceding financial year, after deducting any provision for preference dividends.

7. Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares of the issuer at the end of the (a) current period reported on and (b) immediately preceding financial year.

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8. A review of the performance of the group, to the extent necessary for a reasonable understanding of the group’s business. It must include a discussion of the following:

• (a) Any significant factors that affected the turnover, costs, and earnings of the group for the current financial period reported on, including (where applicable) seasonal or cyclical factors; and

• (b) any material factors that affected the cash flow, working capital, assets or liabilities of the group during the current financial period reported on.

Statement of Comprehensive Income

For the year ended September 30, 2020 (“FY20”), the Group recorded revenue and profit for the year of $85.8m and $6.2m respectively.

Revenue declined $16.3m or 16.0% vs FY19, due mainly to a $14.6m reduction in Contract Manufacturing sales. The reduction was attributable to the normalization of orders of the Contract Manufacturing segment this year, whereas in FY19, higher orders were received because of the strategic expansion of sales channels by a customer in that year. The revenue recorded by the Trading segment fell by $1.7m in FY20 due to weak demand from customers.

FY20 gross profit declined $2.3m due to the lower revenue and higher allowance for inventories this year. However, gross profit margin increased to 23.2% in FY20 vs 21.7% in FY19 due to a better product mix.

Other operating income fell by $0.8m, while other operating expenses rose by $0.3m, vs FY19. This was due mainly to the foreign exchange (“FX”) loss in FY20. The Group incurred $0.5m of FX loss in FY20 which was recorded in other operating expenses. However, in FY19, the Group had a $0.9m FX gain recorded in other operating income.

Administrative expenses reduced by $1.0m vs FY19 due mainly to lower staff costs as a result of the lower level of operations.

As a result of the above, profit before tax fell by $2.2m vs FY19.

Under other comprehensive income, the Group recorded a $0.6m fair value loss on financial assets which is mainly attributable to the revaluation of its investment in DSP Innovation BV. This is pursuant to a reduction in the valuation of this company as assessed by an independent valuer engaged by the Group.

Statement of Financial Position

Although revenue declined vs FY19, trade receivables rose slightly by $1.0m vs September 30, 2019. Trade payables also rose slightly by $0.8m vs September 30, 2019. Both increases were due to higher sales and purchases respectively in the last few months of FY20 as compared to the last few months of FY19.

Inventories declined $2.7m vs FY19 due to utilisation during the year.

Financial assets held at FVTOCI declined $1.3m vs FY19. This is due mainly to (i) $0.6m reduction in fair value of the Group’s investment in DSP Innovation BV; and (ii) the disposal of the Group’s entire $0.8m investment in PNE PCB Bhd.

The increase in the Group’s cash and bank balances vs FY19 is due partly to the $0.9m proceeds from the disposal of the Group’s investment in PNE PCB Bhd. The Group ended the year with a strong cash and bank balance of $43.2m, up $1.7m vs FY19. The bulk of the cash and bank balances are maintained with reputable banks in Singapore.

The Group has no bank borrowings. The lease liabilities are all attributable to right-of-use assets that have been recognised during the year pursuant to the adoption of SFRS(I) 16 Leases.

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9. Where a forecast, or a prospect statement, has been previously disclosed to shareholders, any variance between it and the actual results.

Not applicable.

10. A commentary at the date of the announcement of the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months.

The Covid19 outbreak is still on-going with no end in sight as yet. There are even signs of the outbreak escalating in various areas, including Malaysia where the Group has operations in, and in Europe where the Group’s associate as well as some of the Group’s customers and suppliers are located in. As such, there is a lot of uncertainty and it is not possible to estimate reliably the impact on future demand for the Group’s products, as well as the potential disruptions that may occur in case of more lockdowns.

While international trade disputes have not had a significant impact on the Group yet, any major escalation in future may still negatively affect the Group’s prospects.

Foreign exchange rates still remain volatile. As the Group has sales denominated in the United States Dollar, any weakening of the United States Dollar will have an adverse impact on the Group to the extent that the revenue is not matched by costs denominated in the United States Dollar.

The Group continues to face intense pressures from customers for lower pricing on its products, as well as cost pressures in China and Malaysia, where its manufacturing operations are based in. The Group continuously monitors its activities to enforce stringent control of its costs and to identify opportunities to streamline operations for better efficiencies and operational excellence.

High costs and long lead times for raw materials also present challenges to the Group, and the Group actively liaises with both its customers and suppliers to better manage its costs and supply chain.

11. If a decision regarding dividend has been made:-

• (a) Whether an interim (final) ordinary dividend has been declared (recommended); and

• (b)(i) Amount per share …… cents

• (b)(ii) Previous corresponding period ….. cents

• (c) Whether the dividend is before tax, net of tax or tax exempt. If before tax or net of tax, state the tax rate and the country where the dividend is derived (if the dividend is not taxable in the hands of shareholders, this must be stated).

The directors are pleased to declare as follows:

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(d) The date the dividend is payable

Payment of the dividend, if approved by the shareholders at the forthcoming Annual General Meeting of the Company, will be made on 26 February 2021.

(e) The date on which Registrable Transfers received by the company (up to 5.00pm) will be registered before entitlements to the dividend are determined.

Notice is hereby given that the Share Transfer Books and Register of Members of PNE Industries Ltd will be closed at 5.00 p.m. on 29 January 2021 for the preparation of dividend entitlement and shall reopen on the following working day.

Duly completed and stamped registrable transfers received by the Company’s Registrar, Boardroom Corporate & Advisory Services Pte. Ltd., at 50 Raffles Place #32-01 Singapore Land Tower, Singapore 048623 up to 5.00 p.m. on 29 January 2021 will be registered to determine shareholders’ entitlements to the said dividend. Members whose securities accounts with The Central Depository (Pte) Limited are credited with shares at 5.00 p.m. on 29 January 2021 will be entitled to the proposed dividend.

12. If no dividend has been declared (recommended), a statement to that effect and the reason(s) for the decision.

Not applicable.

13. If the Group has obtained a general mandate from shareholders for IPTs, the aggregate value of such transactions as required under Rule 920(1)(a)(ii). If no IPT mandate has been obtained, a statement to that effect.

No IPT mandate has been obtained.

14. Confirmation that the issuer has procured undertakings from all its directors and executive officers (in the format set out in Appendix 7.7) under Rule 720(1).

The Company has obtained undertakings from all its directors and executive officers in the format set out in Appendix 7.7 under Rule 720(1).

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PART II - ADDITIONAL INFORMATION REQUIRED FOR FULL YEAR ANNOUNCEMENT (This part is not applicable to Q1, Q2, Q3 or Half Year Results)

15. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuer’s most recently audited annual financial statements, with comparative information for the immediately preceding year.

ANALYSIS BY BUSINESS SEGMENT

(i) Segment revenue and results

The following is an analysis of the Group's revenue and results by reportable segment:

(ii) Segment assets and liabilities

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15. Segmented revenue and results for business or geographical segments (of the group) in the form presented in the issuer’s most recently audited annual financial statements, with comparative information for the immediately preceding year.

ANALYSIS BY BUSINESS SEGMENT (continued)

(iii) Other segment information

• Excluding deferred tax assets

ANALYSIS BY GEOGRAPHICAL INFORMATION

16. In the review of performance, the factors leading to any material changes in contributions to turnover and earnings by the business or geographical segments.

The decline in profit of both the contract manufacturing segment and the trading segment were due to the decrease in turnover of the respective segments.

The decline in revenue from the Netherlands and Poland were due mainly to the normalization of orders in FY20, because in FY19, higher orders were received due to the expansion of sales channels by a customer during that year. The increase in revenue from China in FY20 was due to higher orders from customers in China.

The reduction in non-current assets in Malaysia was due to the disposal of the Company’s FVTOCI equity investment in PNE PCB Berhad. The reduction in non-current assets in the Netherlands was due to the lower fair value of the Group’s FVTOCI equity investment in DSP Innovation BV.

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17. A breakdown of sales as follows:-

18. A breakdown of the total annual dividend (in dollar value) for the issuer’s latest full year and its previous full year as follows:-

• Includes interim dividends declared and paid during the financial year, as well as final dividend recommended in respect of that financial year, but payable/paid in the following financial year.

19. Disclosure of person occupying a managerial position in the issuer or any of its principal subsidiaries who is a relative of a director or chief executive officer or substantial shareholder of the issuer pursuant to Rule 704(13) in the format below. If there are no such persons, the issuer must make an appropriate negative statement.

BY ORDER OF THE BOARD

Ms Tan Meng Siew Company Secretary November 25, 2020

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