Extracted from Annual Report 2019"In response to the challenging business environment in recent years, we took swift, vigorous, realistic measures to stabilise the business, calibrate our productmix portfolio, and strengthen our fundamentals, while focusing on the long term strategy of the Group to capture new and emerging growth opportunities."
Fabchem China Limited's ("Fabchem" or "the Group") macro business environment continues to be unsettled over the past 12 months, with subdued growth and additional regulatory measures that undermine our operating activities as well as those of our key customers in the mining industry.
In response to the challenging business environment in recent years, the management took swift, vigorous, realistic measures to stabilise the business, calibrate our product-mix portfolio, and strengthen our fundamentals, while focusing on the long-term strategy of the Group to capture new and emerging growth opportunities.
Given the external market conditions, the Group undertook an assessment of the production lines of our three core business segments for the full year ended 31 March 2019 ("FY2019"). After the review, an impairment allowance on property, plant and equipment of approximately RMB 119.0 million was made to ensure that the Group's balance sheet reflects the recoverable value of the assets.
As a result, the impairment allowance further impacted our financial performance in FY2019. More details of the Annual Report and Audited Financial Statements for FY2019 of Fabchem will be shared in the next few pages.
Nevertheless, essential to our niche and highly specialised operating activities, we continue to devote resources to enhance the safety DNA of our Group by investing in innovation and developing new manufacturing capabilities.
On this front, we have started the design and construction of our third automated boosters production line, however due to teething issues related to the fabrication process of the boosters machineries, the Group's third automated boosters production line will likely be delayed until 1 October 2019.
Separately, on a different note, we issued an announcement on 15 March 2019 relating to a mandatory conditional cash offer by Triple Vision Pte. Ltd. ("Triple Vision") for all the issued and paid-up ordinary shares (the "Shares") of Fabchem.
This is in accordance with Rule 14 of the Singapore Code on Take-overs and Mergers after Triple Vision acquired an aggregate of 13,993,200 shares from a substantial shareholder, DNX Australia Pty Limited ("DNX Australia"), at S$0.158 per share.
Previously, the Group has been selling our explosive devices products to business entities related to DNX Australia and as a result of this divestment by DNX Australia, future transactions between the Group and business entities related to DNX Australia will cease to be Interested Person Transactions. Shareholders should be highlighted that business transactions between the Group and business entities related to DNX Australia will continue as normal and the divestment by DNX Australia will not have any impact on these business transactions.
In FY2019, the Group's revenue declined 19.3% to approximately RMB 154.4 million with lower sales registered across our three core product segments namely, (a) explosive devices such as boosters; (b) industrial fuse and initiating explosive devices such as detonating cords and non-electric tubes; and (c) industrial detonators such as non-electric detonators and piston non-electric detonators.
Contributing 45.8% of the Group's revenue, sales of the Group's explosive devices product segment dipped 10.4% to approximately RMB 70.8 million while the industrial detonators product segment decreased 8.8% to approximately RMB 53.7 million.
The Group had to temporarily cease production activities for about 10 days during June 2018 due to the Chinese authorities' issuance of a temporary cease production directive to commercial explosive manufacturers in the Shandong province in relation to The Shanghai Cooperation Organisation meeting in Qingdao that took place in June 2018.
Separately, some of our customers' mining operations in the domestic market were affected by additional safety measures that restricted the use of detonating cords for mining activities since the second quarter of FY2018, hence sales of industrial fuse and initiating explosive devices product segment dropped 44.4% to approximately RMB 29.6 million in FY2019.
In our overseas markets, sales dipped marginally by 4.5% to approximately RMB 63.5 million in FY2019 as sales to Australia decreased 23.0% to approximately RMB 44.0 million due to lower number of scheduled shipments of boosters to customers in Australia.
As the Group's production activities were affected during FY2019 that resulted in lower production volume across all its product ranges, the Group's gross profit margin dipped marginally from 18.8% to 18.5% in FY2019.
The Group's distribution expenses decreased 2.4% to approximately RMB 20.8 million in FY2019. However, administrative expenses increased marginally by 4.7% to approximately RMB 32.2 million in FY2019 due to increased depreciation expenses and research and development expenses.
Factoring in the impairment allowance on property, plant and equipment of approximately RMB 119.0 million, the Group registered a loss after tax of approximately RMB 150.4 million in FY2019.
After the assessment of the production lines of our three core business segments, total assets stood at approximately RMB 333.0 million as at 31 March 2019. The Group's cash and cash equivalent position stood at approximately RMB 83.2 million with a gearing of 0.17x.
The Group's trade receivables, another major component of current assets, stood at approximately RMB 29.3 million as at the end of March 2019.
As at 31 March 2019, the Group had total liabilities of approximately RMB 140.8 million, of which the major components are trade and other payables of approximately RMB 56.5 million and other financial liabilities of RMB 58.0 million.
And as at 31 March 2019, shareholders' equity stood at approximately RMB 192.2 million and net asset value per share stood at RMB 4.11 per share.
During FY2019, the Group continued with its capital management initiatives which generated net cash from operating activities of approximately RMB 12.1 million. However, the Group recorded net cash used in investing activities of approximately RMB 12.4 million and net cash used in financing activities of approximately RMB 5.45 million.
As a result, the Group generated an overall net cash outflow of approximately RMB 5.8 million in FY2019.
As part of our continual strategic focus, the Group will proactively evaluate new measures to utilise our working capital more efficiently and strengthen our financial foundation.
It is with sadness and regret that Dr. Lim passed away on 1 September 2018. Since the Group's listing in 2006, Dr. Lim has had many outstanding contributions to the Board during his tenure, working tirelessly and providing valuable insights in the roles that he served within the Remuneration Committee, Nominating Committee and Audit Committee of the Group.
It has been a privilege to serve with him and on behalf of the Board and management, we would like to express our deepest appreciation and gratitude again for Dr. Lim's dedicated service and commitment over the years in guiding the Company.
Pending the formal appointment of the Company's Chairman, the Group's Lead Independent Director, Mr Wee Phui Gam, was appointed the Company's Acting Chairman in the interim.
Other than this change in the composition of our Board of Directors, Mr Sun Bowen was re-designated from the position of Executive Director and Senior Advisor of the Company to Non-Executive Non-Independent Director of the Company with effect from 1 December 2018.
On behalf of the Board of Directors, I would like to express my sincere thanks to everyone who has contributed positively to our Group over the last 12 months. In particular, the efforts and commitment of our employees made the current challenging business journey much more bearable and meaningful.
I would also like to thank my fellow Directors for their commitment and contributions during the past eventful year. Last but not least, to our shareholders, thank you for your continuing confidence and support.
There is a lot more to do in developing new value propositions for the Group but we can undertake that work from a strengthening position.