“The highly commendable performance underscores the hard work and success of the transformation led by our CEO, Derek Goh Bak Heng, and his team. Thanks to their efforts over the last two years, the Group has overcome the challenges of the loss of a major supplier and the disruptions caused by COVID-19.”

Dear Shareholders,

On behalf of the Board of Directors (the “Board”), I present to you the annual report of Serial System for the financial year ended 31 December 2021 (“FY2021”). This is the first time I am presenting this report following my appointment as Independent Non-Executive Acting Chairman in October 2021.

I am pleased to inform you that it has been another profitable year for Serial System despite the immense challenges in the operating environment. The highly commendable performance underscores the hard work and success of the transformation led by our CEO, Derek Goh Bak Heng, and his team. Thanks to their efforts over the last two years, the Group has overcome the challenges of the loss of a major supplier and the disruptions caused by COVID-19.

This turnaround has been achieved by our efforts to expand both supplier and customer networks in the semiconductor sector, improve internal efficiencies and grow our consumer products division. These strategies are being executed under an unprecedented shortage of chips worldwide.

Allow me now to outline the full-year results in some detail.

Financial Performance

Revenue for FY2021 increased 22% to US$895.9 million from US$731.4 million a year ago, driven by improved performance in the electronic components distribution and consumer products distribution business segments.

The ongoing U.S.-China “tech war”, as well as the global shortage of chips, have worked in our favour as we are able to pivot our distribution strategies to add value, particularly in Greater China. Consequently, gross profit for the year rose 59% to S$73.0 million from S$45.9 million in FY2020. Of significance, overall gross profit margin improved to 8.1% in FY2021 compared to 6.3% last year.

On the back of higher sales and improved gross profit margin, our net profit for FY2021 increased more than 42-times to US$11.1 million from US$0.3 million last year.

The challenges of the pandemic notwithstanding, there is still strong business momentum in digital sectors that we serve – data centres, 5G, IoT, autonomous and electric vehicles. At the same time, domestic chip manufacturers in China are scaling up their product quality and some have turned to Serial System to expand their market reach.

Revenue contribution from the consumer products division also increased, as work-from-home measures boosted sales in PC and gaming peripherals, particularly in Malaysia where we have grown to be the leading motherboard and VGA card distributor in FY2021.

Meanwhile, revenue for other businesses declined, mainly due to lower sales in the Group’s fast-moving consumer goods trading and distribution, offset by better performance from the medical devices assembly and distribution, and hospitality and healthcare solutions segments.

The corporate recovery strategies over the last two to three years have borne fruit. Our network and value proposition for both electronic components and consumer products have grown stronger. The uncertainties in the supply chain due to the pandemic and global chip shortage, and more recently, the conflict in Ukraine offer fresh touchpoints for Serial System to demonstrate its value as a trusted distributor. At the same time, we continue to put focus and efforts to strengthen internal efficiencies through adoption of technology and process improvements.

In FY2021, we have also raised net proceeds of S$1.35 million from the placement of an aggregate of 9 million treasury shares at S$0.15 per share. The fund was used to invest in convertible loans in Transwap Private Limited, a Singapore incorporated fintech company.

Dividend

The Board has proposed a final cash dividend of 0.45 Singapore cent per share. Together with the interim cash dividend payout of 0.22 Singapore cent a share, shareholders will receive a total of 0.67 Singapore cent per share for the year, compared to 0.11 Singapore cent a share in FY2020.

Outlook

We have adapted our operations to suit a post-COVID world, and as many countries look towards implementing an endemic approach towards COVID-19, it is safe to say we are past the worst of the pandemic. With our growth strategies in place, Serial System will be pursuing further growth in the years ahead, increasing revenue from our business segments as well as expanding our product portfolio and customer base.

Despite the global shortage of chips showing no signs of abating in the near future, demand for chips with increasing processing power and memory storage continues to grow, as emerging technologies such as 5G infrastructure, IoT, and autonomous and electric vehicles gain traction. On the consumer products business front, we will continue to maintain our edge in Malaysia by growing our network and product portfolio offerings, and focus efforts to strengthen our foothold in Japan.

We are watching closely the Ukraine conflict to assess the impact on further supply chain disruptions and geopolitical uncertainties. Even against the backdrop of uncertainties, we will build upon the foundation to capture new opportunities. We are confident our strategies will continue to bear fruit.

Appreciation & Acknowledgements

On behalf of the Board of Directors and Management, I would like to thank our customers and business partners for their support throughout the year. I would also like to extend my gratitude to the staff of Serial System; without their hard work, Serial System would not be where we are today. In particular, I would like to express my appreciation to our CEO, Derek for his leadership and dedication to grow the business and improve operational efficiency, which have been critical in the turnaround of Serial System.

Last but not least, I would like to extend my gratitude to our shareholders, for your faith and unwavering support throughout the years. We remain committed to building a stronger company and continue adding value to our shareholders.

Mr. Teo Ser Luck
Independent Non-Executive Acting Chairman
March 2022