Captii Limited

Investor Relations.
(Extracted from Annual Report 2018)

Dear Captii Shareholder:

On behalf of the Board of Directors, I am pleased to present the Annual Report of Captii Limited for the financial year ended 31 December 2018.

A broadly positive year

Our Group entered 2018 on a strong footing having maintained profitability for ten consecutive years.

Both our GlobeOSS and Unifiedcomms businesses generated higher revenue this year. GlobeOSS posted revenue of S$19.7 million, an increase of 50.3% from the S$13.1 million recorded in 2017. Unifiedcomms revenue marginally increased by 0.7% to S$11.8 million in 2018 compared to the S$11.7 million achieved the year before.

The significantly higher revenue delivered by GlobeOSS was the main driver for the S$6.7 million improvement in overall Group revenue for the year to S$31.5 million.

Gross profit achieved by our Group was higher this year, as a result of increase in revenue. However the magnitude of the increase was lesser than that of revenue gross profit rose by 5.7%, as compared to the 26.9% increase in revenue. This reflected the considerably lower average gross profit margin for the year of 38.1%, which resulted from the less favourable sales mix for 2018. This year the lower margin system sale contract revenues of GlobeOSS comprised a much greater proportion of Group revenue.

Group profit before tax came in at S$3.7 million for the year, 30.6% higher compared to the S$2.8 million recorded for 2017. Apart from the flow-down effect of the better performance of GlobeOSS this year, the substantial increase in profit before tax arose from the progress achieved at Captii Ventures whose investment portfolio had increased in value during the year.

Our overall bottom-line for the year was positive at S$3.4 million, a 47.1% improvement on the S$2.3 million recorded last year.

Our 10th consecutive year of profit going into our 21st year of business

2018 represented our tenth consecutive year of profitability. Profitability in 2018 had improved compared to 2017 - our Group's return on equity (ROE) increased to 6.2% this year from 3.2% the year before. This improvement in our ROE performance is in large part attributable to a non-cash, fair value gain on investment that we enjoyed on the Captii Ventures investment portfolio.

Higher system sale contract and managed service contract performance this year

Efforts to grow the managed service business persisted in 2018 and the results are encouraging. Revenues from this contract type improved by S$1.1 million against last year with the increase being attributable to the higher managed service contract revenues at GlobeOSS. The revitalised unit within the Unifiedcomms business, PostPay that focuses on amongst others, prepaid credit solutions on a managed service model, achieved further growth this year. PostPay revenues grew in 2018 to countervail any decline or slow growth in the other managed service contracts in the Unifiedcomms portfolio.

The significant improvement in system sale contract revenues at GlobeOSS especially in the latter part of the year together with the growth in managed service contract revenues at both GlobeOSS and PostPay had more than offset the underperformance at Unifiedcomms within its other managed service business.

Investing in technology and innovation

At the start of 2018, we continued to have adequate cash balances to continue with the strategy of augmenting organic growth with growth by strategic investment. The Captii Ventures team identified and screened many candidates for investment throughout 2018. During the year, Captii Ventures completed two further investments in early stage start-ups to bring the number of investees in the portfolio to fifteen in total. The work to identify, screen and engage on further investment opportunities will persist in the new year.

Balance sheet strength and dividends

Apart from the further investments made by Captii Ventures in 2018, during the year we continued to reinvest in GlobeOSS and Unifiedcomms especially for the PostPay business for further product development as well for the acquisition of assets to support the fulfilment of managed service contracts. We continue to have a strong balance sheet at year-end 2018 with ample cash and cash equivalents of S$8.7 million. This was also after declaring and paying to shareholders a dividend for the ninth year running. We had on 18 September 2018, paid a tax- exempt interim dividend of 1.25 Singapore Cents per share. In light of the anticipated capital requirements of our Group's growth and investment-driven development strategy, no further and final dividend payment has been recommended by our Directors for the financial year ended 31 December 2018.

In gratitude

2018 proved to be a broadly positive year for our Group. We ended the year with improved revenue and operating profit results courtesy of a strong year at GlobeOSS and encouraging progress in the venture investment activities at Captii Ventures.

We look forward to doing better in the year ahead and will strive to deliver an improvement in Group financial performance for 2019.

For the year that was, I extend my deepest gratitude to the talented and dedicated individuals across all the businesses that make up our Group, for your commitment and perseverance. I ask the same from you again in the new financial year ahead, to move our business onward and upward. To you, our shareholder, I thank you for your continued belief and patience in our people and our business. Last but certainly not least, my thanks go to the government agencies and regulatory bodies for their guidance and support.


Wong Tze Leng
Executive Chairman

18 March 2019