Captii Limited

Investor Relations.
 
 
(Extracted from Annual Report 2022)

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 2022.

An unexpected and disappointing outcome

Disappointingly, we were unable to extend our long track record of profitability in 2022. Instead, we saw a sharp reversal of our strongly positive bottom-line results in 2021.

Although our GlobeOSS and Unifiedcomms businesses saw a decline in their revenue performance compared to the year before, this wasn't the main contributor to our negative bottom-line outcome for the year. The sharp increase in interest rates across South-East Asia and in the US and Europe had significantly impacted the value of our business' expected cash flows and also the valuation of certain Captii Ventures investees. The impact of both these non-cash fair-value and goodwill impairment losses of almost S$4.9 million combined, had more than offset the profits from our business operations.

Muted but profitable business operations

Both our GlobeOSS and Unifiedcomms business generated lower revenue this year. GlobeOSS posted revenue of S$8.3 million, a decrease of 4.2% from the S$8.7 million achieved in 2021. Unifiedcomms revenue decreased by 1.7% to S$14.9 million in 2022 compared to the S$15.2 million achieved the year before. As a result of this, group revenue declined from S$23.9 million in 2021 to S$23.2 million in 2022.

Gross profit recorded by our group was lower this year, in line with the decline in revenue. Average gross profit margin decreased marginally from 48.7% in 2021 to 48.6% in 2022, arising from the less favourable sales mix of 2022.

Our group ended the year with a loss before tax of S$2.5 million, in contrast with the profit before tax of S$10.4 million the year before. The substantial profit recorded in 2021 was mainly due to a significant fair value gain on the Captii Ventures investment portfolio. Our group suffered a fair value loss instead on the same portfolio this year, along with an impairment loss on goodwill relating to the 2012 acquisition of Ahead Mobile.

This culminated in a group loss after tax for the year of S$3.2 million, in contrast with the profit after tax of S$9.5 million achieved in 2021.

Negative bottom-line: negative ROE

Due to the negative bottom-line outcome for the year, our group recorded negative return on equity (ROE) of 7.1% in 2022, in contrast with the ROE of 19% achieved in 2021. Excluding the non-cash exceptional losses (and gains) that have significantly on our bottom-line results, our group recorded an adjusted ROE of 2.9% in 2022, a marginally higher outcome compared to the adjusted ROE of 2.4% generated in 2021.

Recurring revenues insulating the decline in system sales

Efforts to grow the managed service business persisted in 2022. However, revenues from this contract type declined by S$0.1 million against last year with the decrease being attributable to the lower managed service contract revenues from GlobeOSS.

Group system sale contract revenues was lower for 2022, as a result of lower system sale contract revenues at both Unifiedcomms and GlobeOSS. System sale revenues of GlobeOSS decreased by 5.4% to S$5.2 million in 2022 compared to S$5.5 million achieved in 2021. Unifiedcomms system sale contract revenues meanwhile declined by 29.8% to S$1 million in 2022 compared to S$1.5 million recorded in 2021.

Investing in technology and innovation

At the start of 2022, 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 several candidates for investment throughout 2022 but none progressed further to consummation. As a result, the number of investees in the portfolio remained as nine in total as at end-2022. The work to identify, screen and engage on further investment opportunities will persist in the new year.

Balance sheet strength and dividends

Although we had no acquisitions or investments in 2022, during the year we continued to reinvest in GlobeOSS and Unifiedcomms - especially for the PostPay business - for further product development as well as for the acquisition of assets to support the fulfilment of managed service contracts. We continue to have a strong balance sheet at end-2022 with ample cash and cash equivalents of S$13.2 million. This was also after declaring and paying to shareholders a dividend for the twelfth year running. We had on 19 September 2022, 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 2022.

In gratitude

2022 proved to be challenging and disappointing year for our group. We look forward to doing better in the year ahead and will strive to deliver an improvement in group financial performance in 2023.

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

24 March 2023