Captii Limited

Investor Relations.
(Extracted from Annual Report 2016)

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 2016.

A broadly positive year

Our Group entered the 2016 financial year on the back of nine profitable years. This year, a significant improvement in bottom line performance was achieved.

Our GlobeOSS business generated higher revenue while our Unifiedcomms business had a lower revenue year in 2016. GlobeOSS posted revenue of S$11.0 million, an increase of 96.9% from the S$5.6 million recorded in 2015. Unifiedcomms revenue however declined by 9.1% to S$12.3 million in 2016 compared to the S$13.5 million achieved the year before. The higher revenue delivered by GlobeOSS BU – which more than offset the decline in Unifiedcomms revenue performance – had contributed significantly to the S$4.2 million increase in Group revenue for the year to S$23.5 million.

Gross profit achieved by our Group was higher again this year and in line with the higher revenue recorded. However the magnitude of the increase was lesser than that of revenue – gross profit rose by 6.1%, as compared to the 21.5% increase in revenue. This reflected the considerably lower average gross profit margin for the year of 53.2%, which resulted from the less favourable sales mix for 2016, where the lower margin system sale contract revenues of GlobeOSS comprised a much greater proportion of Group revenue.

Group profit before tax for 2016 came in at S$7.4 million, 89.3% higher compared to the S$3.9 million recorded for 2015. 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 subtantially increased in value during the year.

In terms of the bottom-line, Group profit after tax for the year was S$6.5 million, a 115.2% improvement on the S$3.0 million recorded last year.

Our 9th consecutive year of profits, going into our 19th year of business

2016 represented our ninth consecutive year of profitability. Profitability in 2016 had improved compared to 2015 – our Group’s return on equity (ROE) increased to 15.7% this year from 7.7% 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 portfolio. Without this fair value gain, our Group recorded an adjusted ROE of 8.8% in 2016, still an improvement compared to the 7.7% generated in 2015.

Higher system sale contract revenues offsetting managed service contract underperformance

During the year management of our Group persisted with efforts to grow the managed service business. The results were rather disappointing, with revenues from this contract type declining overall against last year in spite of our attention. The bulk of the decline was attributable to the lower managed service contract revenues of the Unifiedcomms business, due both to the disappointing performance of certain existing contracts as well as continued delays in the commencement or completion of several new contracts. The revitalised unit within the Unifiedcomms business called Mobilization that focuses on amongst others, prepaid credit solutions on a managed service model achieved significant growth this year but this was not sufficient to countervail the slow growth or decline in other managed service contracts.

The significant improvement in system sale contract revenues at GlobeOSS especially in the latter part of the year, together with savings in Group operating expenses had however more than offset this underperformance at Unifiedcomms within its managed service business.

Growth by acquisition and strategic investment

At the start of 2016, 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 strategic investment throughout 2016 and completed four further investments in both early and late stage start-ups to bring the number of investees in the portfolio to ten 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 2016, during the year we continued to reinvest in our Unifiedcomms businesses for product development as well as in assets to support the fulfilment of managed service contracts. We continued to have a strong balance sheet at year-end 2016 with zero borrowings and ample cash and cash equivalents of S$9.0 million. This was also after declaring and paying to shareholders a dividend for the seventh year running. We had on 13 September 2016, paid a tax-exempt interim dividend of 2.5 Singapore Cents per share, in-line with the dividend per share paid in 2015. 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 2016.

In gratitude

2016 proved to be a better year for our Group. We ended the year with improved net profit results courtesy of a strong year at GlobeOSS and the early results of the venture investment activities at Captii Ventures. Management however recognises that we did not manage to deliver the level of performance we have expected especially from the Unifiedcomms managed services business. In the new year ahead we will continue to work at addressing this better while extending the positive results at GlobeOSS, Mobilization and Captii Ventures.

To the talented and dedicated individuals across all the businesses that make up our Group, I extend my deepest gratitude 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
Group Executive Chairman

21 March 2017