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 2015.
A broadly positive year
Our Group entered the 2015 financial year on the back of eight profitable years. Although our ROE outcome for 2015 remains below what we have been targeting, our underlying business delivered significant improvement in bottom line performance compared to the year before.
Our Unifiedcomms and GlobeOSS businesses, both recorded lower revenue in 2015. Of the two businesses, it was GlobeOSS that recorded the higher decline in revenue of 22.6%, with its 2015 revenue being S$5.6 million compared to S$7.2 million in 2014. Unifiedcomms revenue meanwhile decline by 4.4% to S$13.5 million in 2015 compared to the S$14.1 million achieved in 2014. As a result of this, Group revenue decreased from S$21.6 million in 2014 to S$19.3 million in 2015, a decline of S$2.3 million.
Although revenue was lower in 2015, gross profit achieved by our Group was higher this year. This reflected the considerably higher average gross profit margin for the year of 61%, attributable to the improvement in gross profit margin on system sale contract revenues of both Unifiedcomms and GlobeOSS.
Group profit before tax for 2015 came in at S$3.9 million, 35.5% higher compared to the S$2.9 million recorded the year before. Our profit after tax for the year meanwhile was S$3 million, a 33.1% improvement on the S$2.3 million recorded last year.
Our eighth consecutive year of profits, going into our 18th year of business
2015 represented our eighth consecutive year of profitability. Profitability in 2015 had improved compared to 2014 – our Group's return on equity (ROE) increased to 7.7% this year from 6.3% the year before. Although the 2015 financial results show a significant improvement in relative profit performance, this improvement remains inadequate in helping us achieve the double-digit ROE performance we have been targeting.
Higher profitability though lower sales
The profit growth achieved in 2015 is mainly attributable to the contribution of higher-margin system sale contracts of both Unifiedcomms and GlobeOSS. Because of this, our Group's average gross profit margin was significantly improved and this flowed into our Group bottom line.
To management of our Group, 2015 continued to involve persisting our efforts to grow the managed service business. For Unifiedcomms, we recorded lower managed service contract revenues in 2015, which was mainly due to the disappointing performance of certain managed service contracts coupled with the effect of unfavourable foreign exchange translation caused by a weakened Malaysian Ringgit against the Singapore Dollar. The improvement in gross profit margin in 2015, at both GlobeOSS and Unifiedcomms together with savings in operating expenses, underpinned the improvement in financial performance of our Group this year.
Growth by acquisition and strategic investment
At the start of 2015, we continued to have adequate cash balances to continue with the strategy of augmenting organic growth with growth-by-acquisition and strategic investment. Management of our Group identified and screened many candidates for strategic investment throughout 2015 and completed several investments. The work to identify, screen and engage on further strategic investment opportunities will persist in the new year.
Balance sheet strength and dividends
Apart from the several strategic investments made in 2015, during the year we continued to reinvest in our existing businesses for product development as well as in assets to support the fulfilment and expansion of new and existing managed service contracts. The fresh capital required to fund the growth of our existing business is not significant and as a result, we continued to have a strong balance sheet at year-end 2015: zero borrowings and ample cash and cash equivalents of S$13.4 million. This was also after declaring and paying to shareholders a dividend for the sixth year running. We had on 14 September 2015, paid a tax-exempt interim dividend of 2.5 Singapore Cents per share, 25% higher against the dividend per share paid in 2014. In light of the anticipated capital requirements of our Group's growth and development strategy, no further and final dividend payment has been recommended by our Directors for the financial year ended 31 December 2015.
2015 proved to be a better year for our Group. We ended the year with improved net profit results but management recognises that we did not manage to deliver the level of performance we had expected from our underlying business. In the new year ahead we will continue to work at addressing this better.
To the talented and dedicated individuals across all the businesses that make up the Captii 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
22 March 2016