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(extracted from Annual Report 2015)

Dear Shareholders,

2015 was an eventful year and it ended well for Natural Cool Holdings Limited ("Natural Cool" or together with its subsidiaries, the "Group").

Natural Cool acquired the entire issued and paid-up share capital of Loh & Sons Paint Co (S) Pte Ltd for an aggregate consideration of approximately S$7.3 million. We are now working very diligently to grow this paint business as we believe it has untapped growth potential and by this time next year, hopefully we will be able to share more good news with you.

Last year also witnessed the sale of our Gathergates' Switchgear business to Nitto Kogyo Corporation for approximately S$34 million. This was a very positive deal for Natural Cool as it unlocked the value of the assets in Gathergates Group in cash and strengthened our financial and capital resources.

This year, Natural Cool will continue to focus on improving operational efficiency and cost control measures.

Financial Review

The Group achieved revenue of S$108.98 million in the full year ended 31 December 2015 ("FY2015"), an increase of S$15.40 million, or 16.45% as compared to S$93.58 million in the full year ended 31 December 2014 ("FY2014"). This was due mainly to higher revenue registered by the Group's Aircon division.

Other income decreased by S$4.62 million or 88.06% to S$0.63 million due mainly to absence of gain on disposal of Benoi factory which occurred in FY2014.

Distribution expenses decreased by S$0.20 million or 12.21% to S$1.41 million due mainly to lower advertisement costs by the Group's Aircon division.

Finance costs increased by S$0.24 million or 36.63% to S$0.89 million due mainly to the unwinding of the discount of the convertible loan notes of S$0.30 million.

The Group recorded an income tax expense of S$0.02 million due to tax savings derived from certain new tax incentives introduced by the government.

Profit from discontinued operation increased by S$7.99 million to S$9.99 million. This was due mainly to gain on disposal of Gathergates Group and offset by payment of profit incentive to top management in accordance to their respective service agreements and one-off special bonus paid to employees of Gathergates Group.

Arising from the above, the Group reported a profit attributable to owners of the Company of S$6.50 million in FY2015.

Property, plant and equipment decreased by S$3.52 million to S$22.07 million as at 31 December 2015 due mainly to disposal of Gathergates Group and partially offset by acquisition of Loh & Sons Paint Co (S) Pte Ltd ("Loh & Sons").

Intangible assets decreased by S$7.01 million to S$1.07 million as at 31 December 2015 due mainly to disposal of Gathergates Group and partially offset by the goodwill arising from the acquisition of Loh & Sons.

Inventories decreased by S$2.14 million to S$14.65 million as at 31 December 2015 due mainly to disposal of Gathergates Group and partially offset by increase in inventories from Group's Aircon division in anticipation of higher orders in next financial year.

Trade and other receivables decreased by S$24.12 million to S$24.28 million as at 31 December 2015 due mainly to disposal of Gathergates Group.

Trade and other payables decreased by S$16.56 million to S$38.06 million as at 31 December 2015 due mainly to disposal of Gathergates Group.

Total loans and borrowings decreased by S$4.06 million to S$17.03 million as at 31 December 2015 due mainly to disposal of Gathergates Group.

Cash flows from operating activities were an outflow of S$0.18 million for FY2015. This was due mainly to increase in inventories by Aircon division.

Cash flows from investing activities were an inflow of S$22.04 million for FY2015. This was due mainly to proceeds from disposal of the Gathergates Group.

Cash flows from financing activities were an inflow of S$0.54 million for FY2015. This was due mainly to proceeds from bank borrowings and issue of convertible loan notes and offset by repayment of convertible loan notes redeemed, repayment of bank borrowings and interest costs.

Commitment and Appreciation

At Natural Cool, we are committed to generating shareholder value and are mindful of our responsibilities and obligations to all our stakeholders. Our customers are pivotal in all that we do and we spare no effort in ensuring that we provide them the best solutions at the shortest possible time. Our investments in people and technology are always about delivering better service with customers as our priority. Of course, our people are what made Natural Cool ticks. To our dedicated staff and management, we thank you for your unrelenting support and many contributions. Your ingenuity and passion will ensure that Natural Cool has what it takes for better performance and results. Last but not least, may we express our heartfelt thanks to all our stakeholders for their strong faith and confidence in us as we continue to do what we do best to create even better value for all.

Yours faithfully,

Joseph Ang Choon Cheng
Executive Chairman

Tsng Joo Peng
Chief Executive Officer