SERIAL SYSTEM went through a tough 4Q2015 with a slew of factors -- especially forex volatility -- contributing to a 78% fall in its net profit to US$1.027 million.

brief2.16Executive chairman Derek Goh @ FY15 results briefing in Tower Club.  Photo by Janine YongBut its full-year revenue of US$1.22 billion, up 18%, was a record and brought cheer to the company. (By the way, Chairman Derek Goh, 54, has made no secret that his ambition is for the company to achieve US$5 billion annual sales -- before he retires). 

The revenue increase in FY15 was aided by recently-acquired subsidiaries as well as organic growth.

Serial, an electronic components and consumer products distributor, reported a 31% fall in its FY2015 bottomline to US$11.035 million.

Associate companies Achieva Technology and Bull Will contributed about US$3 m in losses.

derekgoh2.15aSerial chairman Derek Goh, 54: Ambition is for Serial to achieve US$5 b in annual sales -- before he retires. File photoBut Mr Goh expressed optimism that Achieva (from being 49%-owned last to being 100% owned since 27 Jan 2016) will be able to improve its performance this year owing to better management of its forex risks, which had tripped up the company in 2015.

Mr Goh is optimistic too of continued growth in group revenue in 2016, in part arising from the consolidation of Achieva's results and from organic growth.

The official word is: "Despite the current headwinds in the global semiconductor industry, the Group is confident of prospects in the longer term, given the growing popularity of emerging technologies, especially those for wearable devices and the Internet of Things, all of which require integrated circuits and chips."

Serial has proposed a final dividend of 0.5 Singapore cent a share, compared to the 0.75 cent paid for FY14.

Together with an interim dividend of 0.35 cent a share, the dividend for FY15 totals 0.85 cent a share, compared to 1.05 cent a share in FY14. (If Serial maintains a dividend of 0.85 cent a share in 2016, the yield would be 7.1% based on the current share price of 12 cents).

Serial has been consistent in paying out 40-50% of its earnings as dividends. This, however, has contributed to a gearing of 1.16 as at end-2015, as have higher borrowings to support revenue growth. 

Some interesting developments that may pan out in the near term, as suggested by Derek Goh, Serial's executive chairman, at the FY15 results briefing;

» Avago, a supplier of Serial, has recently acquired a bigger company, Broadcom. Serial is keen to distribute the products of Broadcom, which will boost its topline.

»  Serial is looking to increase its stake in South Pacific Laundry from the present 20% which it bought in 2014.

tech5Clean laundry being moved in suspended bags at South Pacific Laundry, in which Serial has a 20% stake. Photo: Company
Since then, SPL has expanded its high-margin industrial laundry business aggressively in Australia. Serial plans to become a major shareholder ultimately, buying over from its Penang-born founder.

In 2015, SPL contributed US$0.7 million in profit to Serial (FY14: US$0.6 m).

Tingkat delivery is one of the services offered by Tong Chiang Group, which has annual revenue of about $20 million. Photo: Company» Serial is sitting on substantial paper gain from its 21% stake in a food products manufacturer and caterer Tong Chiang Group.

The stake was bought on 28 Aug 2015 for US$3.2 m, valuing the company at US$15.2 million.

Tong Chiang contributed US$0.1 milion to Serial's profitability in 2015, implying that Tong Chiang could have achieved US$1.5 million profit (using the annualised method of estimation).

A keen rival to the better-known Neo Group, Tong Chiang is understood to be eyeing an IPO in 2017.  (See: SERIAL SYSTEM: Takes stake in food business, 3Q profit drops)

"There are investors courting the company but we are selective and want only those who bring strategic value," said Mr Goh.

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