Having read Elsoft Research Bhd’s (“Elsoft“) annual report for FY 2016, after it was published 27 April 2017, I have decided to a write up which serves as an addendum to Analysis of Elsoft Research Bhd.
Let’s get right to it.
This is a summary of the financial performance of Elsoft between FY2015 and FY2016:
- Revenue increased to about 26%, from about RM49 million to roughly RM63 million.
- Costs of sales went up about 7.7%, from RM27 million to RM29 million, owing to an increase in staff costs and raw material consumption.
- Other income (indirect income) decreased about 47%, from RM7.6 million to RM4 million, because of lower contributions from other investments and lower foreign exchange gains.
- Administrative expenses increased about 82%, from RM3.9 million to RM7.1 million, due to an increase in staff costs, professional fees, fair value loss from other investments and recognition of shares based payments as a result of the implementation of Employee Share Offering Scheme.
- Lower taxation rate partly owing to 100% tax exemption under pioneer status.
- Inventories increased by 96%, from RM2.6 million to RM5.1 million, as a result of increasing work-in-progress to meet higher demand for FY2017.
- Cash or cash equivalent dropped 23%, from RM11.6 million to RM15.1 million. This is because Elsoft placed more money in money market funds with financial institutions and they are recognised as “other investments” in accounting.
- Trade and other payables increased 37.7%, from RM9.2 million to RM12.7 million, owing to higher purchases in FY 2016.
- Elsoft spent RM6.6 million or 10.4% of revenue for research and development (“R&D“).
Other salient matters worth mentioning:
- Elsoft employs 27 R&D engineers. Engineers work on digital and analog design, mechanical design, firmware and application software development.
- Elsoft has increased production and service workforce from 25 to 32 employees to keep up with demand in production.
- Butterfly House (PG) Sdn Bhd, a 21% owned associate of Elsoft has reopened a butterfly farm, at Teluk Bahang, Pahang, called Entopia.
There is no secret that FY2016 was a good ride for Elsoft. However what particularly struck me was that inventories increased by 96% owing to higher demand in FY2017.
I own shares in Elsoft.
- Elsoft’s annual report 2016