How did Elsoft Research Bhd fare in FY2016?

Dear Readers

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.

Elsoft

Finances

This is a summary of the financial performance of Elsoft between FY2015 and FY2016:

  1. Revenue increased to about 26%, from about RM49 million to roughly RM63 million.
  2. 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.
  3. 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.
  4. 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.
  5. Lower taxation rate partly owing to 100% tax exemption under pioneer status.
  6. 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.
  7. 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.
  8. Trade and other payables increased 37.7%, from RM9.2 million to RM12.7 million, owing to higher purchases in FY 2016.
  9. Elsoft spent RM6.6 million or 10.4% of revenue for research and development (“R&D“).

Other salient matters worth mentioning:

  1. Elsoft employs 27 R&D engineers. Engineers work on digital and analog design, mechanical design, firmware and application software development.
  2. Elsoft has increased production and service workforce from 25 to 32 employees to keep up with demand in production.
  3. Butterfly House (PG) Sdn Bhd, a 21% owned associate of Elsoft has reopened a butterfly farm, at Teluk Bahang, Pahang, called Entopia.
Conclusion

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.

Disclosure

I own shares in Elsoft.

Reference
  1. Elsoft’s annual report 2016