2016 had proven to be yet another challenging year given the uncertainty surrounding the Brexit vote, and the policy stance of the incoming U.S administration and its global ramifications in the first half of 2016. The Group’s children clothing manufacturing business or the Original Design Manufacturing (“ODM”) business had taken a hit with significant drop in revenue due to decrease in international sales and recognition of allowances on trade receivables. As a result, the Group’s ODM business had incurred a net loss of $21.4 million for the financial year ended 31 December 2016 (“FY2016”).DISPOSAL OF THE ODM BUSINESS
In light of the poor performance of the ODM business since FY2015, the Board is of the view that the ODM business has no prospect of profitability, and had since been exploring other opportunities for collaboration. In addition, the Board is aware of the substantial funding required for the ODM operations which has been loss making since FY2015 with no clear visibility of recovery or profitability. As such, the Company had announced on 27 February 2017 its intention to dispose of China Children Fashion Holdings Pte. Ltd. and its subsidiary corporations (“CCFHPL Group”) which operates the ODM business. At the Extraordinary General Meeting of the Company held on 30 March 2017, shareholders had approved the disposal. The Board believes that the disposal of CCFHPL Group is in the best interests of the Gro+up as it is in line with the Board’s intention to streamline and focus the utilisation of its resources to the new business activities.EMBARKING ON A NEW BUSINESS DIRECTION WITH DIVERSIFICATION
In our continued search for new business opportunities and to bring in more revenue and income streams to improve shareholders’ value and return, the Board has been exploring new and different business opportunities for the Group. At the Extraordinary General Meeting of the Company held on 30 March 2017, the Group’s proposal of business diversification to property development and property investment was approved by shareholders (“Property Business”). The Board is optimistic that the diversification of the Group’s business and operations into the Property Business will provide additional revenue streams for the Group, enable the Group to expand its revenue base and replace the Group’s reliance on its former manufacturing businesses, which were competitive and challenging. The Board also believes that the diversification into the Property Business will allow the Group to have better prospects of profitability and ensure long term growth through access to new business opportunities, which in turn could potentially enhance the return on the Group’s assets and improve shareholders’ value in the long run.FUTURE PLANS
The Group proposes to conduct the Property Business in Malaysia and Australia. The Board is of the view that the property markets in Malaysia and Australia have potential for growth as there are indications of economic resilience and improving sentiment in those markets, consistent population growth, healthy investment demand by foreigners for properties in both the commercial and residential sectors, sustainable disposable incomes, presence of a mortgage lending market and increase in the rate of urbanization, all of which are expected to increase the demand for building and infrastructure that the Property Business will benefit from. On 23 February 2017, the Group had entered into a joint venture agreement with inter alia, HM Realty Holdings Sdn. Bhd. to develop a plot of freehold land in Kempas, Johor Bahru, Malaysia, into a mixed development properties comprising of shopping mall, hotels, and offices. The Group had also entered into option agreements with 4 other land owners to secure the development rights for their respective lands in Permas Jaya and Senai, both in the vicinity of Johor Bahru, Malaysia.
The Group will continue to explore joint venture and/or strategic alliances to carry out the Property Business as and when the opportunity arises. At a future stage, the Group may consider other geographical markets in other states and/or countries that present growth opportunities for the Property Business. Any expansion to new geographical markets will be evaluated and assessed by the Board on its own merit and the Group will seek shareholders’ approval for such expansion at the appropriate time.ACKNOWLEDGEMENTS
On behalf of the Board of Directors and management, we would like to thank our business partners, customers and shareholders for their unwavering support and staunch faith for the Group over the years. We look forward to growing the Group’s new business strategically to provide greater value for our shareholders.