Dear Shareholders,
On behalf of the Board of Directors, it gives me great pleasure to present to you the Group’s annual report for the financial year ended 31 December 2009.
 

The Year 2009 in Review

Last year, I mentioned that Medtecs’ strategy for 2009 was to optimize our current operations. I am pleased to say that in this respect, we have achieved our objective.

Recognizing that the lingering effects of the US sub-prime housing loan-led financial crisis would impact demand for our products and services, we focused our attention on profitability.  Hence, although Group revenue declined 29.7% to US$56.7 million, gross profit was hardly affected; and, we more than doubled our net profit to US$2.1 million.

Consequently, Group’s net profit margin rose by 2.5 percentage points to 3.7%.


The OPM division experienced a 38.2% drop in revenue to US$42.7 million as US demand for linens, hospital and hospitality apparels fell. However, this was partly mitigated by higher sales of protective garments and other H1N1-related products.  Gross profit of this division fell 11.6% to US$8.0 million; however, gross profit margin improved 5.6 percentage points to 18.7% as a result of the focus on higher-margined products and lower energy costs.

Hospital Services division continued to show improvement with revenue rising by 2.8% to US$9.9 million in 2009.  Gross profit for the division rose 4.6% to US$1.7 million as the effect of rate revisions and additional hospital contracts kicked in.

Our Trading and Distribution division also fared better this financial year, more than doubling revenue to US$4.1 million.  Sale of higher-margined products such as medical consumables and protective garments resulted to a gross profit of US$1.1 million in 2009.

An integral part of our optimization programme is the reduction of costs.  To this end, we have been hugely successful.  We managed to reduce Group distribution and selling and administrative expenses by

10.9% to US$8.1 million and, we managed to cut financial expenses by 19.5% to US$2.3 million on lower cost of borrowings in 2009.

On a separate note, on 20 October 2009, the Company successfully conducted the exercise to convert
100 million ordinary shares listed on the SGX to Taiwan Depository Receipts.

Prospects

The global economy is now more stable than before.  However, demand from the world’s largest consumer nation, the US, has not picked up to pre-crisis levels though there remains a strong potential for US-based firms to outsource and large purchasing groups in the US to source directly to manufacturing companies.

Elsewhere, the prospects appear brighter, especially in Asia.　The　various government-induced stimulus packages seem to be working and consumer demand has improved.  In addition, the threat of communicable diseases such as H1N1 and the natural calamities have heightened awareness for hygiene and public health.  All these developments bode well for the demand for the Group’s products and services.

The nature of our industry, healthcare and medical products and services, will provide us a stable source of demand, although price competition is stiff.

Major cost factors such as energy and labour are relatively stable. In addition, the low interest rate environment is also expected to persist, to the benefit of most businesses, including ours. 

We remain positive on the China market, despite concerns of asset bubbles. The defensive nature of our industry and the increased recognition for health issues as the nation progresses, are factors which we believe will support growth in the healthcare and medical field.

Current Year 2010 Focus

The focus for the current year remains much the same as the year before.  Profitability and margins will be our Key Performance Indicators (“KPI”) and we aim to improve our operational and financial efficiency.

On the front end,　we will build up our customer capability, improve customer relationships and service and concentrate on the quality of customers on issues such as regularity of orders, payment record and product mix.   We will also strengthen our sales network to source new customers in US, Europe, China and the Asia Pacific. The Group will re-engineer its sales channels to supply direct to large medical purchasing and hospital groups in the US. Similarly, we intend to strengthen our network for direct sales in China.

We will also continue to seek operational efficiencies through a series of measures including work flow optimization, equipment enhancement and job scope enlargement.  We will continue to evaluate our options to lower our financing costs with more stringent use of working capital.

In this current economic climate, we believe that it is wise to exercise extreme caution in capital expenditure. Aside from investments in more energy - efficient equipment, we will evaluate projects based on viable, sustainable returns on a stand-alone basis as well as synergistic benefits to our other businesses.

Finally, it leaves me to thank all our stakeholders who have contributed to the success of the Company in 2009. I thank the management and staff for your dedication and hard work throughout the year and, our customers and business associates for your continued support and confidence in us.

To my fellow directors, I thank you for your guidance and counsel.

Specifically, we would like to thank Gary Yang Ker-Yi who would cease to be one of the Executive Directors of the Company to focus on his role as Vice President of International Marketing.

And, to our shareholders, I thank you for your continued support, from which we draw our strength.