Headline numbers look good. Boosted up by the one-off insurance claims from the Thai flood incident as well as mark-to-market forex gain as a result of the strengthening of the SGD,  Broadway  posts  a  good  headline  net  profit  of  SGD24.5m.  However,  the  underlying operational performance is poor, with a SGD5.7m core PATMI loss.

HDD  business  is  the  culprit.  During the year, the group ramped up its HDD production capacity during 1H in anticipation of a strong 2H. As the outcome indicated otherwise, the group incurred huge manufacturing overheads amidst poor factory utilisation rate, resulting in net operating loss of SGD10.8m for its HDD business alone.  

Outlook  remains  challenging.  Going  forward,  it  is  widely  expected  by  the  industry  that HDD will continue its structural decline in the face of poor PC outlook and threats of solid state drive substitution. We continue to believe that the group has not downsized its HDD business fast enough to cater for this downturn. As such, though we acknowledge that its foam business may continue to grow strong and its semicon business may recover back to profitability, it is not enough to prop up the loss of the HDD business which represent 65% of the group's FY12 revenue.   

No  final  dividends.  In view of the challenging business conditions, Broadway decided to scrap the final dividends for the first time since 2006.

Source: OSK