Managing Director's Review
Extracted from Annual Report 2006
Financial Performance
In our continued quest to be the world leading company in the provision of total machine vision solution, the year 2006 was another year of exciting growth for us as we achieved unprecedented levels of sales revenue and earnings. Our sales revenue and net earnings soared to record highs of RM 24.00 million and RM 9.50 million respectively. As we reflect on this latest set of encouraging results, we have to concede that it was barely three years ago when our sales revenue was still below the RM 10 million level and net earnings then was slightly over RM 3 million. We have grown considerably since then and it is especially noteworthy to mention that since our inception in the year 2000, we have been delivering commendable sets of results, year after year, that are reflective of our progressive business strategies and fast-track expansionary plans.
Product Development and Operation
During the year under review, we continued to focus and expand on our core business in the development and production of machine vision inspection systems (MVS), automated optical inspection (AOI) system and electronics communication system (ECS) as we believe continuous advances in technologies and growth in areas such as automation, miniaturization and digitalization will drive the demand for more inspections in keeping up with higher quality standards and packaging complexity.In the MVS division, we continued to roll out new and advanced inspection system modules for IC inspection. These include the world first integrated Dual-Cam 3-dimensional 5S inspection system for lead-less IC packages and 3-dimension lead inspection for power IC packages. These products had been well accepted in the market and we expect a stronger growth of these products in coming years. The Group will continue to invest resources into product development to further strengthen our leading position in the areas of 2D and 3D high speed high accuracy vision inspection solution for semiconductor, telecommunications and automotive industries.
The first AOI system for the flexible printed circuit board (FPC) was successfully developed and launched in 2006, sealing our status as the first and only FPC AOI supplier in the Asian region. Having gained commercial acceptance with its successful integration into a US customer, a whole new opportunity has been opened up in the FPC and PCB inspection market which was timely given our strategic thrust into the lucrative AOI market .
After 2 years of intensive research and development on System-On-Chip
(SOC) technology, the Group has successfully developed cost effective
and high speed intelligent electronics communication system for the
equipment designing community. With our dedicated team, we successfully
designed, manufactured and delivered more than 5,000 ECS
products comprising high speed digital direct and remote input output
interface cards and high speed motion control cards in 2006.
Besides expanding and strengthening our product lines, our production capacity received a timely boost as we moved into our newly-completed and modern operational facility, aptly called "ViTrox Innovation Centre". This facility which is housed in a land measuring approximately 12,152 square metres within the Bayan Lepas Industrial Park of Penang comprises an expanded production floor space of approximately 553 square metres as compared to only 86 square metres at the old factory premises and an administrative block for the service support functions such as sales and marketing, finance and human resource. Apart from production and technological advancement, the facility was another feather in our cap of growing accolades, winning the Gold Award for excellence in design in the Office Interior Category at the Malaysian Society of Interior Designers (MSID) Interior Design Award 2006.
In our endeavour to deliver superior value proposition at competitive prices, no effort was spared in keeping costs down and this has resulted in us being able to maintain healthy net profit margins. Going forward, as we expand further in product lines and diversity, we however, concede that this could be a tough act to maintain. Even as profit margins are expected to slide as competition heightens in future, we believe that with higher volume of business, the operations will continue to deliver better absolute returns, year after year.
In addition, our success in procuring pioneer status for periods ranging from 5 to 10 years in respect of products such as PCB assemblies and digital automated vision inspection equipment and modules ensures that these products will continue to yield tax-free profits to the Group over the stated periods.
To complement cost containment measures, efforts are continuously made to sustain sound business fundamentals through on time delivery and quality management system ("QMS"). Quality Objectives are established and implemented to continuously improve the quality of our products and services so as to provide higher value proposition to our customers. Embedded in our quality culture is our strong resolve towards maintaining our ISO 9001: 2000 certification obtained in the year 2004. During the year, the success of the compliance audit conducted by an external party, with zero non-conformance (NCR) reflects on the effective functioning of our QMS. Without being complacent, we will continue to step up on our quality enhancement initiatives to uphold our commitment to provide excellent quality products and services to our customers at competitive price.
In the later part of the year, the success of our operations received another notable recognition when we were adjudged the Winner of the SMB Recognition Award 2006 under the category of SMB Achievers Award. This SMB Recognition Award was organized by the Small and Medium-sized Industries ("SMIs") Association of Malaysia on annual basis to provide due recognition to SMIs and small and medium-sized enterprises ("SMEs") that have achieved excellence and outstanding success in their businesses. Without any doubt, the award will spur us on towards replicating our success and business dynamism.
Research and Development
To continue to thrive in this high technology business and ensure longterm sustainability, product innovations and technological enhancements are the key thrusts of our committed research and development (R & D) efforts. Our R & D team is committed to continuously develop and enhance our products offerings whilst at the same time exploring the technologies and products of the future.During the year, R & D spending was accelerated and a total of RM 1.18 million was expended (2005: RM 0.68 million), out of which some RM 0.51 million was capitalized as development expenditure under intangible asset in line with approved accounting standards.
More specifically, we focused our R & D resources on high-end and advanced machine vision system and ECS development for the semiconductor and electronics assembly, in the likes of high speed 3D QFP/ BGA/QFN vision inspection system, Dual 5S vision inspection system, AOI for the Flex-PCB and highly flexible & high speed digital I/O communication and motion control board.
- Ultra high speed inspection system using advanced digital technologies for IC mark, lead, pad and package checking which is capable of performing inspection on handler running up to 50,000 units per hour(UPH) as compared to prevailing throughput of up to 30,000 UPH, representing an improvement of 67%;
- Real time dynamic line scanning system for tray mark and package inspection which affords inspection on multiple ICs in single scan; and
- Next generation 3D Lead/Pad vision inspection system, utilizing high accuracy optical design and robust algorithms that are applicable to different IC package type and size. This will minimize conversion time of various IC types, leading to improved machine throughput.
Marketing Strategies
As in previous years, participation in international trade shows continued to underline our proven marketing strategies in promoting our products as well as establishing a global network with overseas OEMs and end-users. We participated in two Semicon exhibitions; one in Shanghai, China and the other in San Francisco, USA.Besides such global branding exercise , the year 2006 was a watershed year for the ViTrox Group as we took the bold steps of extending our operating base by firstly, establishing a sales and support office in Suzhou, China in February 2006 and secondly, by setting-up a Representative Office in California, USA in October 2006. These two strategic moves will bring us closer to our growing customers base in China whilst paving the way for us to penetrate into the North American market in the near future.
Other than making our presence felt in certain strategic markets through the setting-up of offices, we continued to explore appointment of high calibre agents to promote our products. Among others, in May 2006, we appointed Ciposa SA of Switzerland as our European representative to promote and sell ViTrox products in the European market. With this appointment in place, ViTrox is now represented in many high growth areas for the vision products.
In line with our customer-focused approach, we continued to increase our customer service and support personnel, initially from 7 in 2004 to 11 in 2005, and further to 19 in 2006. This growing number of personnel will ensure that our customers are given first priority in terms of quality services and prompt attendance to requests and/or enquiries besides best value products.
Business Strategies
We foresee challenges on many fronts in the years ahead but with the strategies already in place which will nevertheless be continuously finetuned from time to time, we remain committed to providing the most innovative, advanced and cost effective machine vision solutions of excellent quality to our customers through the integration of our technology, our people and strategic alliances.Going forward, we will continue to pursue our R & D programmes for product innovations and development, strengthen our production lines to cater to growing expectations of the machine vision market, strive for operational efficiencies to contain cost and maintain profitability, embark on aggressive market expansion plans whilst improving our customer service and tap on our human resource talents to propel us towards the next level of company and personal success.
Our People
Towards this end, we continue to emphasize on training and development, focusing on technical and management skills, as well as creating opportunities to gain expertise and new skill sets through on-the-job learning and assigning wider responsibilities. While our people are encouraged to develop themselves, we make it happen by our enduring commitment to facilitate that and partner them in their learning process. As a reflection of this commitment, during the year , our employees were sent to conferences, seminars and training courses as wide ranging as engineering and programming courses to management and soft skills development courses. We believe that this is really a worthwhile investment into the future of our business and will not hesitate to continue with this practice, year after year.
As well, we recognize that a conducive and caring working environment has to be created for our people to perform sustainably at peak levels. In this regard, we continue to adopt measures that enhance the quality of life and promote family values such as team work and trust and respect, through implementing attractive performance based rewards scheme, making available sporting facilities, encouraging recreational and team-building activities such as yearly company trip, house warming parties and other meaningful indulgences that contribute to the well-being of our people.
To the Company's pride, our efforts to date were given due recognition when we were bestowed with the Human Resource Development award under the Small and Medium-Sized Enterprise (Manufacturing sector) by Pembangunan Sumber Manusia Berhad, the authority overseeing human resource development. Coming on the heels of the numerous awards that we have won over the years for our business operations, this award is a testament to our belief in nurturing our people to bring out the best in them and is truly in keeping up with our profound philosophy that our people are our most important asset.
Indeed, whilst acknowledging the contributory roles and support of our customers, shareholders, business associates and relevant governmental authorities, ViTrox will not be where it is today without the winning desire, dedicated efforts, commitment and sacrifices of our people who worked seamlessly as a great team to build up the business from very humble beginnings. I applaud them and proudly declare that, in our people, we have the fundamental and critical strength to charge ahead with confidence toward the next level of success.
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