Chairman's
Statement

CHAIRMAN'S STATEMENT


Overview

Financial year 2016 has been a challenging year for JF Technology Berhad (“JF Tech or Company”) and its subsidiaries (“Group”) due to high litigation cost lawsuit in the United States besides the slowing down of sales of the disputed product line i.e. Zigma. This lawsuit has now crossed twenty-four (24) months. Our efforts in branding and product promotion are affected by this lawsuit not just in the United States but also outside of the United States.

To mitigate against this lawsuit, the Group has adopted new strategy focusing on strengthening the business opportunities in the Automotive IC devices segment. Our Alpha and Gamma product lines continued to perform satisfactory to offset the drop in sales of our disputed product line, Zigma. During the year, the Group continued to invest in Product Development, Production Capacity and Sales and Marketing activities to promote our brands and products. The Group also recruited additional engineers to support newly introduced products and worked on many new product developments.

With the strong leadership of our fellow Board members together with the commitment of our Management team, the Group is on a stronger footing to meet its future challenges.

Financial Performance

For the financial year ended 30 June 2016, despite the on- going lawsuit which has crossed twenty-four (24) months and coming close to a conclusion expected in the second quarter of the financial year ending 2017 (“FYE 2017”), the Group had recorded an increase in revenue to RM19.0 million and a reduction of profit before taxation (“PBT”) to RM1.17 million as compared to the preceding year with a revenue of RM17.5 million and a PBT of RM2.99 million. There was an increase of 9% in revenue and a decrease in PBT of 61%. These were mainly due to high legal fees paid during the financial year under review which amounted to RM3.75 million.

Dividend

In view of the Group’s financial performance and position in the financial year 2016, the Board did not recommend any final dividend for the financial year ended 30 June 2016 other than the interim dividend of 5% (0.5 sen) per ordinary share which was paid on 25 March 2016. The Board believes that it is of the best interest of the Group to conserve funds for further market development activities.

Outlook Going Forward

The Group will continue to focus and expand on our core businesses in the design, development and manufacturing of test probes and test sockets for the global market. While staying focus on our core businesses, the Company will keep an eyes open for any other potential business opportunities to explore should it fits our portfolio.

JF Tech had launched several new products during the financial year 2016 i.e. OHM, Ostricon, D-One, Gamma 2, Gamma USWS and Phantom. We target to introduce by mid-2017 our product, Unicon for the WLCSP market in line with the growing IOT device and our New Kelvin Short Wipe as demands for short pad probing. Our Gamma USWS is ready to hit the automotive market segment soon. RF, ultra-thin and small size packages test solution to be designed with Beta.5 which will target a bandwidth of 70GHz.

ACHIEVEMENTS AND SIGNIFICANT EVENTS for financial year ended 30 June 2016

1) Legal Case

Twenty-four (24) months had passed and we are coming close to a conclusion in this infringement case from a major competitor in the United States. This case involved our Zigma product line and applicable to the United States only. We had appointed litigation lawyers to address this case. Business will proceed as usual during the litigation process. JF Tech had paid a total of RM3.75 million in legal fees during the financial year ended 30 June 2016.

2) Sales And Markerting Activities

In order to build the brand and market share, JF Tech continues with its momentum by participating in four (4) major exhibitions, resulting in the Group securing eleven (11) new customers from China, Belgium, Korea and Japan.

3) Patent Granted And Filed

As innovation is the bedrock of the Company, JF Tech had filed another ten (10) patents for various new innovations and in various countries during the financial year 2016, taking our patent pending to twenty-eight (28). To-date, the Company has been granted six (6) patents whereby three (3) patents are for our key product i.e. Zigma which were granted in the United States and Singapore with a tenure of twenty (20) years.

4) Quality Management System

JF Tech takes quality very seriously. With this in mind, JF Tech had been granted the latest certification of ISO9001:2015 quality management system. In order to enhance the quality with speed and accuracy, JF Tech had invested in high precision measuring instruments to carry out these processes.

5) Precision Machining

JF Tech stays ahead of competition by continuously improving its machining precision. With this in mind, JF Tech had invested in the next level of high precision CNC machining centers, Wire EDM, upgrading of CAM and simulation software which are operational today. This help to improve 1st Pass Yield and cycle time.

With our constant launches of new products for the smartphone, automotive and IOT IC Devices testing that set new performance benchmark and with the adoption of these products by many major semiconductors players, we expect to grow at a faster pace in FYE 2017 as we had earned the trust of our customers. Our products are now preferred and specified by major semiconductor companies to facilitate test and screen for defective microchips for major companies. This further recognises JF Tech as an important world player in the High Performance Test Socket category and not just a regional player and a supplier of choice.

In view of the continued uncertain economic scenario, the high numbers of mergers and acquisitions consolidation in the semiconductor industry in the last twelve (12) months and the pending legal case, the Group will continue to implement stringent cost control in our internal control measures through lean programs. A strong commitment in containing costs and eliminating waste will ensure our Company to have sufficient resources for product innovation and market expansion, not for immediate future, but to build ourselves into a stronger Company.

We foresee that FYE 2017 will be a very challenging year as well as a breakthrough year for us depending on the outcome of the lawsuit. We are well positioned to capitalise on the next phase of growth through innovation and business excellence.

CORPORATE SOCIAL RESPONSIBILITY (“CSR”)

The Company has been conscious and intentional in our CSR. Below are some of the CSR activities carried out during the financial year:-

  1. The Company has offered technical and industrial trainings to interns from local universities and vocational institutions for which their focus of study is related to our industry. Of which two (2) of the interns had subsequently join us as permanent employees after their graduations.
  2. The Company continues to emphasise on the development of the human capital by sending different individuals from various departments in regards to leadership skills, technical skills, competency skills and over-learning programme.
  3. The Company constantly encourages every employee to cultivate the habit of reading books for self-education and self-development. In this regard, the Chief Executive Officer has set a unique example by organising a special workshop for the Management team entitled, “From Good to Great”. This workshop was conducted by him personally from this leadership book which has inspired him greatly.
  4. Visit to SEMOA care centre. This is a Non-Government Organisation (NGO) known as Semenanjong Orang Asli. Their mission is to help the Orang Asli in Peninsula Malaysia, the minority and marginalised people group in our society. They received the young school children age group from the inner remote jungle who are being denied of education. They house them at the SEMOA centre which is located at Raub, Pahang Darul Makmur. The centre is mainly managed by volunteers and retirees who have passion and love for them. The centre nurtures these children and registers them to local government schools until they reach the tertiary level and become independent and gainfully employed.

We had contributed several commercial electrical equipment such as chiller, freezer and rice cooker, which they have expressed their urgency and pressing need to feed their 85 children and staff. In order to understand their need, our Management team had visited them at their centre on 14 October 2015.

Appreciation

My sincere appreciation to our valued customers, suppliers, business associates, bankers, authorities and most importantly our esteemed shareholders for their unwavering support and confidence to the Group.

Last, but not least, I wish to thank my fellow colleagues on the Board for their counsel, support and commitment this far as well as our employees for their invaluable commitment to the Group.


Dato' Foong Wei Kuong
Chairman