Engineer Zicom issues second profit warning in six months; still plans tech IPO
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Engineering group Zicom issued a profit warning after the market closed on Friday evening, telling investors its full-year results would plunge further into the red.
The Singapore-based group, which makes a wide range of machinery for the marine, construction and oil and gas industries, is expecting a full-year loss of $S11 million to $S11.5 million compared to a $S4.6 million loss last year.
Revenue was also expected to drop 14 per cent to $S80.8 million.
The news follows a half-year profit warning in February, two profit warnings in 2017 and another in 2016 — all of which have accompanied a steady decline in the shares.
The latest loss was blamed on “a deepening downturn in the offshore marine sector which suffered a significant drop in revenue” as well as delays in oil and gas projects “due to uncertainties in the market”.
The group — which has been listed since 1970 — has been trying to transform in recent years, investing in new high-tech businesses aimed at tapping areas such as Internet of Things, clean energy and smart cities.
The group has been planning for more than a year to spin-off its tech investments in an initial public offering — though so far nothing has eventuated.
“The group expects to submit the demerger proposal to shareholders for consideration in the coming AGM and will release timely details when appropriate.”
The costs of its tech investments — including an industrial automation company, a medical imaging play and a clean energy fuel maker — hit $4.4 million last year which “compounded” the group’s latest loss along with “doubtful debts and stock obsolescence”.
In its 2017 annual report, Zicom said the high-tech transformation “has begun to see results which are gaining traction”. But it seems from Friday’s announcement that profits are a ways off.
“Although a few of these investments have commenced commercialisation, they require additional funding to increase manpower in order to scale up commercially and are expected to suffer further gestation costs for the next two years,” the group said.
The offshore marine sector would remain “challenging” for the next two to three years, though revenue from the recovering oil and gas segment would improve.
The group had $S9.7 million in the bank at the end of June.