This printed article is located at https://centurion.listedcompany.com/operations_review.html

Operations Review

Extracted from Annual Report 2010

Being one of the leading manufacturers and service provider of optical storage media in the Asia Pacific Region, the Group is focused on delivering world class services and the highest quality of optical disc products.

Enhancing Efficiency

In spite of the difficult operating environment and weak demand faced by our customers, compounded by rising prices of raw materials, the Group remained steadfast in its commitment to deliver high quality products at a good value. To that end, the Group's key focus for the year was to rationalise the utilisation of resources and consolidate capacity pegged to demand, as well as improve efficiency to optimise operation. By doing so, the Group remained lean and was able to achieve overall higher margins that propped up the Group's bottom line despite the drop in revenue.

During the year, the Group completed its restructuring exercise carried out in its Australian subsidiaries and achieved substantial savings by relocating more production to its Indonesian base.

Through the Group's efficient cost-cutting measures, selling expenses such as freight and marketing salaries also fell by a greater proportion as compared to the decline in sales volume. Selling expenses were down by 29% as opposed to 11% pull back in revenue. Administrative cost also fell by 7% as the Group continued to rationalise its manpower needs.

Through the Group's prudent management of cash flow, the Group managed to generate S$3 million in cash flow from its operating activities. Resultantly, after taking into account the payment of dividends to shareholders and repayment of bank borrowings upon due, the Group's overall cash position improved by approximately S$1 million over the previous financial year.

Committing To Security And Quality

However, the Group's efforts to manage costs did not deter its steadfast commitment to security and quality. The production plants under the Group continue to be certified as compliant under the anti-piracy and security programs of the Content Delivery and Storage Association ("CDSA"). This underscores the Group's dedication towards intellectual property rights protection. In addition, the Group's staunch adherence towards quality standards and environmental protection is also displayed in its ISO9001 and ISO14001 certifications, which endorses the Group's quality and environmental management systems.

It is this perseverance towards stringent environmental and quality standards that has built up the Group's sound reputation in the region, sustained its strong relationship with its customers and differentiated the Group from its competitors. The Group's brand name continues to be associated with reliability and quality which gives customers the confidence that their intellectual property assets are being well-handled and protected.

Fostering New Growth

The Group recognises that the optical media storage industry is unlikely to grow by leaps and bounds going forward. In order to enhance shareholder value, the management team is constantly been on the lookout for good business opportunities that the Group can capitalise on to diversify from its traditional business.

As a result, the Group has recently entered into term sheets to acquire companies in the business of owning, managing and operating workers' dormitories and temporary workers' accommodation. Westlite owns and operates a workers dormitory complex that can accommodate over 5,000 workers. JYC-NCL on the other hand, manages three primary dormitories that can accommodate a total of 9,000 workers. JVCo is not yet operational, but has a piece of land in Mandai which offers the Group an opportunity for further expansion of the dormitory business. Upon obtaining the necessary approvals, a workers' dormitory can be built on this piece of land in Mandai, increasing the Group's capacity by a further 4,000 beds.

On completion of this series of Proposed Transactions, the Group will be able to immediately have on hand a portfolio of dormitories with a capacity exceeding 14,000 with the potential to reach 18,000 and more. With such a sizeable capacity, the Group will be able venture into this new business in a meaningful way by gaining a strong foothold right from the start. The operational assets are already profitable and generating positive cash flow. Hence, the addition of these assets will also improve profitability and strengthen the Group's balance sheet.

Remaining Resilient And Well-Rooted

While the Group is excited with the prospects of its impending new business, the Group will not lose sight of its roots. The Group will continue to explore ways to further enhance its existing operations and maximise utilisation of resources to further increase efficiency and productivity. Keeping operations lean and managing cash flow prudently will continue to keep the Group's financial position strong, allowing it to capitalise on opportunities when they arise.