Trek 2000 AR2005-130306-V2.Indd
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Expanding Our Intellectual Property Library • THUMBDRIVE SMART • THUMBDRIVE SWIPE • SAKE • THUMBDRIVE TUNER • SWIFT • TOUCH • THUMBDRIVE SECURE ANNUAL REPORT 2005 Contents 1 Trek’s Global Intellectual Property Coverage 2 A Message from the Chairman and CEO 7 Group Structure 8 Board of Directors 11 Key Management Team 12 Corporate Information 13 Financial Contents Year 2005 – Key Events 7 March : Trek unveils fi rst of its kind solutions at CEBIT exhibition in Hanover, Germany, namely, ThumbDrive®Swipe Armour; ThumbDrive®Portable Operating System ; ThumbDrive®0.85-inch hard disk drive and A New High Speed ThumbDrive® 14 March: Strategic relationship agreement with Imation Corporation for USB Portable storage products 12 April : Trek Receives U.S. Recognition with patent approval 17 May : Completion of acquisition of shares by Imation Corporation 16 August : Trek receives Patent approvals for New Compression Technology 26 October : UK leads with Patent approval for Trek’s Anti-Piracy and encryption technology (SAKE). 11 November: Trek’s landmark victory on patent ownership over its USB Portable data storage device won fi nal judgment in Singapore. 19 December: Trek expands LENOVO relationship with the new higher-capacity storage device Trek’s Global Intellectual Property Coverage Canada Eurasia Mongolia Europe Saudi Arabia South Korea Bahrain Japan Arctic Ocean United Kingdom China Atlantic Ocean Taiwan Pacifi c Nigeria Ocean UAE IndiaIndia Namibia Thailand Malaysia Singapore Hong Kong USA Brunei Philippines South Africa Australia Brazil New Zealand Trek 2000 R & D Centres Trek’s Patented Core Technology Solutions: • Wireless • USB • Anti-piracy • Security • Centralised Management System (CMS) 1 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders The measures implemented in FY2005, in a bid to reorganize its business are now yielding results. Having ignited our IP engine and having garnered the support of a globally renowned distributor for our solutions, we are confi dent that the mechanisms are well placed to fuel Trek’s future growth, barring any unforeseen circumstances. The ThumbDrive® Swipe, a biometric enabled device, offers users a high level of security. FY2005 was both a challenging and rewarding year for all of us at Trek 2000 (“Trek” or “the Group”). The highlight of the year surrounds our success in defending our ownership of our ThumbDrive® solution in Singapore in November 2005. Another key event was the vote of confi dence from Toshiba Corporation who raised their equity in Trek from 5.32 % to 10.32 % in January 2006. An option has also been extended to Toshiba to further increase their stake to 19.5% within a year. Corresponding to our strategy to develop Trek into a global Research & Development (“R&D”) house with patenable solutions, Trek will forge strategic alliance with Technology leaders on joint developments and exchange programmes. On the marketing front, we will position Trek as a leading Original Equipment Manufacturer (“OEM”)/ Original Design Manufacturer solutions provider. Over the years, Toshiba’s confi dence and support in Trek were among the catalytic drivers underlying the growth of our R&D activities. Our symbiotic relationship and the trust that we have forged over the years with Toshiba, a giant in the global IT industry, will stand us in good stead to jointly tap into the opportunities in the growing global IT industry. 2 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders On the business front, the Group registered higher sales as we received more orders from both our existing and new customers for our ThumbDrive® solutions. FY2005 saw sales rising by 21.8% to $171.0 million. This in turn boosted our net profi t after tax to $4.8 million representing an increase of 358.4%. Recently, we have registered more than 200 patents worldwide, of which more than 80 patents have been granted. Operationally, our business strategy to focus our resources in the area of R&D will inevitably incur more expenses. In a bid to tap into the pool of creative talents in the region and plug into the regional R&D hub, our teams of engineers in India and Malaysia were expanded during the year. As we continue to increase our focus in R&D activities, we hope that we will be able to bring more solutions to the market based on our library of patent portfolio. Of particular emphasis will The ThumbDrive® Tuner, Trek’s latest creation, allows users to receive digital broadcast through the convenience of their USB-enabled computers. be in the area of Trek’s family of USB storage ThumbDrive® solutions; Security, Anti-piracy (SAKE), Wireless and Encryption. The growing awareness on the importance of information and data access and securitization will release many opportunities in the fi nancial, healthcare, educational, government and many other industries across the world. Our paradigm shift in FY2005 has placed us in an optimal position to tap into the vast opportunities ahead of us. OPERATIONS AND FINANCIAL REVIEW The Group’s turnover rose 21.8% to S$171.0 million in FY2005 from S$140.4 million in the previous fi nancial year (“FY2004”) due to the rising demand for its ThumbDrive® range of products and contributions from its Intellectual Property (“IP”) assets. The performance this year also refl ects the growing acceptance and confi dence among OEM customers of Trek’s engineering solutions and products, in particular, the Group’s renowned ThumbDrive® range of products. The recent recognition of the Group’s patent ownership for its ThumbDrive® by the Court in Singapore in May 2005 further entrenched Trek’s position globally for this particular device. Setting a new paradigm in the R&D industry in Singapore, it further reinforces the validity and importance of respecting intellectual property rights. 3 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders The Group’s gross profi t dipped by 1.0% in FY2005 to S$10.5 million from S$10.6 million in FY2004 largely due to keen competition and being offset by the stronger contribution from licensing revenue, a growing business segment. Licensing registered the strongest contribution in FY2005 with revenue totaling approximately S$3.0 million as compared to S$0.7 million in FY 2004. Going forward, this business segment will become increasingly important as businesses begin to pay serious attention to intellectual property protection. Net profi t after tax was higher by 358.4% rising to S$4.8 million from S$1.1 million. The higher net profi tability is largely due to the reduced litigation cost incurred this year pertaining to defending the Group’s IP. In FY2005, the Revenue by Business Segment Group litigation cost amounted to S$1.0 million compared to S$3.0 million in FY2004. The year also saw the incurrence of reduced marketing and distribution 2004 Digital Technology Turnover (S$million) Profi t Before Income Tax (S$million) Licensing 44.8% 0.5% 180 108.1 125.4 140.3 171.0 6.5 5.1 1.0 5.3 10 160 Customized Engineering 140 8 54.7% 120 100 6 80 4 60 2005 Digital 40 Technology 2 62.9% 20 Licensing 0 0 1.7% Customized 2002 2003 2004 2005 2002 2003 2004 2005 Engineering 35.4% expenses which declined 16.8% to S$2.8 million due to ongoing cost control measures. Operationally, general and administration expenses were higher increasing by 3.7% to S$2.3 million compared to S$2.2 million in the previous fi nancial year. With the Group’s increasing focus on R&D activities and to ensure that it stays ahead of competition in the R&D business, higher expenses were incurred in this area. Total R&D expenses for the year, inclusive of the amortisation of intangibles, rose 30.7% in FY2005 to S$2.6 million from S$2.0 million in FY2004 due to increased activities and the additional costs for new patent fi lings. Included in the incremental expenses incurred by the Group’s R&D are the expenses arising from the expansion of the Group’s overseas R&D activities in India and Kuala Lumpur. Included in the Group’s other operating income/(expenses) are interests earned on fi xed deposits and unrealised foreign exchange gain in FY2005. The unrealised foreign exchange gain is as a result of the depreciation of the Singapore dollar against the US dollar as the Group’s monetary assets were mainly denominated in US dollar. 4 Trek 2000 International Ltd Annual Report 2005 Chairman’s Message To Shareholders We are pleased to present a stronger balance sheet this year. The key highlights of our balance sheet include the S$0.9 million increase in our intangible assets. Compared to the previous year, our intangible assets were higher rising from S$8.8 million in FY2004 to S$9.7 million in FY2005. This increase is due to the new patents fi led for solutions that relates to our core digital technology business. As a technology leader the Group will continue to place strong emphasis in R&D. In this regard, we expect to further expand our library of patents over the years. The stronger business performance also resulted in an increase in the Group’s trade debtors which rose from S$20.0 million as at 31 December 2004 to S$40.0 million as at 31 December 2005. Trade debtors’ collection days for the abovementioned fi nancial years stood at 65 days and 52 days respectively. The The OEM and ODM businesses are driven by customers’ specifi cations. This forms part of Trek’s Customised Engineering business. acquisition of new key customers gave rise to extended credit terms during the year under review.