Design Studio

Chairman's Statement

Tan Siok Chin

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present our Annual Report for the financial year ended 31 December 2015 ("FY2015"). While the year in review was characterised by weak economic conditions and lacklustre property market sentiments in the region, Design Studio Group stayed on a profitable track to report a net profit after tax of S$16.8 million on revenue of S$166.9 million.

Design Studio Group's FY2015 results are testament to the quality and commitment of our management team and staff, as well as the underlying strength of our proven capabilities as a leading premier furniture manufacturer, product and interior fitting-out specialist.

Overall, the Group's margins remained fairly resilient at 20.7% in FY2015. Our cash and short-term deposits stood at S$54.1 million and our order book remains healthy. The value of our onhand projects amounted to S$227.7 million1, comprising a mix of contracts from an established customer base in Singapore and the region.

Consistent with our approach of sharing in the fruits of our labour and supported by our sound financial health, the Board is delighted to reward Shareholders with a total dividend of 6.50 Singapore cents per share in FY2015, translating into a dividend yield of 13.0%2. This dividend pay-out comprises a final dividend of 1.25 Singapore cents per share, the interim dividend of 1.25 Singapore cents per share declared in August 2015 as well as a special dividend of 4.00 Singapore cents per share.

The Year in Review and Beyond

Overall, our operating environment was challenging in FY2015. Singapore, our largest geographical market at 84.9% of FY2015 revenue, registered a slower economic growth of 2.1% for the year, and its residential property market remained subdued due to the property cooling measures. Across the Causeway, Malaysia's property market was also weak due to property cooling measures and the implementation of a Goods and Services Tax (GST) in April 2015. The People's Republic of China (the "PRC" or "China"), another strategic market for the Group, saw its economic growth rate slowing to a 25-year low of 6.9%. For FY2015, the Malaysian and China markets respectively accounted for 10.6% and 0.2% of total Group revenue.

Even as the overall business environment remained difficult, with slowing market demand bringing about increased competition and pricing pressures among industry players, Design Studio Group maintained a steadfast commitment towards growth, and focused on the execution of our business strategies. Leveraging the Group's strong brand and reputation for delivering quality projects on a timely basis, we continue to strengthen our product and service offering to existing and new clients globally. We kept a close watch on strategic opportunities to replenish our order book, and successfully secured 19 new contracts in FY2015 across multiple geographical markets. On the costs front, the manufacturing capability of our China production facility is enabling Design Studio Group to reap better costs efficiencies.

For our distribution business, the Group came to the end of its exclusive distribution partnership with SieMatic Möbelwerke GmbH & Co. KG ("SieMatic") on 1 January 2016. We will continue to work with SieMatic on a project basis as and when opportunities arise.

As we transition into FY2016 against a backdrop of uncertainty in our core operating markets, we remain steadfast in our strategic focus to build a sustainable and profitable business model for Design Studio Group. Backed by our sound fundamentals and a diverse base of customers spanning the residential, commercial and hospitality sectors, I believe that Design Studio Group is well-positioned to weather challenges that may come our way and emerge stronger.


Welcoming our New CEO and Director

On behalf of the Board, I extend our warmest welcome to our new Chief Executive Officer, Mr Ku Wei Siong. Mr Ku brings with him strong credentials and a wealth of experience in the real estate sector. His leadership skills, experience and deep relationships with many of Design Studio Group's customers are invaluable. The Board and I look forward to working with Mr Ku and the team as we continue on our growth journey.

During the year, our Non-Executive Director, Mr Mhd. Nadim Akhras had left the Board, and I would like to express the Board's appreciation for his contributions and for bringing valuable insights to the Board during his tenure. I would also like to welcome Mr Roderick David Maciver to the Board as a Non-Executive Director, and as a member of the Nominating and Remuneration Committees.

In Closing

Despite our established market position, we remain alert to potential headwinds from the volatile economy and uncertain property markets. We believe that Design Studio Group has in place strong foundations for our businesses, and are well-positioned to sustain and expand upon our credible performance.

In closing and on behalf of the Board of Directors, I would like to extend my heartfelt gratitude and appreciation to the team at Design Studio Group. It is your passion and hard work that has ensured our market leading position amid a challenging environment. I would also like to thank our partners and customers for their support and feedback which drives us to strive harder and inspires us to innovate. Finally, we thank you, our shareholders, for your commitment and support. Let us continue to work together to build an even better future for Design Studio Group in 2016.

Tan Siok Chin (Ms)
Non-Executive Chairman