MayAir Group plc (LON:MAYA), a leading specialist provider of air purification technology, announced today its final results for the year ended 31 December 2016.
Commenting on the final results, Yap Wee Keong, Chief Executive Officer, said: “The Board is pleased to report another profitable year and continued revenue growth for MayAir. We are focused on continuing to tackle the ever-important air pollution problems in China which drive the market for MayAir’s services. Commercial sales have enjoyed growth with several projects completed for large customers including Huawei and the State Grid Jiangsu Electric Power Company.
Despite profit for the year being lower than originally anticipated, we consider that the additional operating expenses incurred have positioned the Group well as we invest in new production equipment and our new factory to support demand, while our balance sheet continues to strengthen. We also see further opportunities for growth in Replacement sales and will maintain our efforts to boost this area of the business.
We finish the year pleased with the progress we have made across the business, and are now focused on 2017 as we remain confident that the Group will continue to deliver strong and sustainable long-term growth.”
| Audited | Audited | |
| 2016 | 2015 | |
| (US$ million) | (US$ million) | |
| Revenue | 65.6 | 63.6 |
| Gross Profit | 20.3 | 20 |
| Operating Profit | 6.2 | 8.1 |
| EBITDA* | 7.2 | 9 |
| Profit After Tax | 4.4 | 6.3 |
| EPS – Basic (US$ cent) | 9 | 14.6 |
| Cash | 20.5 | 19.4 |
| Net Assets | 49.2 | 47.3 |
| * Earnings before interest, tax, depreciation and amortisation |
Chairman’s Statement
On behalf of the Board, I am pleased to introduce MayAir’s second set of full year results since the Group’s successful admission to trading on AIM in May 2015. The Group has made steady progress in the financial year ended 31 December 2016, with sustainable growth achieved overall and we continue to see a healthy pipeline of long-term opportunities in all four core market sectors; Industrial, Commercial, Residential and Replacement.
Strategy
MayAir’s overall strategy is to become a leading global provider of clean air solutions with a focus on developing new geographic segments and revenue streams.
I am pleased to report that the Group is making solid progress on delivering its stated strategy. Our end markets, both in China and internationally, continue to offer considerable opportunity for future growth. The Group’s overall performance during the year was less than originally anticipated, despite encouraging growth achieved in both Commercial and Replacement sales. Performance was impacted due to the timing of completion of an Industrial mega project which was expected to occur prior to the end of the period. More details of this mega project are covered in the CEO’s Review.
A key reason for MayAir’s AIM IPO was to provide the Group with a solid platform for future growth, enhancing its reputation with existing and potential customers and supporting the development of the MayAir brand in Asia and globally, as well as expanding our production capabilities with a larger and more modern manufacturing facility. I am pleased to say that we have seen the benefits of our listing and are focused now on delivering against our stated objectives.
Corporate Governance
At MayAir, corporate governance remains ingrained in every aspect of the organisation. The practice of good corporate governance continues to be strengthened in line with MayAir’s aspiration to be a leading global business, coupled with corporate values that uphold strong ethics and integrity. A high level of corporate governance is integral to the next phase of MayAir’s corporate development and is crucial in ensuring continued enhancement of shareholder value through financial performance while maintaining business sustainability.
Together with the Board, we will continue our efforts in enhancing MayAir’s corporate governance framework, internal processes, guidelines and systems to ensure that they remain robust and relevant as the business grows.
Dividend
In line with the Group’s strategy for growth, MayAir does not recommend the payment of a dividend for the 2016 financial year. No dividend was paid in the prior year.
Our employees and stakeholders
MayAir’s continuous success has been based on the skills, experience and commitment of our employees. Through all their efforts, the Group has maintained and improved its status as a leading brand and operator in the indoor clean air industry in China. The strong performance of the Group reflects the dedication and quality of the Group’s employees. Their enthusiasm, innovation and performance remain key assets of the Group and are vital to its future success as we develop the business internationally.
On behalf of the Board, I would like to thank all our employees, customers, suppliers, business partners and shareholders for their strong support, which provide us with the opportunity for long-term development of our business.
In conclusion, MayAir remains well placed in its chosen industry and has an exciting future due to the pipeline of opportunities visible to the Group. The long-term drivers remain firmly in place and I am confident that these, together with our strategic direction, should ensure the continued growth of the Group over the coming years.
Martin Bloom
Non-Executive Chairman
11 April 2017
Chief Executive Officer’s Review
I am pleased by the Group’s progress over the last year and remain excited about its future potential. MayAir has had another year of solid growth as the Group continues to benefit from environmental pressures driving demand. As part of the Group’s growth strategy set out at the time of admission to AIM, MayAir continued to grow all four core market sectors; Industrial, Commercial, Residential and Replacement. The Group delivered on commitments, completing several projects during the period with blue chip customers including Huawei and the Jiangsu Electric Power Company. Plans to expand operations outside of China continue to gain traction and the pipeline across all markets remains healthy.
Results
Group revenue increased by 3.1% to US$65.6 million (2015: US$63.6 million). This revenue growth was below the Board’s original expectations due to a delay in the completion of a mega project for Tianma Micro Electronics Co Ltd. Gross profit increased by 1.5% to US$20.3 million during the period (2015: US$20.0 million). Gross margin was 31.0% compared with 31.5% in 2015. This slight decrease in gross margin resulted from a combination of the negative impact of competitive pricing for Industrial sales, which was compensated by improved margins in Replacement sales and Commercial sales maintaining its gross margin in the period.
EBITDA decreased by 21.1% to US$7.2 million (2015: US$9.0 million) with profit after tax reducing by 30.0% to US$4.4 million (2015: US$6.3 million). This reduction in profitability resulted from an 18.4% increase in operating expenses to US$14.2 million (2015: US$12.0 million) reflecting greater expenditure in Research & Development, Sales & Marketing, and the impact of employee recruitment as the Group scaled from 465 to 493 employees during the period.
Market Growth
The Group’s products and services are sold to customers in the industrial, commercial and residential markets, as well as the sale of replacement parts. Industrial sales continues to dominate the revenue mix, accounting for almost 60% of total Group revenue for the period, compared with 76% for the equivalent period in 2015. In addition, Replacement sales, which is aimed at generating recurring revenues primarily from the sale of replacement parts to customers of previously-completed industrial market projects, accounted for 19% of total Group revenue compared with 13% for the equivalent period in 2015. Commercial sales contributed 19% of total Group revenue during the period compared with 10% for the prior year. Overall, the mix is becoming more balanced as we diversify across our core markets.
Industrial sales
MayAir’s customers for its industrial clean air solutions consist primarily of businesses that require cleanrooms as part of their own manufacturing processes, including technology companies, semiconductor manufacturers, pharmaceutical companies, hospitals and food & beverage businesses.
During the period, industrial market sales decreased by 18% to US$39.5 million (FY-2015: US$48.4 million), largely as a result of increased competition and the timing of a mega project. Projects delivered during the year included cleanroom solutions for customers such as Chongqing HKC Optoelectronics Technology Co Ltd, Nanchang O-film Tech Co Ltd and BOE Technology Group Co. Ltd.
Replacement sales
Notwithstanding the decrease in sales in Industrial sales, the Board is pleased with the significant increase in Replacement revenues, which are derived from previously installed Industrial projects. As we continue to increase the number of completed Industrial projects, we anticipate an increased contribution from Replacement sales. During the period, revenue from Replacement sales increased by 45% to US$12.6 million (FY-2015: US$8.7 million).
Commercial sales
In the commercial market, MayAir provides clean air solutions for venues such as commercial office buildings, airports, subways, hotels, exhibition centres and schools. Demand for the Group’s solutions in the commercial market is driven by the desire for improved air quality to protect against health issues such as asthma and other respiratory conditions, skin conditions, allergies, increased cardiovascular risks, nausea and fatigue; and thereby improving quality of life.
During the period, sales in the commercial market increased by 105% to US$12.5 million (FY-2015: US$6.1 million). Noteworthy projects during the period include providing clean solutions for the office buildings of the State Grid Jiangsu Electric Power Company and Huawei Technologies Co. Ltd.
Residential sales
The Group expects demand in the residential market for clean air solutions to improve (as with the commercial market) health and quality of life. In this market, MayAir focused on developing unique solutions targeted at property developers rather than the existing ‘off the shelf’ products for consumers. During the period, revenues from residential sales increased by 150% to US$1.0 million (FY-2015: US$0.4 million).
International Expansion
In pursuit of the Group’s stated strategy to expand the Group’s business internationally beyond the PRC, it is pleasing to report that revenue generated outside of China in the period grew by 34% to US$3.2 million, a marginal geographical mix improvement. MayAir’s revenue generated in China remains significant at 95% of total revenue (FY-2015: 96%).
During 2017, the Group has a number of sales and marketing activities and initiatives that it plans to implement in the South-East Asia market. Although these activities and initiatives may not result in immediate returns for the Group, they are an important focus in terms of delivering long-term future growth and profitability in this region.
Product Development
Research and Development at MayAir is critical to the Group’s long-term success and its ability to maintain its competitive advantage within the Group’s end markets. For this reason, MayAir continues to invest heavily into R&D and the development of new products. A key goal of the Group is to continually research new materials and technologies that provide even greater efficiency and effective solutions for MayAir’s indoor clean air quality products.
As clean air solutions become more of an increasing necessity for people, businesses and governments, due to the rising rates of pollution and greater awareness, MayAir aims to offer an even wider range of products with increasing production capacity to support the demand. New contract wins signed during 2017 to date have provided reassurance that the research undertaken is being translated into demand for MayAir’s products in the Group’s core markets.
Production Capacity Expansion
The construction of the new factory in Nanjing, which will provide increased long-term production capacity, is progressing well and within budget and is on track for completion and occupancy in the final quarter of 2017. This new 38,500m2 manufacturing facility will double the existing leased manufacturing facility when it is replaced. The Board anticipates that the additional space in the new factory will provide a number of business benefits to the Group, including increased facilities for research and new product development.
Trading Outlook
The completion of the Industrial mega project that was originally scheduled for Q4-2016, in the first quarter of this year, has provided MayAir with an early contribution to revenue for FY-2017 and a good foundation for the Group’s operations during the current financial year. Furthermore, China’s continued initiative to raise overall investment into high technology manufacturing capacity provides the Group with excellent visibility for ongoing market demand for its products and bodes well for the Industrial sector outlook. However, due to increased competition, the Group has less visibility on Industrial revenues, due to the impact on market share and margins the increased competition is expected to cause. MayAir will continue to leverage on its robust fundamentals and the completion of the new factory this year provides additional support to further grow market share.
The Board anticipates that the demand from Commercial sales will continue its strong growth. The rising level of pollution around the world, in particular within China, has led to increased publicity within the global media, highlighting the negative effects it has on human health. Governments are beginning to act and in Beijing it has become mandatory for schools to install clean air solutions in all classrooms. The Board believes that MayAir has the right technologies and solutions, as well as strong brand recognition, to grow sales in these markets over the coming year.
Our continuous investment and efforts in strengthening Replacement sales, together with other measures to develop new geographic segments and revenue streams, will ensure sustainable and profitable growth in the long term for MayAir Group plc.
The Group looks forward to another year of good progress.
Yap Wee Keong
Chief Executive Officer
11 April 2017
