UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For
the Fiscal Year Ended |
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
File Number:
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Tel:
Email:
(Name, Telephone, email and/or fax number and address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered | ||
Securities registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
Ordinary Shares, $0.001 par value, at December 31, 2021
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933.
Yes
☐
If the report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15D of the Securities Exchange Act of 1934.
Yes
☐
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | ||
| Emerging
Growth Company |
If
an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
| International Financial Reporting Standards as issued by the International Accounting Standards Board ☐ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has elected to follow:
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes
☐
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 20-F contains forward-looking statements. A forward-looking statement is a projection about a future event or result, and whether the statement comes true is subject to many risks and uncertainties. These statements often can be identified by the use of terms such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “approximate” or “continue,” or the negative thereof. The actual results or activities of the Company will likely differ from projected results or activities of the Company as described in this Annual Report, and such differences could be material.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results and performance of the Company to be different from any future results, performance and achievements expressed or implied by these statements. In other words, our performance might be quite different from what the forward-looking statements imply. You should review carefully all information included in this Annual Report.
You should rely only on the forward-looking statements that reflect management’s view as of the date of this Annual Report. We undertake no obligation to publicly revise or update these forward-looking statements to reflect subsequent events or circumstances. You should also carefully review the risk factors described in other documents we file from time to time with the Securities and Exchange Commission (the “SEC”). The Private Securities Reform Act of 1995 contains a safe harbor for forward-looking statements on which the Company relies in making such disclosures. In connection with the “safe harbor,” we are hereby identifying important factors that could cause actual results to differ materially from those contained in any forward-looking statements made by us or on our behalf. Factors that might cause such a difference include, but are not limited to, those discussed in the section entitled “Risk Factors” under Item 3. – “Key Information.”
FINANCIAL STATEMENTS AND CURRENCY PRESENTATION
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America and publish our financial statements in United States Dollars.
REFERENCES
In this Annual Report, “China” refers to all parts of the People’s Republic of China other than the Special Administrative Region of Hong Kong. The terms “we,” “our,” “us,” “the Group” and the “Company” refer to JE Cleantech Holdings Limited and, where the context so requires or suggests, our direct and indirect subsidiaries. References to “dollars,” “U.S. Dollars” or “US$” are to United States Dollars and “RMB” are to Chinese Renminbi.
PART I
Item 1. Identity of Directors, Senior Management and Advisors
Not Applicable
Item 2. Offer Statistics and Expected Timetable
Not Applicable
Item 3. Key Information
A. Reserved
B. Capitalization and Indebtedness
Not applicable
C. Reasons for the Offer and Use of Proceeds.
Not applicable
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D. Risk Factors
You should carefully consider the following risks, together with all other information included in this Annual Report. The realization of any of the risks described below could have a material adverse effect on our business, results of operations and future prospects.
Risks Related to Our Business and Industry
We only have a limited number of customer groups and our business is significantly dependent on our major customer groups’ needs and our relationships with them. We may be unsuccessful in attracting new customers.
Our aggregate sales generated from our top five customer groups amounted to approximately 68.5%, 88.4% and 80.6% of our revenue for the years ended December 31, 2019, 2020 and 2021, respectively. In particular, sales to our largest customer group, which is principally engaged in the manufacture of HDD, amounted to approximately S$5.2 million, S$13.2 million and S$4.8 million, representing approximately 28.8%, 61.5% and 32.7% of our revenue, for the years ended December 31, 2019, 2020 and 2021, respectively. The concentration of our customers has not changed materially during the year ending December 31, 2022. Accordingly, our sales would be significantly affected by changes in our relationship with or in the needs of our major customer groups, particularly our largest customer group, as well as other factors that may affect their purchases from us, many of which are beyond our control. Any adverse changes in the economic conditions in the markets in which our customer groups operate and in their business expansion plans may negatively affect their purchasing practices and result in a reduction in demand for our products and services. Furthermore, we have a limited number of customer groups for both our sale of cleaning systems and other equipment business and our centralized dishwashing and general cleaning services business. We sold cleaning systems and other equipment to 15, 14 and 11 customer groups during the years ended December 31, 2019, 2020 and 2021, respectively. Our centralized dishwashing services and general cleaning services business provided centralized dishwashing services to 35, 38 and 54 customer groups during the years ended December 31, 2019, 2020 and 2021, respectively, and provided general cleaning services to seven, seven and seven customer groups, respectively, during those periods. If our major customer groups do not place their new orders with us, our business, financial condition, results of operations and prospects could be materially and adversely affected. In addition to maintaining and growing our business with existing customers, the success of our business also depends on our ability to attract new customers. If we are unable to attract new customers, our business growth will be hampered and our business, financial condition, results of operations and prospects may be materially and adversely affected.
We are dependent upon our largest customer group for a substantial amount of our revenue.
We derived a significant portion of our revenue from our largest customer group during the years ended December 31, 2019, 2020 and 2021. Our sales to that customer group amounted to approximately S$5.2 million, S$13.2 million and S$4.8 million for the years ended December 31, 2019, 2020 and 2021, respectively, which accounted for approximately 28.8%, 61.5% and 32.7% of our total revenue for the years ended December 31, 2019, 2020 and 2021, respectively. This dependence on our largest customer group has not changed materially and we expect that this customer group will continue to account for a significant portion of our total revenue for a considerable period of time if we cannot expand our customer base and our geographical coverage. There is no assurance that we will be able to maintain the same or achieve even higher sales amounts to that customer group. Our sales to such customer group will be affected by the results of operations of the companies within that group, which may in turn be affected by many factors such as global and/or regional political, economic or social conditions, foreign trade or monetary policies, legal or regulatory requirements or taxation or tariff regime, demand for their products and implementation of sales and marketing strategies for their products. If the companies within our largest customer group are unable to launch their marketing plans for their products successfully, or if there is any material and adverse change in political, economic or social conditions, foreign trade or monetary policies, legal or regulatory requirements or taxation or tariff regime or if the demand for their products weakens materially, and if we are unable to develop new customers and secure purchase orders of comparable size or under substantially the same terms, our business, financial condition, results of operations and prospects may be materially and adversely affected. Further, if we fail to achieve more diversified income or reduce our reliance on such customer group, or if we fail to secure a similar level of business from other customers on comparable commercial terms, such that the reduction in revenue from our largest customer group could be partly or wholly offset, our business, financial condition, results of operations and prospects may be materially and adversely affected.
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In addition, there is generally no long-term commitment from customers of our cleaning systems and other equipment business to purchase an agreed amount from us. Therefore, any material change in a customer’s product development plan may also directly affect its demand for our products. If we fail to quote a competitive price to our customer, if the quality of our products does not meet our customer’s specifications or if there is any disruption to our business relationship with our customer, we may be unable to secure further business from such customer. Any significant decrease in sales to any of our customers for any reason, including any disruption to our business relationship with them, may materially and adversely affect our business, financial condition, results of operations and prospects.
We are subject to risks relating to the operation of our production and processing facilities.
We are dependent on our JCS Facility and Hygieia Facility for our operations. Our production and processing facilities are subject to the risk of operational breakdowns caused by accidents occurring during the production process, including, but not limited to, faulty machines, suspension of utilities, human error or subpar output or efficiency. Any interruption in, or prolonged suspension of any part of production at, or any damage to or destruction of, any of our production and processing facilities arising from unexpected or catastrophic events or otherwise may prevent us from carrying out our businesses of the sale of cleaning systems and other equipment and provision of centralized dishwashing services to our customers, which in turn may result in a material adverse effect on our results of operations and financial condition. In addition, any interruption or suspension of the production process or failure to supply our products and/or services to our customers in a timely manner may result in breach of contract and loss of sales, as well as expose us to liability and the requirement to pay compensation under the relevant contracts with our customers, lawsuits and damage to our reputation, which may have a material and adverse effect on our business, financial condition, results of operations and prospects.
The operation of our production and processing facilities is also subject to risks and issues in respect of our production processes such as mechanical and system failures, equipment upgrades and delays in the delivery of machinery and equipment, any of which could cause interruption or suspension of the production process and reduced output.
Additionally, there may be accidents or injuries to our workers caused by the use of machinery or equipment at our production and processing facilities, which could interrupt our operations and result in legal and regulatory liabilities. While none of our workers were involved in any work-related accidents or suffered any work-related injuries during the years ended December 31, 2019, 2020 and 2021, or during the period from January 1, 2022 through the present date, there is no assurance that there will not be any such accidents or injuries in the future, which could cause operational breakdowns. Any such operational breakdowns, interruptions or suspensions may affect our business, financial condition, results of operations and prospects.
The non-recurring nature of our cleaning systems and other equipment business means that there is no guarantee that we will be able to secure new orders, leading to fluctuations in revenue.
We do not enter into any long term agreements with our customers for sale of cleaning systems and other equipment, and sell cleaning systems and other equipment on an order-by-order basis. Therefore, our customers are under no obligation to continue to award contracts to or place orders with us and there is no assurance that we will be able to secure new orders in the future. In this regard, the number of contracts and orders and the amount of revenue that we are able to derive therefrom are affected by a series of factors including but not limited to changes in our customers’ businesses and changes in market and economic conditions.
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Accordingly, there is uncertainty as to whether we will be able to secure new contracts and orders in the future and in the event that our Group fails to secure new contracts or orders of contract values, size and/or margins comparable to previous orders, our business, financial condition, results of operations and prospects may be materially and adversely affected.
We do not enter into long-term agreements for the provision of centralized dishwashing and general cleaning services and there is no assurance that such agreements will be renewed in the future.
The term of our agreements for our provision of centralized dishwashing services and general cleaning services is usually for a period of one to two years. Our customers are not obliged to renew the agreement or engage us again for the provision of such services upon the expiration of the agreement. We do not have any long-term agreements with our customers.
There is no assurance that our existing customers will renew their agreements or that we will be able to secure new contracts from our existing and new customers with similar or better terms. In the event we are unable to secure new contracts from existing or new customers, there may be a significant decrease in revenue and our business, financial condition, results of operations and prospects may be materially and adversely affected.
We depend on our key management team and our experienced and skilled personnel and our business may be severely disrupted if we are unable to retain them or to attract suitable replacements.
Our performance depends on the continued service and performance of our Directors and senior management because they play an important role in guiding the implementation of our business strategies and future plans. We also depend on our key employees, Mr. Wui Chin Hou and Mr. Zhao Liang. The relationships that our experienced management team has developed with our customers over the years is important to the future development of our business. If any of our Directors, any members of our senior management or either of our key employees were to terminate their services or employment, there is no assurance that we would be able to find suitable replacements in a timely manner. The loss of services of either of these key personnel and/or the inability to identify, hire, train and retain other qualified engineering, technical and operations personnel in the future may materially and adversely affect our business, financial condition, results of operations and prospects.
As Ms. Bee Yin Hong, our Chairman, executive Director and chief executive officer, contributes significantly to various key aspects of our business, including business development and operations, the continued success and growth of our Group is dependent on our ability to retain her services. We do not carry key person life insurance on the life of Ms. Hong or any of our Directors or executive officers. The loss of Ms. Hong’s services as our Chairman, executive Director and chief executive officer may materially and adversely affect our business, future plans and prospects.
We also rely on experienced and skilled personnel for our operations and our ability to design and manufacture quality products and provide good customer care service depends to a large extent on whether we are able to secure adequately skilled personnel for our operations. In particular, we rely on our team of qualified engineers for the design and manufacture of our cleaning systems. If we are unable to employ suitable personnel, or if our personnel do not fulfil their roles or if we experience a high turnover of experienced and skilled personnel without suitable, timely or sufficient replacements, the quality of our products and/or services may decline, which may adversely affect our business, financial condition, results of operations and prospects.
We may be affected by the prospects of the industries in which our customers are engaged.
Our cleaning systems and other equipment sales business is largely dependent on orders and contracts from our major customers, which are primarily in the hard disk drive, semiconductor and industrial electronics equipment/product manufacturing industries in Singapore and Malaysia. Our provision of centralized dishwashing services and ancillary services is dependent on contracts from our customers in the food and beverage industry in Singapore. We are therefore dependent on the outlook for these industries, and are indirectly exposed to the uncertainties and business fluctuations of these industries. Accordingly, our business may be adversely affected if there is any slowdown in the growth and development of such industries that compels industry participants to reduce their capital expenditures and budgets. These industries are also subject to the impact of the industry cycle, general market and economic conditions and government policies and expenditures, which are factors beyond our control. A decline in the number of new contracts and orders due to these factors may cause us to operate in a more competitive environment, and we also may be required to be more competitive in our pricing which, in turn, may adversely impact our business, financial condition, results of operations and prospects.
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The war in Ukraine could materially and adversely affect our business and results of operations.
The recent outbreak of war in Ukraine has already affected global economic markets, including a dramatic increase in the price of oil and gas, and the uncertain resolution of this conflict could result in protracted and/or severe damage to the global economy. Russia’s recent military interventions in Ukraine have led to, and may lead to, additional sanctions being levied by the United States, European Union and other countries against Russia. Russia’s military incursion and the resulting sanctions could adversely affect global energy and financial markets and thus could affect our customers’ businesses and our business, even though we do not have any direct exposure to Russia or the adjoining geographic regions. In addition, Russia and Ukraine are major exporters of critical minerals needed for semiconductors, which could have a significant negative impact on many of our customers. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions caused by Russian military action or resulting sanctions may magnify the impact of other risks described in this section. We cannot predict the progress or outcome of the situation in Ukraine, as the conflict and governmental reactions are rapidly developing and beyond their control. Prolonged unrest, intensified military activities or more extensive sanctions impacting the region could have a material adverse effect on the global economy, and such effect could in turn have a material adverse effect on our business, financial condition, results of operations and prospects.
We may be unable to meet the specifications of our customers or keep up with fast-changing technological developments.
The needs of our customers may change as a result of new developments in technology. Our future success depends on our ability to launch better cleaning systems that meet evolving market demands of our customers, and in particular, new cleaning systems that are compatible with new products sold by our customers. The preferences and purchasing patterns of our customers can change rapidly due to technological developments in their respective industries. There is no assurance that we will be able to respond to changes in the specifications of our customers in a timely manner. Our success depends on our ability to adapt our products to the requirements and specifications of our customers. There is also no assurance that we will be able to sufficiently and promptly respond to changes in customer preferences to make corresponding adjustments to our products or services, and failing to do so may have a material and adverse effect on our business, financial condition, results of operations and prospects.
We are vulnerable to fluctuations in the cost or supply of our raw materials.
Expenses for raw materials, such as stainless steel, aluminum, and electronic components, constitute most of our cost of revenues, representing approximately 41.8%, 57.8% and 43.5% of our total cost of revenues for the years ended December 31, 2019, 2020 and 2021, respectively. Expenses for raw materials as a percentage of our total cost of revenue have not materially changed through the present date. A shortage of raw materials or material increases in the cost of raw materials may materially and adversely affect our operations and profitability, and there is no assurance that we will be able to identify suitable alternatives at comparable prices and quality in order to meet our contract requirements.
As our contract price is fixed at the time that our customer confirms an order, it is difficult for us to manage the pricing of our cleaning systems and other equipment to pass on any increase in costs to our customers. In the event of a shortage of raw materials, there may be a resultant material increase in the purchase prices of such key materials. In such event, if we are unable to pass on such price increases to our customers, our cost of production will increase whereupon our gross margin and profitability may be adversely affected.
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We are subject to risks relating to computer hardware or software systems and potential computer system failure and disruptions.
Part of our work is carried out by computers and software systems used for design and engineering works such as the ANSYS Discovery, SolidWorks and AutoCAD software systems. During the years ended December 31, 2019, 2020 and 2021 and during the period from January 1, 2022 to the present date, we engaged third party information technology service providers to provide support services for our various hardware and software systems. The computer systems of our Group are currently located at our office in Singapore, with access restricted to authorized personnel. A physical breakdown of and/or damage to our computer hardware and software systems and/or data storage facilities may lead to a loss of data. In addition, our software systems may be vulnerable to interruptions due to events beyond our control, including, but not limited to, telecommunications or electricity failure, computer viruses, hackers and other security issues, and any such interruption or failure could disrupt our business and operations. There is no assurance that we have sufficient ability to protect our computer hardware and software systems and data storage facilities from all possible damage, including telecommunications or electricity failure or other unexpected events.
We are subject to environmental, health and safety regulations and penalties, and may be adversely affected by new and changing laws and regulations.
We are subject to laws, regulations and policies relating to the protection of the environment and to workplace health and safety. We are required to adopt measures to control the discharge of polluting matters, toxic substances or hazardous substances and noise at our production and processing facilities in accordance with such applicable laws and regulations and to implement such measures that ensure the safety and health of our employees. Changes to current laws, regulations or policies or the imposition of new laws, regulations and policies in the cleaning systems or the dishwashing industry could impose new restrictions or prohibitions on our current practices. We may incur significant costs and expenses and need to budget additional resources to comply with any such requirements, which may have a material and adverse effect on our business, financial condition, results of operations and prospects.
We may be unable to successfully implement our business strategies and future plans.
As part of our business strategies and future plans, we intend to expand our product portfolio, expand our research and development and engineering team, strengthen our production capability for cleaning systems and other equipment and improve the production efficiency of our centralized dishwashing services business. While we have planned such expansion based on our outlook regarding our business prospects, there is no assurance that such expansion plans will be commercially successful or that the actual outcome of those expansion plans will match our expectations. The success and viability of our expansion plans are dependent upon our ability to successfully implement our research and development projects, hire and retain skilled employees to carry out our business strategies and future plans and implement strategic business development and marketing plans effectively and upon an increase in demand for our products and services by existing and new customers in the future.
Further, the implementation of our business strategies and future plans may require substantial capital expenditure and additional financial resources and commitments. There is no assurance that these business strategies and future plans will achieve the expected results or outcome such as an increase in revenue that will be commensurate with our investment costs or the ability to generate any costs savings, increased operational efficiency and/or productivity improvements to our operations. There is also no assurance that we will be able to obtain financing on terms that are favorable, if at all. If the results or outcome of our future plans do not meet our expectations, if we fail to achieve a sufficient level of revenue or if we fail to manage our costs efficiently, we may not be able to recover our investment costs and our business, financial condition, results of operation and prospects may be adversely affected.
Increased labor costs could affect our financial performance.
We intend to recruit additional staff to expand our research and development and engineering team and to build up our business development team. Both the cleaning equipment industry and the dishwashing industry face labor shortages and rising labor costs in Singapore. This may result in a need to employ more foreign workers for companies involved in the manufacturing sector in Singapore. If we are unable to recruit and retain sufficient and qualified staff, including foreign workers, for us to execute our business, or if we have to increase our costs to attract and maintain such staff, our results of operations and financial performance may be materially and adversely affected and our future growth may be inhibited. Further, we may be unable to recruit additional staff necessary to implement our business strategies. We incurred employee benefit expenses of approximately S$3.3 million, S$3.1 million and S$3.2 million, representing approximately 18.1%, 14.4% and 21.6% of our total revenue for the years ended December 31, 2019, 2020 and 2021, respectively. Although our labor costs will increase upon recruitment of additional staff, there is no assurance that our revenue or gross profit will increase accordingly. As such, in the event we are unable to obtain more orders for both our sale of cleaning systems and other equipment business and our centralized dishwashing and ancillary services business after implementation of such planned investment, our business, financial position and profitability may be adversely affected.
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Non-renewal of permits and business licenses would have a material adverse effect on our operations.
In order to carry on our business operations, we are required to obtain certain permits, licenses and certificates from various governmental authorities and organizations. As of the date of this Annual Report, we have obtained all material permits and licenses for our business operations. However, certain of these permits and licenses are subject to periodic renewal and reassessment by the relevant government authorities and organizations, and the standards of compliance required in relation thereto may be subject to change. Non-renewal of our permits, licenses and certificates would have a material adverse effect on our operations. We would be unable to carry on our business without such permits, licenses and certificates being granted or renewed. In addition, if there are any subsequent modifications of, additions or new restrictions to compliance standards for our permits, licenses or certificates, it may be costly for us to comply with such subsequent modifications of, additions or new restrictions to, these compliance standards. In such event, we may incur additional costs to comply with such new or modified standards which may adversely affect our profitability.
We depend on the quality of the work of our sub-contractors.
We engage third party sub-contractors, mainly for specific works during the production and manufacturing of our cleaning systems and other equipment and for the provision of labor for our centralized dishwashing operations and on-site cleaning services from time to time. We generally select our sub-contractors based on their pricing, quality of services, capacity and market reputation. However, there is no assurance that the sub-contractors will meet the requirements of our Group and our customers. We may be unable to monitor the performance of our sub-contractors as directly and efficiently as with our own staff. As we remain contractually responsible for the delivery of products and/or services in accordance with the requirements and contract terms of our customers, any delay, non-performance or poor performance by our sub-contractors may cause us to breach our contracts with our customers and expose us to the risk of damages. If such events were to occur, there may be a material and adverse effect on our business, financial condition and results of operations, as well as reputational damage to our Group.
We are exposed to the credit risks of our customers.
We extend credit terms to our customers. Our average accounts receivable turnover days were approximately 103.4 days, 120.3 days and 138.5 days for the years ended December 31, 2019, 2020 and 2021, respectively. Our customers may be unable to meet their contractual payment obligations to us, either in a timely manner or at all. The reasons for payment delays, cancellations or default by our customers may include insolvency or bankruptcy, or insufficient financing or working capital due to late payments by their respective customers. While we did not experience any material order cancellations by our customers during the years ended December 31, 2019, 2020 and 2021, or during the period from January 1, 2022 to the present date, there is no assurance that our customers will not cancel their orders and/or refuse to make payment in the future in a timely manner or at all. We may not be able to enforce our contractual rights to receive payment through legal proceedings. In the event that we are unable to collect payments from our customers, we are still obliged to pay our suppliers in a timely manner and thus our business, financial condition and results of operations may be adversely affected.
If we are unable to maintain and protect our intellectual property, or if third parties assert that we infringe on their intellectual property rights, our business could suffer.
Our business depends, in part, on our ability to identify and protect proprietary information and other intellectual property such as our client lists and information and business methods. We rely on trade secrets, confidentiality policies, non-disclosure and other contractual arrangements and copyright and trademark laws to protect our intellectual property rights. However, we may not adequately protect these rights, and their disclosure to, or use by, third parties may harm our competitive position. Our inability to detect unauthorized use of, or to take appropriate or timely steps to enforce, our intellectual property rights may harm our business. Also, third parties may claim that our business operations infringe on their intellectual property rights. These claims may harm our reputation, be a financial burden to defend, distract the attention of our management and prevent us from offering some services. Intellectual property is increasingly stored or carried on mobile devices, such as laptop computers, which increases the risk of inadvertent disclosure if the mobile devices are lost or stolen and the information has not been adequately safeguarded or encrypted. This also makes it easier for someone with access to our systems, or someone who gains unauthorized access, to steal information and use it to our disadvantage. Advances in technology, which permit increasingly large amounts of information to be stored on mobile devices or on third-party “cloud” servers, may increase these risks.
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If we fail to maintain an effective system of internal controls, we may be unable to accurately or timely report our results of operations or prevent fraud, and investor confidence and the market price of our Ordinary Shares may be materially and adversely affected.
Although our management has concluded that our internal control over financial reporting is effective, our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. After conducting its own independent testing, it may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company may also place a burden on our management, operational and financial resources and systems for the foreseeable future such that we may be unable to timely complete our evaluation testing and any required remediation.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, is designed to prevent fraud. There can be no assurance that our internal controls will continue to be effectively implemented.
Our failure to implement and maintain effective internal controls over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which may result in volatility in and a decline in the market price of the Ordinary Shares.
Upon the completion of our initial public offering in April 2022, we became a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F. In addition, if we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting on an annual basis.
During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify material weaknesses and deficiencies in our internal control over financial reporting. The Public Company Accounting Oversight Board, or PCAOB, has defined a material weakness as “a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim statements will not be prevented or detected on a timely basis.”
In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally speaking, if we fail to maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations and lead to a decline in the trading price of our Ordinary Shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud, misuse of corporate assets and legal actions under the United States securities laws and subject us to potential delisting from Nasdaq, to regulatory investigations and to civil or criminal sanctions.
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We may be unable to detect, deter and prevent all instances of fraud or other misconduct committed by our employees or other third parties.
We are exposed to the risk of fraud or other misconduct by our employees and other third parties. Misconduct by such parties may include theft, unauthorized business transactions, bribery or breaches of applicable laws and regulations, which may be difficult to detect or prevent. We are not aware of any instances of fraud, theft and other misconduct involving employees and other third parties that had any material and adverse impact on our business and results of operations during the years ended December 31, 2019, 2020 and 2021, or during the period from January 1, 2022 to the present date. However, there is no assurance that there will not be any such instances in the future. We may be unable to prevent, detect or deter all instances of misconduct. Any misconduct committed against our interests, which may include past acts that have gone undetected or future acts, could subject us to financial losses and harm our reputation and may have a material and adverse effect on our business, financial condition, results of operations and prospects.
We may be harmed by negative publicity.
We operate in highly competitive industries and there are other companies in the market that offer similar products and services. We derive most of our customers through word of mouth and we rely on the positive feedback of our customers. Thus, customer satisfaction with our cleaning systems and other equipment, and with our centralized dishwashing and ancillary services, is critical to the success of our business as this will also result in potential referrals from our existing customers. If we fail to meet our customers’ expectations, there may be negative feedback regarding our products and/or services, which may have an adverse impact on our business and reputation. In the event we are unable to maintain a high level of customer satisfaction or any customer dissatisfaction is inadequately addressed, our business, financial condition, results of operations and prospects may also be adversely affected.
Our reputation may also be adversely affected by negative publicity in reports, publications such as major newspapers and forums, or any other negative publicity or rumors. There is no assurance that our Group will not experience negative publicity in the future or that such negative publicity will not have a material and adverse effect on our reputation or prospects. This may result in our inability to attract new customers or retain existing customers and may in turn adversely affect our business and results of operations.
Our insurance coverage may be inadequate.
We maintain insurance coverage for our major assets and operations, including insurance covering plant and machinery, fire, theft and accident. However, we do not have or are unable to obtain insurance in respect of losses arising from certain operating risks, such as acts of terrorism. Our insurance policies may be insufficient to cover all of our losses in all events. The occurrence of certain incidents, including fraud, confiscation by investigating authorities or misconduct committed by our employees or third parties, severe weather conditions, war, flooding and power outages may not be covered adequately, if at all, by our insurance policies. If our losses exceed the insurance coverage or are not covered by our insurance policies, we may be liable to bear such losses. Our insurance premiums may also increase substantially due to claims made. In such circumstances, our business, financial condition, results of operations and prospects may be materially and adversely affected.
We are exposed to risks in respect of acts of war, terrorist attacks, epidemics, political unrest, adverse weather conditions and other uncontrollable events.
Unforeseeable circumstances and other factors such as power outages, labor disputes, adverse weather conditions or other catastrophes, epidemics or outbreaks of communicable diseases such as COVID-19, Severe Acute Respiratory Syndrome, Middle East Respiratory Syndrome, Ebola or other contagious diseases, may disrupt our operations and cause loss and damage to our production and processing facilities, and acts of war, terrorist attacks or other acts of violence may further materially and adversely affect the global financial markets and consumer confidence. Our business may also be affected by macroeconomic factors in the countries in which we operate, such as general economic conditions, market sentiment, social and political unrest and regulatory, fiscal and other governmental policies, all of which are beyond our control. Any such events may cause damage or disruption to our business, markets, customers and suppliers, any of which may materially and adversely affect our business, financial condition, results of operations and prospects.
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Our business and operations may be materially and adversely affected in the event of a re-occurrence or a prolonged global pandemic outbreak of COVID-19.
The global pandemic outbreak of COVID-19 announced by the World Health Organization in early 2020 has disrupted our operations, and the operations of our customers, suppliers and/or sub-contractors. If the development of the COVID-19 outbreak becomes more severe or if our customers, suppliers and sub-contractors are forced to close down their businesses after prolonged disruptions to their operations, we may experience a delay or shortage of raw materials, supplies and/or services by our suppliers and sub-contractors, or termination of our orders and contracts by our customers. In such event, our operations may be severely disrupted, which may have a material and adverse effect on our business, financial condition and results of operations. In addition, if any of our employees or employees of our sub-contractors are suspected of having contracted COVID-19, some or all of our employees or the employees of our sub-contractors may be quarantined and we will be required to disinfect our workplace and our production and processing facilities. In the event our employees are placed under quarantine orders under the Infectious Diseases Act 1976 of Singapore, we may face a shortage of labor and our operations may be severely disrupted. Our revenue and profitability may also be materially affected if the COVID-19 outbreak continues to materially affect the overall economic and market conditions in Singapore and the economic slowdown and/or negative business sentiment could potentially have an adverse impact on our business and operations. We are uncertain as to when the outbreak of COVID-19 will be contained, and we cannot predict if the impact of the outbreak will be short-lived or long-lasting. If the outbreak of COVID-19 is not effectively controlled within a short period of time, our business, financial condition, results of operations and prospects may be materially and adversely affected.
We are exposed to risks arising from fluctuations of foreign currency exchange rates.
Our business is exposed to certain foreign currency exchange risks as our reporting currency is Singapore dollars and our overseas sales and procurement were denominated in United States dollars during the years ended December 31, 2019, 2020 and 2021. To the extent that our Group’s sales and purchases and operating costs are not denominated in the same currency and to the extent that there are timing differences between invoicing and payment from our customers and to our suppliers, we may be exposed to foreign currency exchange gains or losses arising from transactions in currencies other than our reporting currency.
We may be affected by adverse changes in the political, economic, regulatory or social conditions in the countries in which we and our customers and suppliers operate or into which we intend to expand.
We and our customers and suppliers are governed by the laws, regulations and government policies in each of the countries in which we and our customers and suppliers operate or into which we intend to expand our business and operations, such as Singapore, Malaysia, Thailand, Belgium and South Korea. Our business and future growth are dependent on the political, economic, regulatory and social conditions in these countries, which are beyond our control. Any economic downturn, changes in policies, currency and interest rate fluctuations, capital controls or capital restrictions, labor laws, changes in environmental protection laws and regulations, duties and taxation and limitations on imports and exports in these countries may materially and adversely affect our business, financial condition, results of operations and prospects.
We may face the risk of inventory obsolescence.
As of December 31, 2019, 2020 and 2021, we had inventories of S$3.1 million, S$1.4 million and S$2.6 million, respectively. The higher inventory for the year ended December 31, 2021 was primarily the result of purchasing more raw materials in anticipation of slower delivery times due to supply chain issues and increased orders for 2022. Our inventory turnover days for the years ended December 31, 2019, 2020 and 2021 were 87.5 days, 51.7 days, and 75 days, respectively. The higher number of days for the year ended December 31, 2021 was mainly due to increased raw materials inventory purchased in anticipation of slower delivery lead times and increased orders for 2022. Our business relies on customer demand for our products. Any reduction in customer demand for our products may have an adverse impact on our product sales, which may in turn lead to inventory obsolescence, decline in inventory value or inventory write-off. In that case, our business, financial condition, results of operations and prospects may be materially and adversely affected.
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Our business is subject to various cybersecurity and other operational risks.
We face various cybersecurity and other operational risks relating to our businesses on a daily basis. We rely heavily on financial, accounting, communication, and other data processing systems as well as the experienced staff who operate them to securely process, transmit and store sensitive and confidential customer information, and communicate with our staff, customers, partners, and suppliers. We also depend on various third-party software and cloud-based storage platforms as well as other information technology systems in our business operations. These systems may fail to operate properly or become disabled as a result of tampering or a breach of our network security systems or otherwise, including for reasons beyond our control.
Our customers typically provide us with sensitive and confidential information as part of our business arrangements. We are susceptible to attempts to obtain unauthorized access to such sensitive and confidential customer information. We also may be subject to cyber-attacks involving leaks and destruction of sensitive and confidential customer information and our proprietary information, which could result from an employee’s or agent’s failure to follow data security procedures or from actions by third parties, including actions by government authorities. Although cyber-attacks have not had a material impact on our operations to date, breaches of our or third-party network security systems on which we rely could involve attacks that are intended to obtain unauthorized access to and disclose sensitive and confidential customer information and our proprietary information, destroy data or disable, degrade or sabotage our systems, often through the introduction of computer viruses and other means, and could originate from a wide variety of sources, including state actors or other unknown third parties. The increase in using mobile technologies can heighten these and other operational risks.
We cannot assure you that we or the third parties on which we rely will be able to anticipate, detect or implement effective preventative measures against frequently changing cyber-attacks. We may incur significant costs in maintaining and enhancing appropriate protections to keep pace with increasingly sophisticated methods of attack. In addition to the implementation of data security measures, we require our employees to maintain the confidentiality of the proprietary information that we hold. If an employee’s failure to follow proper data security procedures results in the improper release of confidential information, or our systems are otherwise compromised, malfunctioning or disabled, we could suffer a disruption of our business, financial losses, liability to customers, regulatory sanctions and damage to our reputation.
Risks Related to Our Securities and This Offering
An active trading market for our Ordinary Shares may not continue and the trading price for our Ordinary Shares may fluctuate significantly.
We cannot assure you that a liquid public market for our Ordinary Shares will continue. If an active public market for our Ordinary Shares does not continue, the market price and liquidity of our shares may be materially and adversely affected. The public offering price for our shares in our initial public offering was determined by negotiation between us and the representative of the underwriter based upon several factors, and we can provide no assurance that the trading price of our shares will not decline below the public offering price. As a result, investors in our shares may experience a significant decrease in the value of their shares.
We may not maintain the listing of our Ordinary Shares on the Nasdaq which could limit investors’ ability to make transactions in our Ordinary Shares and subject us to additional trading restrictions.
Our Ordinary Shares are listed on Nasdaq. In order to continue listing our shares on Nasdaq, we must maintain certain financial and share price levels and we may be unable to meet these requirements in the future. We cannot assure you that our shares will continue to be listed on Nasdaq in the future.
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If Nasdaq delists our Ordinary Shares and we are unable to list our shares on another national securities exchange, we expect our shares could be quoted on an over-the-counter market in the United States. If this were to occur, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our Ordinary Shares; | |
| ● | reduced liquidity for our Ordinary Shares; | |
| ● | a determination that our Ordinary Shares are “penny stock,” which will require brokers trading in our shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Ordinary Shares; | |
| ● | a limited amount of news and analyst coverage; and | |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
As long as our Ordinary Shares are listed on Nasdaq, U.S. federal law prevents or preempts the states from regulating their sale. However, the law does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar their sale. Further, if we were no longer listed on the Nasdaq, we would be subject to regulations in each state in which we offer our shares.
The trading price of our Ordinary Shares has been volatile, which could result in substantial losses to investors.
Since our Ordinary Shares commenced trading on April 22, 2022, the trading price of our Ordinary Shares has been volatile and has fluctuated widely due to factors beyond our control. This may continue in the future because of the broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in Singapore that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for our shares may be highly volatile for factors specific to our own operations, including the following:
| ● | fluctuations in our revenues, earnings and cash flow; | |
| ● | changes in financial estimates by securities analysts; | |
| ● | additions or departures of key personnel; | |
| ● | release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and | |
| ● | potential litigation or regulatory investigations. |
Any of these factors may result in significant and sudden changes in the volume and price at which our shares will trade.
In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.
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If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our Ordinary Shares, the market price for our Ordinary Shares and trading volume could decline.
The trading market for our shares will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts downgrade our shares, the market price for our shares would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our shares to decline.
The sale or availability for sale of substantial amounts of our Ordinary Shares could adversely affect their market price.
Sales of substantial amounts of our Ordinary Shares in the public market, or the perception that these sales could occur, could adversely affect the market price of our shares and could materially impair our ability to raise capital through equity offerings in the future. We currently have 15,020,000 Ordinary Shares outstanding, of which 4,490,000 shares are freely tradable without restriction or further registration under the Securities Act. The remaining shares may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and applicable lock-up agreements. In conjunction with our initial public offering in April 2022, our directors and officers and certain other shareholders agreed not to sell any shares until April 22, 2023 without the prior written consent of the representative of the underwriters of that offering, subject to certain exceptions, although the representative of the underwriters may release these securities from these restrictions at any time. In addition, 720,000 of the freely tradeable shares may be sold in the public market only in accordance with the prospectus contained in the registration statement pursuant to which those shares were registered under the Securities Act of 1933 (the “Securities Act”). We cannot predict what effect, if any, market sales of securities held by our controlling shareholder or any other shareholder or the availability of these securities for future sale will have on the market price of our shares.
Short selling may drive down the market price of our Ordinary Shares.
Short selling is the practice of selling shares that the seller does not own but rather has borrowed from a third party with the intention of buying identical shares back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the shares between the sale of the borrowed shares and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the shares to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling the shares short. These short attacks have, in the past, led to selling of shares in the market. If we were to become the subject of any unfavorable publicity, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality.
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our Ordinary Shares for a return on your investment.
We currently intend to retain all of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our shares as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Singapore law. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors as determined by our board of directors. Accordingly, the return on your investment in our Ordinary Shares will likely depend entirely upon any future price appreciation of our Ordinary Shares. There is no guarantee that our Ordinary Shares will appreciate in value or even maintain the price at which you purchase our shares. You may not realize a return on your investment in our shares and you may even lose your entire investment.
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Our founders and initial investors purchased their shares at a price that may be significantly less than the current trading price of the shares and will be able to sell their shares after expiration of the restrictions under Rules 144 and 701 and their lock-up agreements.
Our founders and initial investors purchased their shares at an average price of approximately US$1.41 per share, which may be substantially lower than the current trading price of our shares. The Ordinary Shares issued to our founders and initial investors are “restricted” securities under applicable U. S. federal and state securities laws and may be sold in the public market only in accordance with Rule 144 and Rule 701 under the Securities Act and applicable lock-up agreements entered into in conjunction with our initial public offering. Because these shareholders paid a lower price per Ordinary Share, when they are able to sell their shares, they may be more willing to accept a lower sales price than public investors. This fact could impact the trading price of the Ordinary Shares to the detriment of our public investors.
If we are classified as a passive foreign investment company, United States taxpayers who own our securities may have adverse United States federal income tax consequences.
We are a non-U.S. corporation and, as such, we will be classified as a passive foreign investment company, which is known as a PFIC, for any taxable year if, for such year, either
| ● | At least 75% of our gross income for the year is passive income; or | |
| ● | The average percentage of our assets (determined at the end of each quarter) during the taxable year that produce passive income or that are held for the production of passive income is at least 50%. |
Passive income generally includes dividends, interest, rents, royalties (other than rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.
If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. taxpayer who holds our securities, the U.S. taxpayer may be subject to increased U.S. federal income tax liability and may be subject to additional reporting requirements.
It is possible that, for our current taxable year or for any subsequent year, more than 50% of our assets may be assets which produce passive income. We will make this determination following the end of any particular tax year. We treat our affiliated entities as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their operating results in our consolidated financial statements. For purposes of the PFIC analysis, in general, a non-U.S. corporation is deemed to own its pro rata share of the gross income and assets of any entity in which it is considered to own at least 25% of the equity by value.
For a more detailed discussion of the application of the PFIC rules to us and the consequences to U.S. taxpayers if we were determined to be a PFIC, see “Material Tax Considerations — Passive Foreign Investment Company Considerations.”
Our controlling shareholder has substantial influence over the Company. Its interests may not be aligned with the interests of our other shareholders, and it could prevent or cause a change of control or other transactions.
Ms. Hong, our Chairman, executive director and chief executive officer, beneficially owns an aggregate of approximately 64% of our issued and outstanding Ordinary Shares. Accordingly, our controlling shareholder could control the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations, the election of directors and other significant corporate actions, including the power to prevent or cause a change in control. The interests of our largest shareholder may differ from the interests of our other shareholders. Without the consent of our controlling shareholder, we may be prevented from entering into transactions that could be beneficial to us or our other shareholders. The concentration in the ownership of our shares may cause a material decline in the value of our shares. For more information regarding our principal shareholders and their affiliated entities, see “Item 7. Major Shareholders and Related Party Transactions – Major Shareholders.”
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As a “controlled company,” we are exempt from certain Nasdaq corporate governance requirements, which may result in our independent directors not having as much influence as they would if we were not a controlled company.
We are a “controlled company” as defined under the Nasdaq Stock Market Rules, because one of our shareholders holds more than 50% of our voting power. As a result, for so long as we remain a controlled company as defined under that rule, we are exempt from, and our shareholders generally are not provided with the benefits of, some of the Nasdaq Stock Market corporate governance requirements, including that:
| ● | a majority of our board of directors must be independent directors; | |
| ● | our compensation committee must be composed entirely of independent directors; and | |
| ● | our corporate governance and nomination committee must be composed entirely of independent directors. |
Although we intend to have a majority of independent directors, that may change in the future.
As a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.
As a foreign private issuer whose Ordinary Shares are traded on Nasdaq, we rely on a provision in the Nasdaq corporate governance listing standards that allows us to follow Cayman Islands law with regard to certain aspects of corporate governance. This allows us to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on Nasdaq.
For example, we are exempt from Nasdaq regulations that require a listed U.S. company to:
| ● | have a majority of the board of directors consist of independent directors; | |
| ● | require non-management directors to meet on a regular basis without management present; | |
| ● | have an independent compensation committee; | |
| ● | have an independent nominating committee; and | |
| ● | seek shareholder approval for the implementation of certain equity compensation plans and dilutive issuances of Ordinary Shares, such as transactions, other than a public offering, involving the sale of 20% or more of our Ordinary Shares for less than the greater of book or market value of the shares. |
As a foreign private issuer, we are permitted to follow home country practice in lieu of the above requirements. Our audit committee is required to comply with the provisions of Rule 10A-3 of the Exchange Act, which is applicable to U.S. companies listed on the Nasdaq. Therefore, we intend to maintain a fully independent audit committee in accordance with Rule 10A-3 of the Exchange Act. However, because we are a foreign private issuer, our audit committee is not subject to additional Nasdaq corporate governance requirements applicable to listed U.S. companies, including the requirements to have a minimum of three members and to affirmatively determine that all members are “independent,” using more stringent criteria than those applicable to us as a foreign private issuer.
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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.
We are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our Amended Memorandum and Articles of Association, the Companies Act and the common law of the Cayman Islands. The rights of shareholders to take action against our directors and us, actions by minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which are generally of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws than the United States, and provide significantly less protection to investors. In addition, Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will generally recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the Amended Memorandum and Articles of Association) or to obtain copies of lists of shareholders of these companies. Our directors are not required under our Amended Memorandum and Articles of Association to make our corporate records available for inspection by our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as U.S. states. Currently, we plan to rely on home country practice with respect to any corporate governance matter. Accordingly, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
As a result of all of the above, shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of the board of directors or controlling shareholders than they would as shareholders of a company incorporated in a U.S. state.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, all of our current directors and officers are nationals and residents of countries other than the United States and substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands may render you unable to enforce a judgment against our assets or the assets of our directors and officers. As a result of all of the above, our shareholders may have more difficulties in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
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We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.
The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period, although we have early adopted certain new and revised accounting standards based on transition guidance permitted under such standards. As a result of this election, our future financial statements may not be comparable to other public companies that comply with the public company effective dates for these new or revised accounting standards.
We are a foreign private issuer within the meaning of the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:
| ● | the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; | |
| ● | the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; | |
| ● | the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and | |
| ● | the selective disclosure rules by issuers of material non-public information under Regulation FD. |
We are required to file an annual report on Form 20-F within four months after the end of each fiscal year. In addition, we intend to publish our financial results on a semi-annual basis through press releases distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you if you were investing in a U.S. domestic issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last Business Day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to us on June 30, 2022. In the future, we would lose our foreign private issuer status if (1) more than 50% of our outstanding voting securities are owned by U.S. residents and (2) a majority of our directors or executive officers are U.S. citizens or residents, or we fail to meet additional requirements necessary to avoid the loss of foreign private issuer status. If we lose our foreign private issuer status, we will be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. We will also have to comply with U.S. federal proxy requirements, and our officers, directors and 10% shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, we would incur significant additional legal, accounting and other expenses that we do not incur as a foreign private issuer.
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We will incur significantly increased costs and devote substantial management time as a result of the listing of our Ordinary Shares on Nasdaq.
We will incur additional legal, accounting and other expenses as a public reporting company, particularly after we cease to qualify as an emerging growth company. For example, we will be required to comply with the additional requirements of the rules and regulations of the SEC and the Nasdaq rules, including applicable corporate governance practices. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate the number of additional costs we may incur as a result of becoming a public company or the timing of such costs.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidelines are provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may also initiate legal proceedings against us and our business may be adversely affected.
Item 4. Information on the Company
History of the Company
Our Group’s history can be traced back to November 1999 when JCS was founded by Ms. Hong, our Chairman, Executive Director and Chief Executive Officer, together with her then partner Mr. Yeo Hock Huat. Our Group commenced business in 2005. We have manufactured a broad range of cleaning systems, including aqueous washing systems, plating and cleaning systems, train cleaning systems and other equipment for our customers. Our business in the provision of centralized dishwashing services for the food and beverage industry commenced in 2013.
As of the date of this Annual Report, our Group is comprised of the Company and its subsidiaries, JE Cleantech International Limited, JCS-Echigo Pte Ltd., Hygieia Warewashing Pte. Ltd. and Evoluxe Pte. Ltd.
Corporate Structure
Our Company was incorporated in the Cayman Islands on January 29, 2019 under the Companies Act as an exempted company with limited liability. Our authorized share capital is US$100,000 divided into 100,000,000 Ordinary Shares, par value US$0.001 each. Prior to a group reorganization, JE Cleantech International Limited was the holding company of our group of companies comprised of JCS Echigo Pte. Limited, Hygieia Warewashing Pte. Limited and Evoluxe Pte. Limited. JE Cleantech International Limited was held 80% by JE Cleantech Global Limited (which is wholly-owned by Ms. Hong, our CEO), 14% by Triple Business Limited, 4% by Ever Bloom Properties Company Limited and 2% by Aqua Lady Group Limited. Upon completion of our reorganization, we are owned as to 9,600,000, 1,680,000, 480,000 and 240,000 Ordinary Shares by JE Cleantech Global Limited, Triple Business Limited, Ever Bloom Properties Company Limited and Aqua Lady Group Limited, respectively, and JE Cleantech International Limited, JCS Echigo Pte. Limited, Hygieia Warewashing Pte. Limited and Evoluxe Pte. Limited are our direct and indirect subsidiaries.
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Organization Chart
The chart below sets out our corporate structure as of the date of this Annual Report.
Entities
A description of our subsidiaries is set out below.
JE Cleantech International Limited (“JEC International”)
On April 9, 2018, JEC International was incorporated in the BVI as a BVI business company with limited liability. JEC International is authorized to issue a maximum of 50,000 shares of a single class of US$1.00 par value each. As part of a group reorganization on December 28, 2021, JEC International became a direct wholly-owned subsidiary of our Company.
JEC International has been an investment holding company with no business operations since its incorporation.
JCS-Echigo Pte Ltd (“JCS”)
On November 25, 1999, JCS was incorporated in Singapore as a private company with limited liability. JCS commenced business in 2005 and is principally engaged in the manufacture and sale of cleaning systems and other equipment. As part of a group reorganization on December 28, 2021, JCS became an indirect wholly-owned subsidiary of our Company.
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Hygieia Warewashing Pte. Ltd. (“Hygieia”)
On December 29, 2010, Hygieia was incorporated in Singapore as a private company with limited liability. Hygieia commenced business in 2013 and is principally engaged in the provision of centralized dishwashing services, general cleaning services and leasing of dishwashing equipment. As part of an internal reorganization on December 28, 2021, Hygieia became an indirect wholly-owned subsidiary of our Company.
Evoluxe Pte. Ltd. (“Evoluxe”)
On May 6, 2016, Evoluxe was incorporated in Singapore as a private company with limited liability. Evoluxe has been dormant since incorporation and has not engaged in any business activities since its incorporation. As part of an internal reorganization on December 28, 2021, Evoluxe became an indirect wholly-owned subsidiary of our Company.
Key Milestones
The key milestones in the development of our Group are highlighted chronologically below:
| Year | Milestones | |
| 1999 | JCS was established. | |
| 2005 | JCS began its business in the sale of cleaning systems. | |
| 2006 |
We established the JCS Facility and commenced the business of the design, development, manufacture and sale of cleaning systems.
We completed our first order for a cassette washing system for a customer in the HDD industry. | |
| 2007 | We registered our first patent in Singapore under JCS for a cleaning process and apparatus. | |
| 2010 | Hygieia was established. | |
| 2011 | We completed our first order for a medical cleaning system. | |
| 2012 | We completed our first order for a dish cleaning system. | |
| 2013 | Hygieia commenced provision of centralized dishwashing services at a customer’s premises. | |
| 2014 | We established the Hygieia Facility. | |
| 2018 | We received an invitation from a statutory board in Singapore to showcase a prototype of a robot floor scrubber for the interior of public trains. |
Industry Overview
We are principally engaged in (i) the sale of cleaning systems and other equipment; and (ii) provision of centralized dishwashing and ancillary services. Our cleaning systems business commenced in 2005. We design, develop, manufacture and sell cleaning systems for various industrial end-use applications to our customers primarily in Singapore and Malaysia.
Precision Cleaning Industry In Singapore And Malaysia
The precision cleaning industry often requires the provision of a sophisticated cleaning process and equipment to ensure that items can be cleaned to a level that would meet the relevant industry standards for their specific use. In Singapore and Malaysia, the precision cleaning industry can be divided into two sub-segments of precision cleaning services and precision cleaning equipment manufacturing.
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There are two major business models within the precision cleaning industry: (i) companies without manufacturing capability but providing precision cleaning product and services by selling standardized equipment and products to end-clients; and (ii) precision cleaning equipment manufacturers that offer both standardized and customized equipment and products to end-clients.
Precision Cleaning Industry in Singapore
The precision cleaning industry in Singapore saw a CAGR of 5.8% from 2016 to 2020, and market size was approximately S$88.8 million in 2020. Growth before COVID-19 was driven by technology advancement and demand for miniaturized components for machinery which in turn increased demand for precision cleaning services and equipment for these components. However, growth was slightly dampened when the airlines were adversely affected by COVID-19. Nonetheless, other industries such as electronics saw stable growth while pharmaceutical and medical devices saw accelerated growth in 2020, helping to cushion the decreased sales to the airline industry so the overall market only saw a slight decline.
The Singapore government’s initiatives to support Industry 4.0 has been supporting the growth of the precision cleaning industry. Presently, both the manufacturing sector and the cleaning sector fall under the S$4.5 billion Industry Transformation Map (ITM), and the Singapore government has been supporting technology trials for cleaning and waste management systems under the INCUBATE program.
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2016 | 2017 | 2018 | 2019 | 2020 | 2016-2020 | ||||||||||||||||||
| Precision Cleaning Industry | 70.8 | 85.2 | 92.2 | 99.0 | 88.8 | 5.8 | % | |||||||||||||||||
| Growth Rate (%) | 4.0 | 20.3 | 8.2 | 7.3 | –10.3 | — | ||||||||||||||||||
| — Precision Cleaning Services | 32.6 | 30.0 | 33.3 | 37.8 | 33.6 | 0.8 | % | |||||||||||||||||
| —Precision Cleaning Equipment Manufacturing | 38.3 | 50.0 | 55.1 | 60.7 | 55.2 | 9.6 | % | |||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment and services providers as well as the relevant trade associations in Singapore.
Since the outbreak of the first COVID-19 case in Singapore on January 23, 2020, the Singapore government raised the DORSCON (the Disease Outbreak Response System Condition, a color-coded framework that shows the current disease situation in Singapore) level from yellow to orange and introduced several restrictions which tightened alongside increasing cases. This eventually culminated in a nationwide partial lockdown, known as the ‘‘circuit breaker’’ from April 7, 2020 to May 4, 2020 (which was eventually extended to June 1, 2020), where, apart from shopping for necessities and work for essential workers, all Singaporeans were required to stay at home.
Despite the significant impact on most of the retail and service industries, the overall cleaning industry, especially the precision cleaning industry, was less impacted since the key end client group are business-to-business (“B2B”) clients who are less likely to suffer direct impact from the downturn of consumer demand.
The precision cleaning industry is estimated to see an accelerated CAGR of 9.0% between 2021 and 2025. Such growth is expected to be driven by the manufacturing segment with a CAGR of 10.7% over the same period, which is expected to be benefited from Industry 4.0 as the industry continues to transform. Nonetheless, as Industry 4.0 requires a hefty capital outlay, this will favor larger players who are managing large facilities. In the near future, it is expected that precision cleaning companies will continue to invest in AI technology and data to fully automate tasks, linking to cloud drive storage, and potentially leveraging the latest 5G technology to enhance data transmission and processing speed.
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Precision Cleaning Industry in Singapore, Forecast (2021F–2025F)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2021F | 2022F | 2023F | 2024F | 2025F | 2021F–2025F | ||||||||||||||||||
| Precision Cleaning Industry | 101.2 | 112.7 | 123.3 | 132.5 | 143.0 | 9.0 | % | |||||||||||||||||
| Growth Rate (%) | 14.0 | 11.4 | 9.4 | 7.4 | 7.9 | — | ||||||||||||||||||
| — Precision Cleaning Services | 39.4 | 42.8 | 45.1 | 47.1 | 50.2 | 6.2 | % | |||||||||||||||||
| — Precision Cleaning Equipment Manufacturing | 61.8 | 70.0 | 78.2 | 85.4 | 92.8 | 10.7 | % | |||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment and services providers as well as the relevant trade associations in Singapore.
Precision Cleaning Industry in Malaysia
The precision cleaning industry in Malaysia experienced a CAGR of 22.9% from 2016 to 2020, with a market size of MYR213.4 million in 2020. Sharp growth of 77.2% in the industry in 2020 was driven by the strong momentum in the manufacturing segment, resulting in 166.8% growth in 2020, due to the launch of 5G technology, the increase in demand experienced by the HDD and semiconductor industries and geopolitical issues that arose over that period.
Precision Cleaning Industry in Malaysia, Historic (2016–2020)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (MYR million) | 2016 | 2017 | 2018 | 2019 | 2020 | 2016–2020 | ||||||||||||||||||
| Precision Cleaning Industry | 93.5 | 105.1 | 112.6 | 120.4 | 213.4 | 22.9 | % | |||||||||||||||||
| Growth Rate (%) | 8.1 | 12.4 | 7.1 | 6.9 | 77.2 | — | ||||||||||||||||||
| — Precision Cleaning Services | 58.4 | 63.2 | 66.3 | 69.4 | 77.1 | 7.2 | % | |||||||||||||||||
| — Precision Cleaning Equipment Manufacturing | 35.1 | 41.9 | 46.3 | 51.1 | 136.3 | 40.4 | % | |||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment and services providers as well as the relevant trade associations in Malaysia.
The US-Sino relationship saw no improvement after the US presidential election in 2020. The geopolitical impact caused by the trade dispute between the world’s two largest economies constrained the growth of the semiconductor manufacturing industry in China. Leading semiconductor manufacturers were then looking for a cost-friendly market in which to expand their manufacturing capacity in order to better target the fast-growing Greater China and ASEAN markets. As a result, the demand for precision cleaning equipment manufacturing shifted from markets like Singapore to neighboring markets such as Thailand and Malaysia.
The strongly promoted initiative of Industry 4.0 by the Malaysian government acted as another major growth driver to keep the industry growing. Despite the large capital outlay required for a company to transform into a highly automated manufacturer with AI technology and IoT capabilities, industry players, in general, believe that such transformation can increase overall operational efficiency enough to result in an approximately 20% increase in revenue, post-transformation.
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Precision Cleaning Industry in Malaysia, Forecast (2021F–2025F)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (MYR million) | 2021F | 2022F | 2023F | 2024F | 2025F | 2021F–2025F | ||||||||||||||||||
| Precision Cleaning Industry | 236.4 | 258.9 | 279.1 | 299.5 | 319.8 | 7.8 | % | |||||||||||||||||
| Growth Rate (%) | 10.8 | 9.5 | 7.8 | 7.3 | 6.8 | — | ||||||||||||||||||
| — Precision Cleaning Services | 85.7 | 90.9 | 96.7 | 101.7 | 106.7 | 5.6 | % | |||||||||||||||||
| — Precision Cleaning Equipment Manufacturing | 150.8 | 168.0 | 182.3 | 197.7 | 213.1 | 9.0 | % | |||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment and services providers as well as the relevant trade associations in Malaysia.
It is expected that the growth of precision cleaning activities in the Malaysian domestic market will record moderate growth over the next few years. By 2025, it is expected that the industry will reach MYR319.8 million from MYR236.4 million in 2021 with a CAGR of 7.8%. (Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment and services providers as well as the relevant trade associations in Malaysia.)
Precision Cleaning Equipment Manufacturing Industry In Singapore
Market Overview
In Singapore, precision cleaning equipment manufacturing is a niche market and is estimated to have grown at a CAGR of 9.6% over the period from 2016 to 2020, driven by a steady increase in both end-use applications and awareness of the beneficial effects of precision cleaning. Precision cleaning employed in the electronics industry is linked closely to the industry’s output performance.
The strong growth in semiconductor production was driven by the increasing demand from the smartphone market. In addition, a global shortage in the memory segment of semiconductor chips also led to a strong gain for Singapore’s semiconductor producers in 2020.
Precision Cleaning Equipment Manufacturing Industry in Singapore, Historic (2016–2020)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2016 | 2017 | 2018 | 2019 | 2020 | 2016–2020 | ||||||||||||||||||
| Precision Cleaning Equipment Manufacturing | 38.3 | 50.0 | 55.1 | 60.7 | 55.2 | 9.6 | % | |||||||||||||||||
| Growth Rate (%) | 3.0 | 30.7 | 10.2 | 10.1 | –9.0 | — | ||||||||||||||||||
| — Electronic Subsector | — | 30.0 | 33.3 | 37.8 | 42.7 | — | ||||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment providers as well as the relevant trade associations in Singapore.
Precision cleaning equipment manufacturing in the electronics subsector, representing 77.4% of the industry at S$42.7 million in 2020, produces equipment used to clean a wide range of electrical components including printed circuit boards, silicon wafers for semiconductors, flat panel displays and consumer mobile parts, as well as the heads of hard disk drives (HDDs). An HDD is an electro-mechanical data storage device that stores and retrieves digital data using magnetic storage, and is a type of semiconductor device that is made of semiconductors.
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Market Drivers
Components, in particular those intended for consumer electronic end-use applications, are increasingly being miniaturized as manufacturers pursue compactness. This requires highly precise cleaning at the micro-level to remove microparticles to ensure the components’ reliability and performance and prevent adverse effects in their subsequent use. The miniaturization trend of components has caused companies and production managers to increasingly pay attention to cleanliness, as they realize that their intricately engineered devices can be rendered inoperable by undesired microcontaminants.
Historically, Singapore has long been a manufacturing hub for HDD because of the prime location stationed in the fast-growing ASEAN economies, as well as business-friendly legislation and political stability. Seagate, one of the key leading manufacturers of HDDs, began establishing its manufacturing plants in Singapore in 2006, with its first Asian manufacturing hub. Recently, the Singapore government’s strong initiative in Industry 4.0 further supports high-tech manufacturing industries including HDD manufacturing, fueling the growth of such segment. It is expected that with the continuous effort of the Singapore government to develop the country into the regional powerhouse for advanced manufacturing technologies, which provides a platform for the U.S. to enter ASEAN markets, the HDD industry will continue to grow steadily.
Market Constraints
In the short term, precision cleaning equipment market players face growth constraints posed by a shrinking labor pool and rising labor costs. Precision cleaning equipment manufacturers face steep competition for a shrinking pool of highly skilled labor in an ageing Singaporean population. In addition, as labor regulations prevent the mass hiring of foreign skilled labor, companies increasingly pay wage premiums to retain these employees. This can, however, be mitigated in the long term as companies invest in innovation and technology to automate manufacturing processes.
The Singapore Purchasing Managers’ Index (“PMI”), which indicates the industry consensus of the market condition of Singapore’s manufacturing sectors monthly, recorded growth in May 2020 at 46.8, after three consecutive months of decline from 50.3 in January 2020 to 44.7 in April 2020. A PMI below 50 indicates that the overall manufacturing sector is under contraction. Since then, the market condition started to grow and by February 2021, a PMI of 50.5 was recorded, showing that the overall manufacturing sector continues to expand. Singapore’s manufacturing PMI in March 2022 was 50.1.
The electronics sector PMI also posted a decline from 50.1 in January 2020, down to 42.8 in April 2020. Such decline in manufacturing activities indicates that the domestic demand for precision cleaning equipment from the manufacturing sector, including the electronics sector, has been weakened since the COVID-19 outbreak in Singapore in February 2020. The decline stopped in April 2020, when the electronics sector PMI recorded 42.8, and started to grow. By August 2020, with a PMI of 50.6, it had overtaken the PMI of the overall manufacturing sectors. By February 2021, a PMI of 50.8 was recorded for the electronics sector. Although in February 2022 it had receded slightly to 50.5 from 50.8 in January 2022, and in March 2022 it receded further to 50.4, a PMI above 50 indicates that the overall sector continues to expand.
Singapore’s manufacturing PMI of 50.1 in March 2022 was relatively low compared to regional neighbors’ including Indonesia and the Philippines, which were 51.3 and 53.2, respectively, but higher than Malaysia, which dropped to 49.6 in March.
Operating Costs
Manufacturers that produce precision cleaning equipment in Singapore face high set-up, production and operating costs, which pose high barriers to entry for potential new firms. This is split generally into about 30–40% for direct labor costs, staff costs and sub-contracting costs, 10% for utilities and overhead, and the remaining 50–60% for raw materials. The predominant raw material for production of precision cleaning equipment is stainless steel, with minimal plastic components for certain machines.
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Source: Department of Statistics Singapore, The Ministry of Manpower Singapore; Euromonitor findings from custom research.
According to the Ministry of Manpower in Singapore, the median gross monthly income from work of full-time employed residents increased from S$4,056 in 2016 to S$4,534 in 2020, recording a CAGR of 2.8% over the historic period. With no significant change in terms of the foreign labor policy as well as the low unemployment rate in the country, it is expected that Singapore’s median gross monthly income will grow at a steady rate of 3.8% CAGR over the forecast period, from S$4,706.3 in 2021, to S$5,463.5 by 2025.
In comparison, the steel bar price per ton fluctuated throughout the historic period with dramatic growth from approximately S$397.1 in 2015 to approximately S$649.6 in 2016, an increase of approximately 63.6% in a year time, driven by the rapid increase in construction contracts in Singapore, at the cost of the resulting in reduced profit margins for the manufacturing and construction industries. Although growth of construction contracts, value and volume was sluggish in 2017 and was recorded at only approximately 4.1% and 3.6% in 2018 and 2019, the steel bar price per ton, once again, recorded double digit growth of 12.5% in 2020. Such growth is the result of the reduced logistic capacity in the steel bar export and import business, caused by the COVID-19 pandemic.
Over the forecast period, both the construction and the manufacturing sectors are expected to further drive up the price of steel. On the construction side, the Mega 2 infrastructure projects such as the Integrated Waste Management Facility, Tuas Water Reclamation Plant and Tuas Mega Port all commenced in the latter part of 2019.
On the manufacturing side, foreign investment in the industry sector is increasing, with Toll Group setting up a S$228 million logistic hub in Tuas, and Canadian-based Bombardier quadrupling the size of its aircraft maintenance center in Seletar Aerospace Park. British home appliance manufacturer Dyson recently announced that it will set up its first electric car plant here in Singapore, and also double the size of its existing technology center at Science Park One.
The active infrastructure and commercial activities give momentum for the steel price in Singapore to grow steadily in the foreseeable future, from S$784.1 per ton in 2021 to S$816.7 per ton by 2025, an estimated CAGR of 1.0% over the forecast period.
Source: Department of Statistics Singapore, The Ministry of Manpower Singapore; Euromonitor findings from custom research.
*Forecast period figures of Median Gross Monthly Income and Steel Bar Price in Singapore, are estimated by Euromonitor International based on available information from the Passport, Department of Statistics Singapore and custom research.
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Market Outlook
The precision cleaning equipment manufacturing market in Singapore is estimated to be valued at S$88.8 million in 2020 and is expected to reach an estimated S$143.0 million by 2025, marking a CAGR of 9.0% over the forecast period. The stable growth after the drop in 2020 will be largely driven by moderate expansion in the electronics sector and sustained growth of the emerging pharmaceutical and biomedical sectors in Singapore. With no significant change in the requirement of precision cleaning services in the pharmaceutical and biomedical sectors, it is expected that the rapidly expanding sector of electronics will continue to outgrow other subsectors and continue to be the most significant segment of the precision cleaning equipment market.
The precision equipment market for electronics in Singapore is expected to grow, but at a moderate pace in line with expected electronics output in Singapore. The longer-term trends, including the emergence of new technologies such as autonomous vehicles and the proliferation of the IoT in healthcare and robotic applications, is expected to sustain demand for semiconductors in the electronics industry for the forecast period.
With automation, digitization and robotic processes at the forefront of technological developments, it is expected that automated assembly lines with digitized control panels will be the new standard manufacturing process for industrial industries, especially for the precision cleaning equipment industry.
The global pessimistic outlook of the economy in 2020 due to COVID-19 caused a delay of orders for precision cleaning equipment as the market was not certain how long the pandemic would persist. However, as the COVID-19 vaccination progress began in early 2021, orders started to resume at a more normal pace as the global economy was preparing for the post COVID-19 recovery.
The delay of the orders caused a slowdown in cash flow and revenue generation, but the overall demand for precision cleaning equipment is currently unaffected. It is expected that industry activities will resume to normal after the COVID-19 crisis.
Precision Cleaning Equipment Manufacturing in Singapore, Forecast (2021F–2025F)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2021F | 2022F | 2023F | 2024F | 2025F | 2021F–2025F | ||||||||||||||||||
| Precision Cleaning Equipment | 61.8 | 70.0 | 78.2 | 85.4 | 92.8 | 10.7 | % | |||||||||||||||||
| Growth Rate (%) | 12.0 | 13.2 | 11.8 | 9.2 | 8.7 | — | ||||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment providers as well as the relevant trade associations in Singapore.
Competitive Landscape
Singapore’s precision cleaning equipment manufacturing market is niche and relatively consolidated, served by approximately 10 companies, consisting of a handful of larger global companies that operate offices in Singapore, as well as several small and medium-sized players. High barriers to entry in the form of high set-up and operating costs, as well as the importance that end-user clients place on a strong track record, explains the absence of notable new entrants into the market.
The market for precision cleaning equipment manufacturing in the electronics sector mirrors that of the wider industry, given that is the dominant end-use application in the market. End-use application clients in general place a premium on quality of equipment performance and after-sales service. There is also a trend towards procuring high-quality equipment that would last longer, thereby reducing repair and replacement costs. Hence, precision equipment manufacturers that can strike the balance between quality products and price competitiveness will continue to gain inroads into market share.
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Industry players also see a trend towards consolidation in the wider precision cleaning market, as companies move towards offering total solutions in the value chain (both cleaning equipment and cleaning services) in order to stand out from the competition.
Multinational companies (“MNCs”) are one of the major client types, especially for the HDD and semiconductor industries, of the precision cleaning equipment manufacturing industry. MNCs often have a stringent vendor selection process in order to ensure the suppliers meet their specific needs and standards. The rationale behind the rigid and stringent standard in the vendor selection process is to ensure the vendors can provide high-quality products in order for the HDD manufacturers to meet the heightened internal cleanliness standard of ensuring all components of the hard disk drive are free from submicron particulate contamination (less than 0.1 micrometer). Any existing vendor who does not pass its required standard will be removed from the MNC’s approved vendor list. Therefore, suitable suppliers are not easily available and existing suppliers are not easily replaceable.
Generally, precision cleaning equipment and systems have an average life span of two to seven years. It is a common practice for HDD manufacturers to allocate a certain amount of their annual budget to fund the acquisition of machines and equipment, including upgrading of existing machines and equipment, to ensure their production facilities work smoothly, to cater to changes in technology and to meet their production demand and expansion plans. As reported by Euromonitor, the annual budget allocated by MNCs for the purchasing and upgrading of precision cleaning machinery, equipment and systems ranges from 5% to 25% of the cost of owned plant, equipment and machinery. Since the average life span of precision cleaning systems and equipment ranges from two to seven years, upgrading and replacement of those machines have to be done progressively in order to maintain a stable production capacity of MNCs, hence, to avoid the upgrade or replacement process results in under-capacity. There are uncertainties including the system and machines’ stability after the upgrade or replacement. Moreover, if the upgrade or replacement of machines all take place at the same time, the production capacity could drop to zero during the process. It is a risk management consideration to better carry out such process progressively, rather than putting the MNC’s production capacity at risk. Hence, MNCs usually upgrade or replace their entire precision cleaning systems and equipment progressively, in order to level the cost associated with the upgrading and purchasing of machinery while maintaining product capacity throughout the years. Such practice explains the frequency with which MNCs purchase and upgrade precision cleaning systems and equipment on an annual, or on-demand basis. Several factors could cause variation in terms of the frequency and amount of budget allocation for MNCs to replace and upgrade the existing precision cleaning equipment and machinery. These include but are not limited to the life cycle of the currently owned precision cleaning equipment and machinery, technology advancement and product innovation of the company, as well as business expansion need. Under the threat of SSD, in order for leading HDD manufacturers to maintain the low-cost advantage of HDD against SSD, they are encouraged to further develop HDD technology, to not only upgrade existing storage technology but also to improve overall durability.
Precision cleaning systems are generally custom-made to cater to the clients’ requirements and specifications, which involves a detailed understanding of the clients’ production processes and product specifications, which are often highly confidential. Therefore, MNCs generally prefer not to use many different vendors for precision cleaning systems, in order to protect their trade secrets. It would also be costly and time consuming to teach a new vendor the technical requirements of the client. Euromonitor is of the view that this makes HDD and semiconductor manufacturers loyal to only a few qualified vendors and to not change their suppliers from time to time. These factors give a strong competitive advantage to existing vendors in the industry, and make it difficult for new industry players to enter this key industry client segment.
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The Precision Cleaning Equipment Manufacturing Industry In Malaysia
Market Overview
Precision cleaning is a key part of Malaysia’s electronics manufacturing sector, driven by the nation’s large electrical and electronics manufacturing industry. Within the sector, the manufacturing of semiconductors, printed circuit boards, HDD and precision metal components are key users of precision cleaning equipment. Apart from the electronics and components sectors, medical and pharmaceutical, as well as automotive sectors are the other two key end-use sectors that demand precision cleaning equipment and services.
During the period from 2016 to 2020, the precision cleaning equipment manufacturing industry experienced the strongest growth in 2020 with revenue receipts posting growth of 166.8%. The industry’s strong performance in 2020 was driven primarily by increased global demand for semiconductors, as well as the rapidly expanding electrical and electronics industries manufacturing facilities in Malaysia, as per announced in 2020.
Precision Cleaning Equipment Manufacturing Industry in Malaysia, Historic (2016–2020)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (MYR million) | 2016 | 2017 | 2018 | 2019 | 2020 | 2016–2020 | ||||||||||||||||||
| Precision Cleaning Equipment Manufacturing | 35.1 | 41.9 | 46.3 | 51.1 | 136.3 | 40.4 | % | |||||||||||||||||
| Growth Rate (%) | 9.2 | 19.5 | 10.5 | 10.3 | 166.8 | — | ||||||||||||||||||
| — Electronic Subsector | — | — | 27.9 | 30.2 | 79.1 | — | ||||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with precision cleaning equipment providers as well as the relevant trade associations in Malaysia.
The electronics industry accounts for the bulk of revenue receipts from the sale of precision cleaning equipment in 2020, representing approximately 60% of the precision cleaning equipment industry, or approximately MYR79.1 million in terms of value. As the world’s seventh-largest electronics exporter and the leading hub for semiconductor assembly and testing, precision cleaning catering to Malaysia’s HDD and electronics industry is well-positioned for growth. In line with the trend of an increase in global demand for semiconductors, precision cleaning equipment manufacturing companies catering to manufacturers in this sector are expected to post positive growth.
Historically, the Malaysia HDD industry has been growing since the 1990s, thanks to the relatively low cost associated with the establishment of HDD factories and production. In addition, the increasing demand for consumer electronics such as desktop and laptop computers in the region further supports the growth of demand for HDDs over the historic period. However, the uprising of neighboring markets, such as the Philippines and Indonesia, which offer a better cost advantage for HDD manufacturers, has reduced the comparative advantage of Malaysia. On the other hand, the competition from SSD also hinders the demand for HDD. In 2019, Western Digital shut down its HDD assembly facility near Kuala Lumpur and opened up an SSDs factory in Penang to support the growing demand for SSD.
Despite challenges from neighboring markets as well as SSD, the uprising trend of data centers, where HDD remains a better choice of data storage device compared to SSD, continues to grow in Malaysia and bolster the demand for HDD. In 2021, Microsoft announced plans to establish its first data center region in Malaysia, with AWS and Google set to follow. With the advantage of land available for corporations to build data centers at, as well as the long history of HDD and technology devices manufacturing, it is expected that Malaysia’s data center market size will continue to grow and that it will reach revenues of over US$800 million by 2025, hence further fueling growth in the demand for HDD industry.
Market Drivers
The positive growth of Malaysia’s precision cleaning industry is primarily due to the rising global demand for consumer electronics such as smartphones, tablets and wearables. Such demand has attracted investments from electrical and electronics companies, which are key users of products and services offered by precision cleaning equipment manufacturing companies. According to the Malaysian Investment Development Authority (the “MIDA”), approved investments in the manufacturing sector from January 2020 to September 2020 were worth MYR65.3 billion. Malaysia saw a total of 56 electrical and electronics projects with approved investments of MYR7.7 billion in 2020. The MIDA expects investments in the industry to further increase in 2021 and 2022.
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Precision cleaning equipment manufacturers benefit from the increased investments as a rise in local manufacturing capacity or requirements are key drivers of revenue, especially for investments from the United States. The American Malaysian Chamber of Commerce also expects US investments in Malaysia to expand over the forecast period.
Market Constraints
End users often turn to companies that are well established in the precision cleaning equipment manufacturing industry as they are perceived to be more reliable than lesser-known companies. In line with this trend, industry players selling precision cleaning equipment often work towards establishing a long-term partnership with their clients such as through collaborating with precision cleaning chemical suppliers to provide a one-stop-shop solution and offering customization services and after-sales support. As a result of this, new players in the precision cleaning equipment manufacturing industry often struggle to secure new sales opportunities.
Similar to Singapore, COVID-19 caused the overall manufacturing sector of Malaysia to contract in 2020. Malaysia’s PMI declined from 48.8 in January 2020, down to 31.3 in April 2020, which showcased the heavy pressure faced by the manufacturing sectors due to the production suspension or the necessity for factories to operate under capacity. While Singapore’s PMI started to grow again in the middle of 2020, likewise, Malaysia’s PMI grew back to 45.6 in May 2020, and the PMI has remained fairly stable since then. By February 2021, the PMI of Malaysia’s manufacturing sector was recorded at 47.7 and in March 2022 it was 49.6.
Despite the impact of the COVID-19 pandemic on the global chain of manufacturing activities, including the semiconductor sector, the semiconductor industry in Malaysia remains relatively stable compared to other sectors due to the increased demand for electronics products caused by the work from home arrangement during the COVID-19 crisis, which mitigated the decline caused by the lockdown measures imposed from January to May 2020 arising from the COVID-19 outbreak.
Market Outlook
The precision cleaning industry is projected to post positive growth over the forecast period, driven primarily by the semiconductor industry. With emerging megatrends such as IoT and AI creating new application opportunities for semiconductors, global demand for semiconductors is expected to rise. The strong demand for semiconductors will likely lead to increased investment in Malaysia as the country has over the review period emerged as a design, development and manufacturing hub for semiconductors. Increased investment in the semiconductor industry benefits precision cleaning companies as semiconductor manufacturers are key users of precision cleaning equipment.
Similar to Singapore, the global pessimistic outlook for the economy due to COVID-19 caused delays of orders for precision cleaning equipment as the market was not certain how long the pandemic would persist. It is expected that industry activities will resume to normal after the COVID-19 crisis.
Precision Cleaning Equipment Manufacturing in Malaysia, Forecast (2021F–2025F)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (MYR million) | 2021F | 2022F | 2023F | 2024F | 2025F | 2021–2025 | ||||||||||||||||||
| Precision Cleaning Equipment Manufacturing | 150.8 | 168.0 | 182.3 | 197.7 | 213.1 | 9.0 | % | |||||||||||||||||
| Growth Rate (%) | 10.6 | 11.4 | 8.6 | 8.5 | 7.8 | — | ||||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with and trade interviews with precision cleaning equipment providers as well as the relevant trade associations in Malaysia.
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Competitive Landscape
The precision cleaning manufacturing industry in Malaysia is highly consolidated, with the top five companies in the industry accounting for more than 80% of industry sales. The leading players in the industry are primarily in the electronics industry. These manufacturers benefit from the robust growth of Malaysia’s position as a global hub for semiconductor manufacturing. In order to remain competitive, it is common for companies providing precision cleaning equipment to collaborate with chemical suppliers to offer end-users packaged solutions.
The barriers to entry for precision cleaning companies within the electronics industry are high due to the start-up costs involved. The costs incurred in obtaining relevant quality certifications such as the ISO9001 and ISO22000 certifications, for example, discourage small players from entering the industry. In addition, the reluctance of manufacturers within the electronics industry to engage new precision cleaning companies also increases barriers to entry. As a result, the precision cleaning industry in Malaysia is highly consolidated.
The Autonomous Robotic Floor Cleaning Equipment Industry In Singapore
Market Overview
Autonomous cleaning robots have intelligent programming to detect areas in the designated vicinity that need to be cleaned. Their functions include vacuuming, mopping and scrubbing and these robots are often paired with a platform where users can view the progress of the cleaning.
The efficiency of the cleaning makes them a complement or even substitute to manual cleaners such that they have recently become widespread in Singapore. The industry is relatively new in Singapore, with market leaders such as Lionsbot joining in as late as 2018 and still gaining a large market share. This is seen as a potential solution for the labor squeeze in Singapore’s cleaning force, especially for commercial property and food and beverage cleaning sectors.
Autonomous Robotic Floor Cleaning Equipment Industry in Singapore, Historic (2016–2020)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2016 | 2017 | 2018 | 2019 | 2020 | 2016–2020 | ||||||||||||||||||
| Autonomous Robotic Floor Cleaning Equipment | 0.8 | 1.2 | 1.7 | 2.3 | 6.5 | 68.2 | % | |||||||||||||||||
| Growth Rate (%) | 58.6 | 49.2 | 40.2 | 35.3 | 182.6 | — | ||||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with autonomous robotic cleaning equipment manufacturers as well in Singapore.
Market Drivers
While most industries suffered during the lockdown, this industry saw mixed results depending on where most of their robots were deployed. Companies that mostly deployed to shopping malls suffered from reduced sales due to the closure of malls and offices during the lockdown. On the other hand, companies that mostly deployed to healthcare and mass rapid transit stations found increased sales due to the demand for higher frequency and a higher standard of cleanliness as preventive measures against COVID-19.
Government subsidies also play a huge role as grants are extensive, encouraging businesses to adopt the technology. The National Environment Agency of Singapore (the “NEA”) has authorized grants of 80% for approved autonomous cleaners, though there is a cap. As long as the buyer applies for the grant and is able to justify its need for it, it can claim the grant retroactively.
The launch of autonomous cleaning robots in Jewel Changi Airport, the National Gallery, Gardens by the Bay and other prominent areas have raised awareness of this industry, especially since they are often seen on the news. Jewel Changi Airport, in particular, has been spearheading the move towards autonomous cleaning by ordering one robot from every existing autonomous cleaning robot company.
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Market Constraints
The main cost is the manufacturing of the robots, which remain quite expensive due to their advanced components such as LIDAR sensors, cameras, and vacuum motors though such prices are expected to decrease in the future. The robots are also not mass-produced as they must maintain their high quality, and this results in high production costs.
Secondly, the robots need to be maintained by a team of people who understand the equipment and software. Maintenance fee depends on the type and scale of the machine but ranges from around S$3,000 to S$6,000 per year. The attachable features, such as the scrubber head, also need to be replaced regularly depending on the frequency of cleaning. Such high-costs associated with the initial purchase and the ongoing maintenance fee inhibit purchases by some property management companies due to budget concerns.
Market Outlook
Autonomous Robotic Cleaning Equipment Industry in Singapore, Historic (2021–2025)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2021F | 2022F | 2023F | 2024F | 2025F | 2021–2025 | ||||||||||||||||||
| Autonomous Robotic Cleaning Equipment | 12.5 | 17.3 | 23.1 | 29.4 | 36.3 | 30.5 | ||||||||||||||||||
| Growth Rate (%) | 92.3 | 38.4 | 33.5 | 27.3 | 23.5 | — | ||||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with autonomous robotic cleaning equipment manufacturers as well in Singapore.
Since the industry is still in its fast-growing stage in 2022, with a strong push due to the COVID-19 pandemic, which increased the demand for unmanned cleaning solutions for commercial properties and public spaces in Singapore, the overall industry is expected to grow at a CAGR of 30.5% over the forecast period.
The growth of the industry over the forecast period is supported by the government through grants and incentives to companies to adopt the technology. It is also expected that there will be further advancement in cloud infrastructure, AI and 5G that will make the robots more attractive and cost-competitive.
Competitive Landscape
Since this is a relatively new market, the ranking of the market leaders was uncertain though it was acknowledged that there are three major players. These companies provide larger robots for Changi Airport, Singapore Mass Rapid Transit, shopping malls and large offices. There are also a number of smaller companies in the market, though they are not seen as strong competitors as they retrofit traditional cleaning equipment with the technology rather than come up with new models like the leading three players. In light of the fast-growing stage of the industry and the strong support from the government, it is expected that more and more new players will enter the market, hence, the market is expected to move towards fragmentation over the forecast period.
The Centralized Dishwashing Services Industry In Singapore
Market Overview
Dishwashing services entail the cleaning of food preparation equipment used in the foodservice industry to the standard required by the end-user client, on a contractual basis. In Singapore’s food & beverage services sector, dishwashing providers deliver such back-end services to frontline clients which include conventional commercial food & beverage establishments and non-conventional dining. The potential client base may also include hotels, meetings, incentives, conferences and exhibitions (MICE) venues, confectioneries and bakeries.
Dishwashing is undertaken both on-site and at centralized off-site locations. On-site cleaning is traditionally labor-intensive, sometimes undertaken with the aid of small-scale dishwashing machines. In contrast, off-site cleaning is usually semi-automated, complemented by manual labor.
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Apart from dishwashing, companies also provide value-added services such as the lease of dishware and related equipment, as well as consultancy services depending on their capability and clients’ needs.
Singapore’s dishwashing services market is estimated to have posted a CAGR of 0.2% from 2016 to 2020. Before COVID-19, growth was stable, driven by rising food & beverage services consumption due to rising incomes, increased eating out, growth in the tourism and MICE industry, and lack of dishwashing manpower. However, there was a huge decline in 2020 due to the lockdown and temporary or even permanent closure of food stores, though this is set to recover. Now that eating out has resumed, growth is expected because of the government’s Foreign Worker Quota limiting foreign hires.
Centralized Dishwashing Services Industry in Singapore, Historic (2016-2020)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2016 | 2017 | 2018 | 2019 | 2020 | 2016-2020 | ||||||||||||||||||
| Centralized Dishwashing Services | 30.7 | 33.0 | 36.1 | 40.6 | 30.9 | 0.2 | ||||||||||||||||||
| Growth Rate (%) | 10.2 | 7.6 | 9.5 | 12.3 | -23.9 | — | ||||||||||||||||||
| On-site Centralized Dishwashing Services | 1.9 | 2.7 | 3.5 | 4.2 | 2.4 | 5.7 | ||||||||||||||||||
| Off-site Centralized Dishwashing Services | 28.8 | 30.3 | 32.6 | 36.4 | 26.7 | -1.9 | ||||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with centralized dishwashing services providers as well as the relevant trade associations in Singapore
Market Drivers
The biggest driver of the food & beverage services industry is economic growth and rising disposable income. Although Singapore’s GDP growth rate has slowed due to the pandemic, the trend up until 2019 was a general increase and it is expected to continue to grow in the next few years. As living standards rise, the ability to dine out and the propensity to try new culinary offerings also rises.
The rising consumption of food & beverage services has also boosted the number of food & beverage establishments in Singapore. The number of licensed food establishments in Singapore increased from 33,074 in 2015 to 38,373 in 2019, at a CAGR of 0.03%. Another contributing factor is the mall asset enhancement initiatives (AEI) undertaken by shopping mall landlords to adjust to changing consumption patterns. As Singaporeans increasingly engage in e-commerce, there is less need to visit shopping malls. In contrast, they gather with families and friends at restaurants and cafes. Hence, landlords have been allocating more retail space to food & beverage outlets in a bid to make their malls more ‘‘experiential’’ to fight declining retail footfall in this era of e-commerce.
Market Constraints
While the above factors may drive demand for centralized dishwashing services, growth in this traditionally labor-intensive sector is however weighed down by manpower constraints. The scarcity of manpower in the sector is attributed to an increasingly ageing population, and disinterest in manual labor among the younger generation. Dishwashing is undertaken predominantly by elderly workers, as the younger generation shun manual labor in favor of higher value-added jobs that offer high remuneration in Singapore’s knowledge economy. However, this can be alleviated in the longer term as the trend towards higher automation in line with productivity drives continues.
Operating Costs
Centralized dishwashing is a more labor-intensive service in Singapore, as compared to the precision cleaning equipment manufacturing industry. Given that dishwashing labor is in general relatively less skilled as compared to manufacturing labor, companies have an incentive to hire foreign workers even with the cost of paying levies.
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Centralized dishwashing service providers in Singapore, in general, have an operational cost structure comprised of the following components: labor costs, which includes labor costs, staff costs and sub-contracting costs representing 60% to 80% of the operating costs; 5%–15% for cleaning equipment; 10% to 15% for logistical transportation; and 5% to 15% for utilities and rent. The cost structure could vary depending on the business model of the provider, for example, a company that has a stronger focus on on-site dishwashing services will incur a higher proportion of labor costs as compared to an off-site dishwashing services provider, and vice versa.
According to Singapore’s Ministry of Manpower, ‘‘Cleaners, Laborer’s and Related Workers,’’ representing the lower skill level group of labor of the industry, exhibited a CAGR of 2.0% in basic salary over the historic period from S$1,417 in 2016 to S$1,535 in 2020, with the progressive wage model playing a role in the increase. The basic salary of such labor group is expected to grow at a slower CAGR of 2.1% over the forecast period, from S$1,594.4 in 2021 to S$1,741.0 by 2025.
Market Outlook
The dishwashing services market in Singapore was estimated to be valued at S$30.9 million in 2020 due to the lockdown in the first and second quarters. However, recovery is expected to be fast as businesses were already receiving normal crowds in the first quarter of 2021. Dishwashing is expected to reach S$75.0 million by 2024, resulting in a CAGR of 19.7% over the forecast period due to an expected sustained increase in food & beverage services consumption, the existence of remaining market potential to be tapped, the government’s drive to develop the centralized cleaning services sector (especially on-site) and persistent manpower shortages in the cleaning industry.
Demand for food & beverage services is expected to be sustained over the forecast period as the country recovers economically from the lockdown. According to the Singapore Department of Statistics survey of Business Expectations (Services Sector) in the first quarter of 2021, companies in the food & beverage services sector improved business expectations, with 21% of firms being optimistic about future business conditions. This is the first positive weighted balance after four quarters of negative sentiment due to the lockdown. Consumption levels are expected to recover and sustain in the long run as Singapore’s macroeconomic growth recovers at a stable pace.
Furthermore, the Singapore government is also supporting Industry 4.0 for centralized dishwashing services. In the longer term, automation and availability of machines will not render centralized dishwashing services obsolete as the various food & beverage establishments are still too small to possess automated cleaning machines (no economies of scale). Hence, food & beverage companies will still demand centralized dishwashing services instead of directly investing in Industry 4.0 and automation themselves.
The outbreak of COVID-19 caused a significant impact on both the retail and consumer services industries in Singapore. Several restrictions, including the ban on gatherings of more than 8 people and the shutdown of entertainment venues, have significantly reduced the number of people who dine out or shop. Additionally, the fear of COVID-19 also reduces the willingness of people to participate in any group leisure or entertainment activities. The pessimistic and tense situation brought on by COVID-19 has reduced the number of tourists, as well as the frequency at which residents dine in consumer food services venues, thereby reducing the demand for centralized dishwashing services.
Furthermore, the 85.7% drop in visitor arrivals in 2020, predicted by the Singapore Tourism Board, as well as the decline in foot traffic in shopping malls and restaurants caused by the government’s lockdown measures implemented in April 2020, has significantly reduced consumer spending and revenue of the consumer food service industry, thereby causing heavy pressure on the short-demand for centralized dishwashing services in Singapore, before the relaxation of circuit breaker measures in June 2020. Such reduction in visitor arrivals continued into 2021, causing extended pressure on the consumer spending sector.
Consumers footprint towards food halls and restaurants improved significantly subsequent to the relaxation of circuit breaker measures, as did the demand for both on-site and off-site dishwashing services. However, compared to the year-to-date performance in 2019, the demand remains relatively weak. Food and beverage providers in Singapore in general reduced prices and offered take-out options in order to better retain consumers. Dishwashing service providers, in turn, suffered from reduced service fees charged to Singapore’s food and beverage operators during the COVID-19 pandemic.
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Centralized Dishwashing Services in Singapore, Forecast (2021F-2025F)
| CAGR | ||||||||||||||||||||||||
| Industry Revenue Receipts (SGD million) | 2021F | 2022F | 2023F | 2024F | 2025F | 2021F-2025F | ||||||||||||||||||
| Centralized Dishwashing Services | 36.5 | 44.9 | 53.6 | 63.3 | 75.0 | 19.7 | % | |||||||||||||||||
| Growth Rate (%) | 25.7 | 23.0 | 19.5 | 18.0 | 18.5 | — | ||||||||||||||||||
| On-site Centralized Dishwashing Services | 3.1 | 3.9 | 4.6 | 5.4 | 6.1 | 18.3 | % | |||||||||||||||||
| Off-site Centralized Dishwashing Services | 33.4 | 41.0 | 49.0 | 57.9 | 68.9 | 19.9 | % | |||||||||||||||||
Source: Euromonitor estimates from desk research and trade interviews with centralized dishwashing services providers as well as the relevant trade associations in Singapore
Competitive Landscape
Singapore’s dishwashing cleaning services market is relatively consolidated with approximately 10 market players. A few large-sized companies dominate the market, while several other smaller players make up the remainder.
Competition in the sector is keen due to the low barriers to entry and low switching costs. Exit and entry to and from the sector are easy due to the relatively low set-up and labor costs compared to other industries. As a result, companies that can offer the greatest balance between cost, technical competence and track record of quality service would gain the edge in market share.
Driven by the fast-growing demand in centralized dishwashing services, competitors are required to increase productivity by either expanding their factories or by implementing automated assembly lines of dishwashing facilities. The latter is likely to be the future trend of the industry regarding the ongoing Industry 4.0 initiatives and the scarcity of land resources in Singapore.
Business of Our Operating Subsidiaries
Overview
Our Group is based in Singapore and is principally engaged in (i) the sale of cleaning systems and other equipment; and (ii) the provision of centralized dishwashing and ancillary services. Our cleaning systems business started in 2006 and we design, develop, manufacture and sell cleaning systems for various industrial end-use applications to customers mainly in Singapore and Malaysia. We have also provided centralized dishwashing since 2013 and general cleaning services since 2015, mainly for food and beverage establishments in Singapore. According to Euromonitor, our Group was ranked fifth in the precision cleaning equipment manufacturing market in Singapore in 2020, with a market share of approximately 2.0% in terms of revenue, and we ranked first in the precision cleaning equipment manufacturing market in Malaysia in 2020, with a market share of approximately 27.0% in terms of revenue. (Source: Euromonitor estimates from desk research and trade interviews with leading precision cleaning equipment providers and the relevant trade associations in Singapore.) We are also a leading centralized dishwashing services provider in Singapore. Our Group was ranked second in the dishwashing services industry in Singapore in 2020, with a market share of approximately 15.0% in terms of revenue. (Source: Euromonitor estimates from desk research and trade interviews with leading centralized dishwashing services providers and the relevant trade associations in Singapore.)
For the years ended December 31, 2019, 2020 and 2021, our Group generated approximately S$12.2 million, S$16.9 million and S$9.0 million of revenue from our sale of cleaning systems and other equipment business, representing approximately 67.1%, 79.2% and 60.8% of our total revenue, respectively.
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For the fiscal years ended December 31, 2019, 2020 and 2021, our Group generated approximately S$6.0 million, S$4.5 million and S$5.8 million of revenue from our provision of centralized dishwashing and ancillary services business, representing approximately 32.9%, 20.8% and 39.2% of our total revenue, respectively.
The portion of our revenue from each business line has not changed substantially through April 24, 2022.
Our Products And Services
Our Products
The cleaning systems and other equipment we manufacture and sell can be categorized into four different categories, namely aqueous washing systems, plating and cleaning systems, train cleaning systems and other equipment, such as filtration units. The product lives of our cleaning systems and other equipment range from two to ten years.
While the focus of our sale of cleaning systems and other equipment business is on precision cleaning, we are also able to design, develop and manufacture other cleaning systems for various industrial end-use applications using our R&D and engineering capabilities.
Depending on our customers’ requirements and specifications, our cleaning systems are designed to enable our users to monitor various parameters and control the cleaning system or equipment. This enables our customers to monitor critical data and information such as water level, wash and rinse tank temperatures, flow rate of water and chemicals, megasonic or ultrasonic generator power, ultrasonic or megasonic frequency and pH value of the chemicals and waste water. Such critical data and information are crucial to our customers for their cleaning systems, particularly in the HDD, semiconductor and industrial electronic equipment/product manufacturing industries.
Our cleaning systems are mainly designed for precision cleaning, with features such as particle filtration, ultrasonic or megasonic rinses with a wide range of frequencies, high pressure drying technology, high flow rate spray and deionized water rinses, which are designed for effective removal of contaminants and to minimize particle generation and entrapment. In particular, precision cleaning systems to be installed in cleanrooms (enclosed spaces in which airborne particulates, contaminants and pollutants are kept within strict limits), such as those sold to HDD customers, will need to meet stringent cleanliness standards and requirements, and are also equipped with High Efficiency Particulate Air (HEPA) filters to trap particles that are 0.3 microns and larger in size and/or Ultra Low Particulate Air (ULPA) filters to trap particles that are 0.12 microns and larger in size, in order to ensure stringent cleanliness performance.
Our cleaning systems are designed and developed for megasonic cleaning or ultrasonic cleaning, and have megasonic or ultrasonic generators to generate rinses with a wide range of frequencies. In particular, megasonic cleaning uses higher frequencies to produce controlled cavitations, with cleaning bubbles that are smaller and less energetic but more numerous, thereby providing more gentle cleaning of fragile and delicate components and the removal of microscopic contaminants. Megasonic cleaning also reduces or eliminates cavitation erosion and the likelihood of surface damage to the product being cleaned.
The table below sets forth the revenue generated from our sale of cleaning systems and other equipment by product type during the fiscal years ended December 31, 2019, 2020 and 2021:
| 2019 | 2020 | 2021 | ||||||||||||||||||||||
| SGD’000 | % | SGD’000 | % | SGD’000 | % | |||||||||||||||||||
| Aqueous washing systems | 6,932 | 44.6 | 12,920 | 81.9 | 4,757 | 60.9 | ||||||||||||||||||
| Plating and cleaning systems | 1,351 | 2.6 | - | - | - | - | ||||||||||||||||||
| Other equipment | 2,440 | 22.8 | 2,863 | 18.1 | 3.056 | 39.1 | ||||||||||||||||||
| Total | 10,723 | 100.0 | 15,783 | 100.0 | 7,813 | 100.0 | ||||||||||||||||||
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The table below sets out the features and major types of industrial end-use applications of the different types of cleaning systems:
Our cleaning systems are designed and customized based on our customers’ requirements and specifications, and accordingly the cleaning systems that we manufacture and sell are of varying sizes and have different features and functions. Our cleaning systems also are comprised of different modules and components, parts and materials and the production and manufacturing process for each cleaning system will vary between orders, depending on the complexity of the design and the component lead time.
In addition, we also provide repair and servicing of the cleaning systems that we sell to our customers, and we also sell related parts used in such cleaning systems which we purchase from third party suppliers such as proximity sensors and transducer plates. Provision of repair and servicing of cleaning systems and sale of related parts amounted to approximately S$1.5 million, S$1.2 million and S$1.2 million in revenue, representing approximately 8.2%, 5.4% and 7.9% of our total revenue, for the years ended December 31, 2019, 2020 and 2021, respectively.
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We are the sole distributor of STICO anti-slip shoes in Singapore, and our customers are mainly food and beverage establishments in Singapore. The STICO anti-slip shoes are made of ethylene-vinyl acetate (EVA) material and are light with an anti-slip resistance function, making them suitable for wear on wet and oily surfaces. Sale of such STICO anti-slip shoes amounted to approximately S$0.2 million, S$97,000 and S$120,000 in revenue, recognized as other income, for the years ended December 31, 2019, 2020 and 2021, respectively.
We generally provide a one year warranty period for the cleaning systems manufactured and sold to our customers from acceptance of delivery of such cleaning systems. During the warranty period, we offer free replacement for components and related parts, as well as repair and servicing of our cleaning systems. After expiry of the warranty period, repair and maintenance services will be provided with additional charges, based on the complexity of the services and cost of components required for any such repair or maintenance. Other equipment is warranted to be in good working order without faulty workmanship or faulty materials. We generally do not offer any product return or refunds for our cleaning systems and other equipment as our customers acknowledge that our products are functional and met their technical specifications upon delivery and inspection by them.
Our Services
We provide centralized dishwashing services at our Hygieia Facility in Singapore. Leveraging on our expertise in designing, developing and manufacturing cleaning systems, we set up our Hygieia Facility in 2014 with semi-automated washing lines, which are designed and manufactured in-house, for our centralized dishwashing operations. As of the date of this Annual Report, four semi-automated dishwashing lines are installed at our Hygieia Facility, of which two are for washing Halal dishware and another two are for washing non-Halal dishware. Our dishwashing lines have the flexibility to process dishware made of different materials including melamine, stainless steel, porcelain and glass. The Halal washing lines at our Hygieia Facility have obtained a Halal certification, and are thus suitable for the washing of Halal dishware.
Incorporating our experience and know-how from precision cleaning, each of our in-house designed semi-automated washing lines are over 20 meters in length and are designed for automated cleaning and washing of dishware, with high capacity to handle large volume and each washing line can wash up to 20 to 30 tubs per hour, depending on the size and number of items in each tub.
Our washing lines also have proper segregation to minimize cross contamination. Each of the washing lines at our Hygieia Facility is standalone and separate, and the configuration of our Hygieia Facility is such that all the soiled dishware will be loaded on the respective washing lines at the same end and the cleaned dishware is removed and unloaded from the washing lines at the other end, thus keeping the soiled dishware and tubs completely separate from the cleaned dishware and tubs and Halal dishware completely separate from the non-Halal dishware. Our technical support team at our Hygieia Facility oversees our centralized dishwashing operations and provides maintenance services for our washing lines in order to ensure high reliability for our customers.
Soiled dishware is collected from our customers’ premises and transported to our Hygieia Facility for centralized dishwashing and then sent back to our customers’ premises daily throughout the year. As the soiled dishware can be loaded into our washing lines without the need for pre-rinsing, this removes the need for dishwashers at our customers’ premises and saves time and labor costs. The risks of contamination due to food remnants or cleaning detergent is also eradicated. Our off-site centralized dishwashing services also allows our customers to cut down on manpower needed to wash dishware as well as the space allocated to dishwashing in order to maximize the dining area.
Since 2015, we also provide general cleaning services to food courts and hawker centers in Singapore, which comprise off-site centralized dishwashing services and on-site cleaning services. For such general cleaning services, we provide the off-site centralized dishwashing services at our Hygieia Facility and generally outsource the on-site cleaning services to third party sub-contractors. Such customers enter into general cleaning service contracts with our Group to appoint us as the main contractor to provide integrated cleaning solutions and services for their food courts or hawker centers, thereby reducing their administrative burden in having to liaise with various service providers for the cleaning of different aspects of the food and beverage establishment. As our Group specializes in centralized dishwashing services, we generally outsource the labor-intensive on-site cleaning services to our sub-contractors in order to focus our resources on our core competencies. Such on-site cleaning services include, among others, cleaning and maintenance of the entire food and beverage establishment and pest control, as well as the removal and disposal of food waste, litter, rubbish and refuse.
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We typically enter into contracts for our provision of centralized dishwashing and general cleaning services with our customers for a term of one to two years. As of April 24, 2022, 14 of the agreements for our provision of centralized dishwashing and general cleaning services will expire during the year ending December 31, 2022. In view of the continued long-term relationship of at least three to four years with most of the customer groups with whom the Group has expiring contracts, we are confident that the Group will be able to renew these contracts.
We generally charge our customers a fixed monthly fee for both our centralized dishwashing services and general cleaning services, and additional fees if extra services are required. Such extra services include ad hoc logistics services and extra manpower for the decolorization or de-staining of the dishware. Our sub-contractors are then paid a monthly fee for their on-site cleaning services, depending on the number of on-site staff required to work at the relevant food and beverage establishment during the relevant period. For further details, please refer to the paragraphs headed “Key contract terms with customers — Provision of general cleaning services” and “Sub-contracting” in this section.
Dishwashing equipment that we lease to customers
We also provide leasing services of dishwashing equipment to our customers, mainly for use at food and beverage establishments in Singapore. The terms of such leases are typically for a period of one to two year(s) and renew automatically, and our customers are charged a fixed monthly fee for such leasing services. For further details, please refer to the paragraphs headed “Key contract terms with customers— Provision of dishwashing equipment leasing services.” The dishwashing equipment leased to our customers typically enables a food and beverage establishment to wash up to 150 racks of items per hour, depending on the size of the equipment. Such dishwashing equipment is designed and manufactured in-house and can be customized to accommodate the needs of different customers.
Sale of Cleaning Systems
The cleaning systems designed, developed, manufactured and sold by our Group can generally be divided into two categories, namely precision cleaning systems and other cleaning systems, and are designed and customized based on our customers’ requirements and specifications. Precision cleaning systems consist of equipment and machines designed for the cleaning of critical surfaces in precision equipment with minimal particle generation and entrapment. Such cleaning processes aim to meet a measured limit of contaminants such as the particle count and/or non-volatile residue requirements, which are supplied by the customer or industry standards. Our cleaning systems are generally sold to HDD, semiconductor manufacturers or industrial electronic equipment/product manufacturers and are designed for cleaning of surfaces and product parts in various industrial end-use applications. Leveraging on our engineering know-how and expertise, we are able to design, develop and manufacture quality and customized products that suit our customers’ varying needs. Ancillary to our sale of cleaning systems, our Group also manufactures and sells other equipment such as filtration units, provides repair and servicing of cleaning systems and sells related parts.
For the fiscal years ended December 31, 2019, 2020 and 2021 and the period from January 1, 2022 to April 24, 2022, we were engaged by 15, 14, 11 and 8 customers, respectively, and we completed 101, 134, 90 and 20 orders, respectively, for our sale of cleaning systems and other equipment.
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The following table sets forth the movement in orders backlog for our sale of cleaning systems and other equipment in terms of the number of orders during the year or period.
| Year ended December 31, | Period from January 1, 2022 to April 24, | |||||||||||||||
| 2019 | 2020 | 2021 | 2022 | |||||||||||||
| Number of orders as of beginning of year/period(1) | 14 | 14 | 20 | 44 | ||||||||||||
| Number of new orders | 101 | 140 | 114 | 33 | ||||||||||||
| Number of completed orders | 101 | 134 | 90 | 20 | ||||||||||||
| Number of orders as of year/period-end(2) | 14 | 20 | 44 | 57 | ||||||||||||
| (1) Number of orders as of beginning of year/period represents the number of orders which were not completed as of the beginning of the relevant year or period. |
| (2) Number of orders as of year/period-end represents the number of ongoing orders as of the end of the relevant year/period that will be carried forward to the next year or period. |
The following table sets forth the movement in orders backlog for our sale of cleaning systems and other equipment in terms of approximate contract value of orders during the fiscal years ended December 31, 2019, 2020 and 2021 and the period from January 1, 2022 to April 24, 2022.
| Year ended December 31, | Period from January 1, 2022 to | |||||||||||||||
| 2019 | 2020 | 2021 | April 24, 2022 | |||||||||||||
| (SGD’000) | (SGD’000) | (SGD’000) | (SGD’000) | |||||||||||||
| Outstanding contract value as of beginning of year or period(1) | 3,092 | 3,668 | 5,820 | 19,997 | ||||||||||||
| New contract value for the year | 11,298 | 17,935 | 22,208 | 15,815 | ||||||||||||
| Revenue recognized for the year | 10,723 | 15,783 | 8,031 | 1,410 | ||||||||||||
| Outstanding contract value as of year/period end(2) | 3,668 | 5,820 | 19,997 | 34,402 | ||||||||||||
| (1) Outstanding contract value as of beginning of year/period represents the contract value of orders which were not completed as of the beginning of the relevant year or period. |
| (2) Outstanding contract value as of year/period-end represents the contract value of ongoing orders as of the end of the relevant year or period that will be carried forward to the next year or period. |
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Design, Development and Sale Process
A brief description of our design and development process of our cleaning systems is set out as follows:
(1) Customers contact our sales team to inquire about our cleaning systems or we submit tenders to potential customers to bid for contracts
Generally, customers will approach our sales team to inquire about the purchase of our cleaning systems and may inform us of their specifications or requirements. In addition, when suitable opportunities arise, we will also submit tenders to potential customers to bid for certain contracts based on customers’ tender requirements.
(2) Our R&D and engineering team will evaluate our customer’s requirements and specifications
Based on the customer’s initial instructions, our R&D and engineering team will evaluate and will have internal discussions on the design and development plan for the proposed cleaning system. Such discussions include product functions, fabrication and assembly requirements, components, parts and materials required and any customized designs and/or functions required to be implemented in order to develop and manufacture the proposed cleaning system according to our customer’s requirements.
(3) Our R&D and engineering team will discuss the feasibility, design and specifications of the proposed cleaning system with our customer
Our R&D and engineering team will discuss the feasibility, design and specifications of the proposed cleaning system with our customer, in order to understand their specific needs and requirements, the proposed budget and intended usage for such cleaning systems. We will also discuss market developments and trends with our customer, in order to better understand the latest cleaning systems technology utilized in its industry, so that we can provide a comprehensive proposal to our customer.
After such discussions with our customer, we will provide a proposal, which may include draft designs with suggestions on the technical specifications and materials to be used for the cleaning system. The technical specifications of any cleaning system largely depend on its intended use, type and desired outcome of our customer, including washing or rinsing frequency, spray rinse flow rate, drying speed, cleanroom standards, desired residual liquid or air particle count or non-volatile residual levels. It generally takes approximately one to two weeks for us to deliver a proposal to a customer, depending on the complexity of the design.
(4) Our sales team will provide a price quotation to our customers
After the proposal and the designs of the cleaning system have been finalized and confirmed by our customer, our R&D and engineering team will discuss the proposed requirements with our procurement team in order to provide a price quotation to our customer. The quotation will take into account the complexity of the cleaning system to be manufactured and sold, the cost of the relevant parts and materials and the expected duration of the project. It generally takes approximately one to two weeks for us to deliver a quotation to a customer, depending on the complexity of the design and the time required to source for and obtain quotations from our suppliers for certain parts and components.
(5) After receiving confirmation from our customer, we will prepare detailed drawings, 3D designs and/or model simulations
After the quotation has been accepted by our customer, our R&D and engineering team will prepare the designs and detailed drawings for fabrication, manufacture and assembly of the cleaning system. Depending on the nature of the project, we may also use our software systems to prepare design simulations to enable the customer to have a preview of the proposed cleaning system upon the request of the customer, and to demonstrate the feasibility and functionality of the design. It generally takes approximately one to two weeks for our R&D and engineering team to prepare such detail drawings and designs and/or model simulations for our customer.
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(6) Once the drawings and designs are finalized, we will procure the relevant parts, materials and components
Once the design and development plan for the cleaning system has been finalized, our R&D and engineering team will prepare the finalized list of relevant parts, materials and components required for the manufacturing and production process, which will then be handed over to our procurement team. Our procurement team will then proceed to source for and place orders for such parts, materials and components from our suppliers.
(7) Production and manufacturing
Generally, our production process begins with the fabrication of the outer enclosure or tank for the cleaning system or equipment while we wait for the necessary parts, materials and components to be delivered. Once we have the necessary supplies on hand, our engineering and technical support team manufactures and assembles the various modules and components, which will comprise the cleaning system or equipment based or the detailed drawings and designs.
Our JCS Facility is well-equipped for the fabrication, production, assembly and in-house testing of our cleaning systems and equipment. In particular, our JCS Facility is fitted with machines, which utilize the CNC manufacturing process for automated control of tools and machinery using pre- programmed computer software. We also have various machinery and tools at our JCS Facility which are used in the production and manufacturing of the modules and components of the cleaning systems, including laser cutting machines and welding machines. Once the various modules and components have been produced, they are sent to our sub-assembly and system integration units for assembly and implementation. Once the final product has been assembled and completed, we conduct in-house testing on the cleaning system or equipment prior to delivery to our customer.
A brief description of the flow of our production and manufacturing process of cleaning systems and equipment is set out as follows:
(a) Fabrication of outer body of the cleaning system or equipment
Once the design and development plan for the cleaning system or equipment has been finalized, our engineers and technical support team will commence the production and manufacturing process by starting the fabrication of the outer body, which is usually the structure, enclosure or tank for the cleaning system or equipment, mainly using stainless steel. Such fabrication of the outer body is done in-house using (a) laser cutting machines which cut the metal sheets; (b) hydraulic press brake machines which bend the metal sheets to form the shape of the enclosure or tanks; and (c) welding machines to join the material together by welding.
(b) Delivery of components, parts and materials which undergo quality checks
Once the relevant components, parts and materials required for the manufacture of the cleaning system and equipment have been delivered to our JCS Facility, our quality control team will conduct an inspection upon their arrival to determine whether such components, parts and materials conform to our quality standards and the requirements stated in our purchase orders, or whether there are any defects, dents or scratches.
(c) Production and manufacturing of modules and components
Once the relevant components, parts and materials have been inspected, we will proceed to produce and manufacture the cleaning system or equipment. Our engineers and technical support team will use the designs created for our customer to start fabrication of the cleaning system or equipment. The production and manufacturing process utilizes CNC machines for automated control of tools and machinery using pre-programmed computer software, thus minimizing the manual operation and labor required, and enabling us to manufacture each component more efficiently. Once the software program has been input, we will conduct a trial run to ensure that the cleaning system or equipment meets our customer’s requirements and specifications.
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The production and manufacturing processes for the modules and components of our cleaning systems and equipment include (a) laser cutting machines to cut metal sheets to form the machine cover and various parts required to assemble the cleaning system or equipment, such as brackets and air knives; (b) welding machines to weld together and assemble the fabricated tanks or enclosures with the various parts manufactured; and (c) machining tools to manufacture precision parts such as robotic arms.
(d) Sub-assembly and system integration of modules and components
Once each module and component has been manufactured, it is sent to our sub-assembly and system integration units for assembly and implementation. At this stage, the various manufactured modules and components are assembled together, together with the additional related parts such as pipings, pumps and filters, as well as the control panels and electrical wiring to establish the electrical connection for the cleaning systems and equipment. Certain modules and components will also undergo electropolishing prior to assembly to provide additional protection to their stainless steel surface.
At the sub-assembly stage, our engineers and technical support team also conduct quality checks on the functionality and performance of each cleaning system module and component.
(e) In-house testing of assembled cleaning systems and modules
Once the final product has been assembled and completed, the cleaning system or equipment is sent for in-house testing prior to delivery to our customer. Our technical support team will conduct functionality tests to ensure that the overall performance of the cleaning system or equipment is satisfactory and that none of the modules and components are malfunctional, perform in-house quality checks and ensure that the final product functions and performs in accordance with our customer’s order and specifications. A programmer will also check all the input/output points with an electrician, before conducting the program testing and testing the cleaning system or equipment for load and dryness.
(f) Delivery, implementation and inspection by our customer
After production, manufacturing and in-house testing have been completed, the cleaning system or equipment will be delivered to our customer’s designated location. Our technical support team will assist with the implementation of the cleaning system or equipment at our customer’s premises and assist our customer during any inspection or tests conducted. Our customers will typically use cleanliness testing devices, such as a liquid particle counter which is an analytical instrument used to size and count particles in a liquid, to verify that the cleaned item achieves the desired limit of post-cleaning residual contaminants and meets their standards. After our customer conducts its inspections or tests, it is required to sign on a checklist to acknowledge that the cleaning system was functional and met their technical specifications. If required, we will also provide on-site training to our customer on the use and maintenance of the cleaning system or equipment.
The lead time from confirmation of an order by our customer to delivery of the final product generally takes approximately eight to 18 weeks, depending on the complexity of the design and the component lead time.
Provision of Centralized Dishwashing Services
We provide centralized dishwashing services at our Hygieia Facility which has four semi- automated dishwashing lines, of which two are for washing Halal dishware and the other two are for washing non-Halal dishware.
A brief description of the flow of the centralized dishwashing process is set out as follows:
(1) Customers contact our sales team and inquire about our centralized dishwashing services or we may submit tenders to potential customers to bid for contracts
Generally, customers will approach us to inquire about the scope and fees for our centralized dishwashing services and request a quotation for such services. In addition, when suitable opportunities arise, we will also submit tenders to potential customers to bid for certain contracts.
Some customers may also request a quotation for general cleaning services for the food and beverage establishments, which will comprise both off-site centralized dishwashing services and on-site cleaning services. In such instances, we may request a quotation for such on-site cleaning services from our sub-contractors or may undertake such on-site cleaning services ourselves.
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(2) Our sales team conducts site visit at our customer’s premises and assesses the services required
Our sales team will conduct a site visit at the customer’s premises, to inspect the space and the logistical arrangements to be made for collection of the soiled dishware to our Hygieia Facility and delivery of the cleaned dishware from our Hygieia Facility.
(3) Our sales team will provide a price quotation to our customer. After receiving confirmation, we proceed with provision of centralized dishwashing services
Based on our customers’ requirements, our sales team will prepare a price quotation, which will take into account, among other things, (a) the size of the food and beverage establishment, number of seats and expected customer turnover, (b) frequency of collection and delivery of dishware on a daily basis; (c) whether thermo stickers are required; (d) whether the services of a third party logistics provider for collection and return of the dishware are required; and (e) whether the services of our sub-contractor for on-site cleaning services are required.
After the quotation has been accepted by our customer and the service contract has been entered into, we will proceed with the provision of centralized dishwashing services based on the agreed terms of the contract.
(4) We or a third party logistics services provider will collect and deliver the soiled dishware from our customer to our facility
On a daily basis, the soiled dishware will be placed in tubs and trolleys provided by us at our customer’s premises, with Halal dishware being separated from non-Halal dishware. Generally, we or a third party logistics services provider will collect the soiled dishware from our customer’s premises, which will be delivered to our Hygieia Facility, usually one to two times per day depending on the customers’ needs. Upon arrival at our Hygieia Facility, the soiled dishware will be unpacked from the tubs by our staff and food remnants will be removed, if necessary, before the dishware is placed onto the respective Halal and non-Halal semi-automated washing lines for washing, rinsing and blow-drying. The rinsing is performed with high temperatures to sanitize the dishware. In addition, our customers may also request that thermo stickers are placed on a random sample of dishware to ensure that the temperature during the dishwashing process is maintained at a certain minimum temperature for sanitization purposes.
The lead time from collection of the soiled dishware from our customer’s premises to completion of the dishwashing process takes approximately four to 12 hours, depending on the location of our customer’s premises and frequency of collection.
(5) Our team will perform quality checks, and any dishware that requires further washing will be put back onto the washing lines. Cleaned dishware will be packed for delivery
After the dishware has been washed, rinsed and dried, the cleaned dishware is inspected by our staff before it is packed for delivery back to our customer’s premises. If any of the dishware does not pass our quality checks, the dishware will be put back onto the washing lines for re-washing. Once the cleaned dishware has passed our quality checks, it will be packed into clean tubs and trolleys, and moved to the storage area at our Hygieia Facility and will be ready for delivery back to our customers’ premises according to the delivery schedule, usually one to two times per day depending on our customers’ needs.
(6) The cleaned dishware will be packed and delivered by us or the third party logistics services provider to our customer’s premises
At the scheduled time, we or our third party logistics services provider will pick up the cleaned dishware from our Hygieia Facility for delivery back to our customer’s premises.
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The lead time from the inspection and quality checks on the cleaned dishware to the delivery of the cleaned dishware back to our customers’ premises takes approximately three to 12 hours, depending on the delivery schedule for each customer.
Pricing Policy
In respect of the sale of cleaning systems and other equipment, we generally determine the price on a cost-plus basis for each cleaning system or equipment that we manufacture and produce as our cleaning systems are customized. The unit selling price and gross profit margin of each product may fluctuate significantly from order to order, depending on various factors and considerations, including but not limited to the following:
● complexity of the design, particularly for aqueous washing systems and train cleaning systems, as the cleaning systems may include different features and various modules, components and parts, such as ultrasonic wash and rinse stations, spray rinse stations, vacuum oven, cleaning stations with robotic transfer functions, washing baskets, pneumatic control systems, heaters, sensors and pumps;
● the type and availability of the components and materials, such as stainless steel or aluminum, used for the cleaning system or equipment, which would vary in terms of cost price and component lead time;
● technical requirements for the production, including whether the customer’s approval is required for any changes to the processes, products or services for the production and manufacturing process;
● size and dimensions of the cleaning system or equipment, including the overall machine dimension, tank dimension and the size and number of modules, components and parts installed;
● level and number of functionality tests to be conducted, including whether test reports and certificates are to be provided to the customer;
● the customer’s specifications for certain designated suppliers and/or sub-contractors to be used for the production and manufacture of the cleaning system;
● purchase quantity, as certain customers may place orders for more than one unit of the same cleaning system or equipment;
● timeline for the production and manufacture of the cleaning system or equipment;
● provision of installation, testing and commissioning services;
● provision of on-site training by our technical personnel for our customer’s employees; and
● the expected number of units to be placed by our customer in the future.
The selling price and the corresponding profit margin for each cleaning system or equipment which we manufacture and sell will depend on the above factors and considerations, and in particular, the complexity of the cleaning system or equipment to be manufactured and sold, the cost of the relevant parts and materials and the expected duration of the project. Complex aqueous washing systems and train cleaning systems which are generally larger in size and comprised of various modules, components and parts will require a longer time for our R&D and engineering team to prepare the detailed drawings, designs and/or model simulations and will also require a longer time for production and manufacture, with a corresponding increase in the cost of production and the number of relevant parts and materials. Less complex aqueous washing systems such as standalone cleaning machines will require a comparatively shorter time for design, production and manufacture, as well as lower cost of production. From a commercial perspective, our Group will usually quote an initial higher selling price taking into consideration the aforesaid factors and with reference to the range of selling prices for similar cleaning systems and equipment sold by our Group with an aim to maximizing our profit. During the price negotiation process, our Group will adopt different negotiation strategies for different customers and our pricing is affected by various factors, such as the budget and cost consciousness of the customer, size of the customer, our relationship with the customer, the customer’s specifications and requirements, the features and functions of each product and the needs of the customer. The final selling price for each cleaning system or equipment will be arrived at after arm’s length negotiation and largely dependent on the respective bargaining power of our Group and the customer.
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In respect of the sale of related parts used in our cleaning systems, we generally determine the price based on the selling price suggested by our suppliers or at a mark-up of our own costs.
In respect of the provision of centralized dishwashing services and general cleaning services, we generally charge our customers a fixed monthly fee which is determined with reference to factors such as the size, number of seats and expected customer turnover of the food and beverage establishment, frequency of delivery and collection of dishware on a daily basis, our costs of dishwashing (including staff costs, cleaning detergent costs and utilities costs), sub-contracting costs, logistic costs, expected costs to be incurred by our customers if they had the capacity and were to engage their own staff to wash the dishware, duration of the contract and the capacity and utilization rate of our dishwashing lines. We may charge our customers additional fees if extra services are required.
In respect of the dishwashing equipment leasing services, the rental of our dishwashing equipment to our customers is determined with reference to prevailing market rates. In respect of our wholesale sale of STICO anti-slip shoes, the prices are determined with reference to the suggested retail price under our distributorship arrangement and the purchase quantity.
Credit period and payment methods
In respect of the manufacture and sale of cleaning systems, depending on, among other things, the technical requirements, project amount and size, project costs, relationship with our customers and the credit period offered by our suppliers to our Group in respect of the materials and components used in the cleaning systems, our customers may be required to pay a deposit and settle the remaining purchase price upon delivery and acceptance of the product, according to the terms of the contract. In other cases, our customers are generally offered credit terms of 30 to 60 days from delivery. In respect of the sale of other equipment, our customers are generally offered credit terms of 30 to 45 days from the day on which the order is completed.
In respect of the sale of related parts used in our cleaning systems, our customers are generally offered credit periods ranging from 30 days to 60 days.
In respect of the provision of centralized dishwashing services and general cleaning services, our customers are generally offered credit terms of seven to 30 days upon the receipt of invoice. In respect of the provision of dishwashing equipment leasing services, our customers are generally offered credit terms of 30 days upon receipt of invoice.
Settlements with our customers who purchase cleaning systems and other equipment from us are mainly in S$ or US$ by way of check or telegraphic transfers. Settlements with our customers who use our centralized dishwashing services, general cleaning services and dishwashing equipment leasing services are mainly in S$ by way of check or telegraphic transfers.
Seasonality
Our Directors believe that both our sale of cleaning systems and other equipment operations and our provision of centralized dishwashing services and ancillary services operations are not subject to any seasonality.
Our Customers
During the fiscal years ended December 31, 2019, 2020 and 2021, our customers were from various industries, including HDD manufacturing, semiconductor manufacturing, food and beverage and public transportation. As of the date of this Annual Report, our customers continue to be from such various industries. Our cleaning systems and other equipment are mainly sold in Singapore and Malaysia, and we provided centralized dishwashing and ancillary services to customers in Singapore.
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Top five customers
For the years ended December 31, 2019, 2020 and 2021, our top five customers accounted for approximately 68.5%, 88.4% and 80.6% of our total revenue, respectively. Our Group’s largest customer accounted for approximately 28.8%, 61.5% and 32.7% of our total revenue, respectively, for the corresponding year. During the fiscal years ended December 31, 2019, 2020 and 2021 and up to the present, we have not experienced any material disputes with our customers.
The following table sets out information of our top five customers for the periods indicated below:
For the year ended December 31, 2019
| Customer | Country of Incorporation/ Establishment | Product/Services | Year of Commencement of Business Relationship | General Payments | Credit Terms | Transaction Amounts (SGD) | % of Total Sales | |||||||||||||
| Group B(1) | Malaysia and the United States | Cleaning systems | 2009 | 60 days | By check or telegraphic transfer | 5,244 | 28.8 | |||||||||||||
| Group E(4) | Taiwan, South Korea, Thailand and Belgium | Other equipment & related parts | 2008 | 45 days | By check or telegraphic transfer | 2,368 | 13.0 | |||||||||||||
| Group D(3) | Singapore | General cleaning services & leasing of dishwashing equipment | 2016 | 7 to 30 days | By check or telegraphic transfer | 2,029 | 11.1 | |||||||||||||
| Group C(2) | Singapore | Centralized dishwashing & general cleaning services, repair & servicing of cleaning systems | 2015 | 30 days | By check or telegraphic transfer | 1,672 | 9.2 | |||||||||||||
| Group F(5) | Singapore | Centralized dishwashing & general cleaning services, repair & servicing of cleaning systems | 2015 | 30 or 60 days | By check or telegraphic transfer | 1,166 | 6.4 | |||||||||||||
| TOTAL | 12,479 | 68.5 | ||||||||||||||||||
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For the year ended December 31, 2020
| Customer | Country of Incorporation/Establishment | Product/Services | Year of Commencement of Business Relationship | General Payments | Credit terms | Transaction amounts (SGD) | % of Total Sales | |||||||||||||
| Group B(1) | Malaysia, the United States and PRC | Cleaning systems | 2009 | 60 days | By check or telegraphic transfer | $ | 13,163 | 61.5 | ||||||||||||
| Group E(4) | Taiwan, South Korea, Thailand, Belgium and the United States | Other equipment & related parts | 2008 | 45 days | By check or telegraphic transfer | $ | 2,361 | 11.0 | ||||||||||||
| Group C(2) | Singapore | General cleaning services & leasing of dishwashing equipment | 2015 | 30 days | By check or telegraphic transfer | $ | 1,395 | 6.5 | ||||||||||||
| Group D(3) | Singapore | General cleaning services & leasing of dishwashing equipment | 2016 | 7 to 30 days | By check or telegraphic transfer | $ | 1,230 | 5.8 | ||||||||||||
| Group F(5) | Singapore | Centralized dishwashing & general cleaning services, repair & servicing of cleaning systems | 2015 | 30 or 60 days | By check or telegraphic transfer | $ | 765 | 3.6 | ||||||||||||
| TOTAL | $ | 18,914 | 88.4 | |||||||||||||||||
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For the year ended December 31, 2021
| Customer | Country of Incorporation/Establishment | Product/Services | Year of Commencement of Business Relationship | General Payments | Credit Terms | Transaction Amounts (SGD) | % of Total Sales | |||||||||||||
| Group B(1) | Malaysia and the United States | Cleaning systems | 2009 | 60 days | By check or telegraphic transfer | $ | 4,833 | 32.7 | ||||||||||||
| Group E(4) | South Korea, Thailand, Belgium and the United States | Other equipment & related parts | 2008 | 45 days | By check or telegraphic transfer | $ | 3,188 | 21.6 | ||||||||||||
| Group D(3) | Singapore | General cleaning services & leasing of dishwashing equipment | 2016 | 7 to 30 days | By check or telegraphic transfer | $ | 1,188 | 8.0 | ||||||||||||
| Group C(2) | Singapore | General cleaning services & leasing of dishwashing equipment | 2015 | 30 days | By check or telegraphic transfer | $ | 1,441 | 9.8 | ||||||||||||
| Group G(6) | Singapore | Centralized dishwashing & general cleaning services | 2015 | 30 days | By telegraphic transfer | $ | 1,254 | 8.5 | ||||||||||||
| TOTAL | $ | 11,904 | 80.6 | |||||||||||||||||
(1) Four of the entities in Customer Group B, which are principally engaged in the manufacture of HDD, were our customers for the years ended December 31, 2019, 2020 and 2021, respectively. The ultimate holding company of Customer Group B is headquartered in the United States with international offices, and is listed on Nasdaq.
(2) Three, four and four of the entities in Customer Group C, all of which are principally engaged as operators of food courts and retail malls or health and eldercare service providers, were our customers for the years ended December 31, 2019, 2020 and 2021, respectively. The holding entity of Customer Group C is headquartered in Singapore.
(3) Two of the entities in Customer Group D, which are principally engaged as operators of food courts, were our customers for the years ended December 31, 2019, 2020 and 2021, respectively. The shares of Customer Group D’s parent company were listed on the Mainboard of the Singapore Exchange Securities Trading Limited prior to June 5, 2020. The company is now privatized.
(4) Four, five and four entities in Customer Group E, which are principally engaged in the provision of engine and industrial solutions, were our customers for the years ended December 31 2019, 2020 and 2021, respectively. The ultimate holding company of Customer Group E is headquartered in the United States with international offices, and is listed on the New York Stock Exchange.
(5) Four entities in Customer Group F, which are principally engaged as ground-handling and in-flight catering services providers, were our customers for the years ended December 31 2019, 2020 and 2021. The parent company of Customer Group F is headquartered in Singapore and is listed on the Mainboard of the Singapore Exchange Securities Trading Limited.
(6) One entity in Customer Group G, which is principally engaged as an operator of food courts, was our customer for the year ended December 31, 2021. The company is headquartered in Singapore and is listed on the Mainboard of the Singapore Exchange Securities Trading Limited.
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Competitive Strengths
Long and proven track record in precision cleaning in Singapore
We have been providing cleaning systems to our customers for over 13 years and have accumulated extensive industry experience. We believe our strong R&D and engineering capabilities enable us to design, develop and manufacture quality precision cleaning systems and other cleaning systems for various industrial end-use applications, which are customized to each of our customers’ needs.
In April 2018, JCS was awarded the Singapore Quality Class Certification by Enterprise Singapore, which validates JCS’s commitment towards continuous improvement and sustainable business performance and commendable management practices. The management system of JCS has also been assessed as conforming to ISO 9001: 2015 and ISO 45001: 2018 for design, manufacture, supply, installation and serving of integrated cleaning systems.
We believe our strong track record in precision cleaning will facilitate the promotion and demand for our products with both existing and new customers, as well as the expansion of our business. We will continue to develop products for different industrial end-use applications and to meet the needs of our customers across various industries by expanding our product portfolio.
Stable relationships with our major customers
Since 2006, we have developed stable relationships with our major customers and we believe that our engineering know-how and ability to design, develop and manufacture customized cleaning systems to meet our customers’ requirements and specifications and our ability to provide centralized dishwashing services have been the key drivers for them to appoint us as their suppliers over the years.
We have maintained stable business relationships with a majority of our major customers. During the fiscal years ended December 31, 2019, 2020 and 2021, our top five customers included renowned HDD manufacturers, a public transportation operator and food and beverage establishment operators in Singapore, three of which have more than 10 years of business relationships with us. As of the date of this Annual Report, our customers continue to be from such various industries. We believe that certain customers, such as multinational corporations, may have stringent selection processes for their suppliers and we have had to meet certain criteria and audit checks before becoming an approved qualified supplier.
Experienced R&D and engineering team
We have an experienced R&D and engineering team led by Mr. Zhao Liang, who is also a member of our senior management team. Our Directors believe that our Group has strong in-house R&D and engineering capabilities to design high quality precision cleaning systems and other cleaning systems customized to meet the standards and particular needs of our customers, including HDD, semiconductors and industrial electronic equipment/product manufacturers. As of the date of this Annual Report, our R&D and engineering team has 11members, six of whom have obtained a bachelor’s degree in engineering.
With our strong R&D and engineering team, we are able to design and develop customized cleaning systems catered to our customers’ requirements and specifications. Against the backdrop of Industry 4.0 and an increasing demand for digitized and automated machinery in the manufacturing space, we have entered into collaborations with a customer, as well as other parties, to develop new customized cleaning solutions. In addition to previously co-developing a high performance dryer with one of our customers, we have also developed an initial prototype of a robot floor scrubber, which comprises a robotic enhancement that can be attached to floor cleaning equipment, which will then enable such floor cleaning equipment to be used without manual operation. Following from this, we have entered into a collaboration with a statutory board whose functions and duties include the management and operation of the segment of the public transportation system in Singapore (“Collaboration Partner”) to co-develop an autonomous train interior cleaning robot, which is capable of cleaning the floor of the interior of public trains autonomously based on the train type and car configuration. Our Directors believe that such customized cleaning systems and collaborations demonstrate our customers’ belief in the strength of our R&D and engineering capabilities.
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Experienced management team
We have an experienced management team, led by Ms. Hong, our Chairman, executive Director, chief executive officer and founder, who has been instrumental in spearheading the growth of our Group. Ms. Hong has over 16 years of experience in the cleaning solutions industry in Singapore and she is primarily responsible for planning and execution of our Group’s business strategies, including product development, as well as managing our Group’s relationships.
Our Group is supported by a senior management team with substantial experience in the cleaning solutions industry. Our senior management team includes members such as Mr. Zhao Liang, who is the head of our R&D and engineering team and has over 13 years of experience in the precision cleaning equipment industry.
For details of the profiles of the senior management team, please refer to “Management” in this Annual Report.
Business Strategies
We intend to expand our business and strengthen our market position in the cleaning systems industry in Singapore, Malaysia and other countries and in the centralized dishwashing services industry in Singapore by implementing the following business strategies and future plans.
Expand our product portfolio and R&D and engineering team
We believe that our R&D capabilities and engineering expertise are vital in maintaining our long-term competitiveness and driving our business growth. According to the Euromonitor Report, Industry 4.0 is the current trend for automation of industrial manufacturing and it has been an ongoing process in Singapore. As part of the Industry 4.0 initiatives, the Singapore government has allocated investment in R&D projects that speed up industry transformation projects to help local manufacturers undergo the industry transformation. Such ongoing initiatives help create the demand for both digitized and automated machinery in the manufacturing space.
(1) Expand our product portfolio
We have a long track record in the manufacture and sale of precision cleaning systems and other equipment and we are committed to continuing to increase our R&D and engineering capabilities so as to align ourselves with the Industry 4.0 initiatives and to cope with the continuously increasing standards and requirements of our customers. Going forward, against the backdrop of Industry 4.0, we expect an increase in demand for total automation products and solutions and we intend to leverage on our established reputation and engineering know-how, as well as industry expertise to capture opportunities arising therefrom. In this regard, we intend to further grow our automated cleaning systems and equipment business by expanding our product portfolio and developing cleaning systems which can be used across various industries for industrial and/or commercial uses.
To expand our product portfolio and as part of our R&D efforts, we have developed an initial prototype of a robot floor scrubber, which comprises a robotic enhancement that can be attached to floor cleaning equipment, which will then enable such floor cleaning equipment to be used without manual operation. The development of this initial prototype led us to enter into a collaboration with our Collaboration Partner, to co-develop an autonomous train interior cleaning robot which is capable of cleaning the floor of the interior of public trains autonomously based on the train type and car configuration. Our Group intends to further develop, build on and customize our initial prototype of a robot floor scrubber to develop an autonomous train interior cleaning robot, which can operate in the required space and configuration of public trains, for the collaboration with our Collaboration Partner.
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Pursuant to the terms of the collaboration, the collaboration was initially agreed to be for a period of 12 months from April 30, 2019. We agreed with our Collaboration Partner to extend the timeline and in-house testing of the functions of the parts and components of the prototype of the autonomous train interior cleaning robot was conducted in the second and third quarters of 2020. On August 13, 2021, we conducted the final on-site testing of the autonomous train interior cleaning robot at the train depot and submitted the final progress and project report to our Collaboration Partner.
Under the terms of the collaboration, our Group provides in-kind contribution by undertaking the agreed scope of work to develop the autonomous train interior cleaning robot, which includes conducting the engineering study and data collection, prototyping and system testing, whereas our Collaboration Partner provides the monetary funding. The total value of the project is S$350,000. As of June 30, 2021, we had incurred approximately S$272,000 of investment cost for development of the autonomous train interior cleaning.
Further, under the terms of the collaboration, the intellectual property rights developed jointly by the parties in the course of the project belong to our Group (save for those developed solely by any party or its personnel without contribution from the other party, which shall be the sole and exclusive property of such party). In addition, we grant our Collaboration Partner an irrevocable, non-exclusive, royalty-free perpetual license to use the intellectual property for certain purposes, including non-commercial, research, development and academic purposes. Accordingly, the intellectual property and design of the autonomous train interior cleaning robot developed by our Group under the project can be further customized for other uses in the future, including for commercial sale and use in other industries.
We believe that this collaboration to develop a new and technologically-advanced cleaning system demonstrates our Collaboration Partner’s belief in the strength of our R&D and engineering capabilities. Our Group intends to develop and commence commercial sale of the autonomous train interior cleaning robot during the third quarter of 2022. Our initial customer operates train lines covering over 148 kilometers of rail tracks across 106 stations with more than 250 trains in Singapore. Total ridership of its trains amounted to approximately 830 million in 2019. Furthermore, we have an existing business relationship with this customer, our Group’s largest customer for the year ended December 31, 2018. The sale of cleaning systems used for the cleaning of train exteriors to this customer accounted for approximately 19.1% of our total revenue for that year. The sales to this customer during the fiscal years ended December 31, 2019, 2020 and 2021 were not related to such collaboration for the autonomous train interior cleaning robot. We believe the extensive operations of this customer will provide ample demand for the commercial sale of the autonomous train interior cleaning robot.
Following the development and commercial sale of such autonomous train interior cleaning robot for the public transportation industry, we intend to leverage on our know-how from the design and development of the autonomous train interior cleaning robot to expand our product portfolio by further developing autonomous robot floor scrubbers of varying sizes and functionalities to cater to potential customers in other industries, including industrial properties (such as manufacturing facilities, factories and offices), commercial properties (such as medical centers, shopping malls, commercial buildings and hotels) and food and beverage establishments (such as food courts and hawker centers). Our Directors believe that as such properties are typically larger in size, with higher footfall and/or more stringent requirements for hygiene and cleanliness, such industrial and commercial properties are more likely to require automated cleaning equipment in order to reduce the manpower required for cleaning, given that cleaning is labor-intensive in nature, and to ensure consistency in the standards of cleanliness. Our Group expects to develop and commence commercial sale of the autonomous robot floor scrubbers for industrial properties, commercial properties and food and beverage establishments by the second half of 2022 . While our Group has not yet commenced the development and/or marketing of such autonomous robot floor scrubbers for such potential customers, we believe that the increasing awareness of hygiene standards and the growth in demand for total automation products and solutions as well as the increasing labor cost in Singapore will drive the demand for our Group’s autonomous robot floor scrubbers in the future.
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In particular, we believe that we will be able to market and sell the autonomous robot floor scrubbers to our existing customers in the food and beverage industry for our centralized dishwashing and ancillary services, given that such customers are already using our products and services to automate the dishwashing process at their respective food and beverage establishments and commercial properties. There is a push by the Singapore government for Industry 4.0 initiatives to elevate productivity in the food and beverage services sector, including the introduction of centralized dishwashing services at hawker centers, allocating investment into R&D projects that speed up industry transformation projects and strengthening the workforce’s skillsets, to boost productivity in the face of manpower challenges in the food and beverage industry. In light of the fact that such push will drive growth in the dishwashing cleaning sector, our Directors believe that there also will be a corresponding increase in demand for other automation cleaning products and solutions by food and beverage establishments. On the other hand, our existing customers, such as cookhouses, eldercare homes and hospitals for which we have provided centralized dishwashing and ancillary services, may become our potential customers for the sale and marketing of the autonomous robot floor scrubbers in the future.
We believe that we can leverage on our existing customer base to market and sell the autonomous robot floor scrubbers in place of or to supplement our on-site cleaning services, while still retaining the customer base for our centralized dishwashing services. We believe that there will be sufficient demand for the autonomous robot scrubbers, which will also reduce our reliance on third party sub-contractors given that our on-site cleaning services are generally outsourced to third party sub-contractors in order to focus our resources on our core competencies, and therefore the autonomous robot scrubbers will not cannibalize our general cleaning services business. The autonomous robotic cleaning equipment industry is relatively new in Singapore. This is seen as a potential solution for the labor squeeze in Singapore’s cleaning force, especially for the commercial property and food and beverage cleaning sectors. Since the industry was still in its fast-growing stage in 2021, with a strong push due to the COVID-19 pandemic which increased the demand for unmanned cleaning solutions for commercial properties and public spaces in Singapore, the overall industry is expected to grow at a CAGR of 30.5% from 2021 to 2025. With the launch of grants and incentives to companies for adoption of the technology (for example, the Ministry of Education of Singapore has put out a tender to have these cleaning robots in schools), the growth of the industry is supported by the Singapore government. It is also expected that there will be further advancement in cloud infrastructure, artificial intelligence and 5G that will make the robots more attractive and cost competitive. Accordingly, we believe that there will be sufficient market demand for the commercial sale of the autonomous robot floor scrubbers for the public transportation, food and beverage and other industries.
We intend to leverage on our know-how from the design and development of the autonomous train interior cleaning robot to acquire the necessary components and parts and engage in R&D efforts in order to further develop, refine, test and adapt the autonomous robot floor scrubbers of varying sizes and functionalities for commercial sale and use in other industries. We intend to utilize the net proceeds from our initial public offering to develop, refine, test and adapt the autonomous robot floor scrubbers of varying sizes and functionalities, including autonomous robot floor scrubbers for industrial properties, commercial properties and food and beverage establishments. Such amount is expected to be sufficient to do so as it is not intended that the net proceeds from this offering will be used for the commercial production and manufacture of such autonomous robot floor scrubbers.
Expected cost of expanding our product portfolio by further developing, refining, testing and adapting our autonomous robot floor scrubbers for commercial sale and use in other industries (S$’000):
| Industrial design and mechanical engineering | 150 | |||
| Production tooling cost for plastic enclosure | 80 | |||
| Production cost for mechanical enclosure and structure components | 620 | |||
| Total | 850 |
We believe our engineering know-how is the key to our success and we plan to increase our R&D efforts in order to support the expansion of our product portfolio and strengthen our competitive edge. Accordingly, we intend to utilize part of the net proceeds from our initial public offering to increase our manpower by hiring at least three engineers for our R&D and engineering team.
(2) Strengthen our production capability for cleaning systems and other equipment
There is expected growth at a CAGR of approximately 10.7% from 2021 to 2025 in respect of the manufacture of precision cleaning equipment in Singapore. The growth will largely be driven by the expansion in the electronics sector in Singapore. We strive to leverage on this upward trend so as to strengthen our market presence in the cleaning equipment manufacturing industry by taking on more projects. Our ability to strengthen our production capabilities and expand our product portfolio, as well as take on more projects concurrently is dependent on, among other things, us having sufficient and quality machinery and equipment. We intend to achieve this by purchasing upgraded or new production machinery and equipment for our JCS Facility.
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Accordingly, we intend to utilize part of the net proceeds from our initial public offering to acquire the following machinery and equipment to replace the existing ones used at our JCS Facility:
● new vertical machining center to replace the existing one used at our JCS Facility which has fully depreciated and is past its useful life. Such new vertical machining center will be equipped with an automatic workpiece measurement system and higher spindle speed, and thus will have better accuracy and a higher cutting rate of up to 20 meters per minute, which will improve the machining process with 40% higher efficiency, hence increasing the production capacity by about 40%; and
● new CNC lathe machine to replace the existing one used at our JCS Facility which has fully depreciated and is past its useful life, which will improve the turning process with higher efficiency and productivity. The new CNC lathe machine will be equipped with higher spindle motor power to machine tougher materials and achieve a cutting speed 30% faster than our existing machine, hence increasing the production capacity by about 30%.
We do not currently have a laser welding machine or a wire cutting machine at our JCS Facility. Accordingly, we intend to utilize part of the net proceeds from this offering to acquire the following machinery which have better features and functions to strengthen our production capabilities:
● laser welding machine, which will enhance quality finishing and high precision welding application as the laser beam permits accurate micro-welding of a wide range of metals and miniature components such that the parts have minimal deformity or distortion, hence increasing the production capacity by 100%; and
● wire cutting machine, which will increase our engineering capability as such wire cutting machine is able to cut workpieces of up to 100 mm thickness and is able to produce 16 times higher output compared to laser cutting technology, with higher precision accuracy of within 0.005 mm. A wire cutting machine is also able to achieve better surface finishing and will improve productivity as fewer secondary processes are required to finish the workpieces and reduce our dependency on sub-contractors, hence increasing our production capacity by 100%.
In addition, we intend to utilize part of the net proceeds from our initial public offering to purchase an additional laser cutting machine with an updated software system, which will reduce our dependency on sub-contractors for the cutting of workpieces and increase our productivity by 100%, reducing the outsourcing lead time and sub-contracting costs.
Further, we typically outsource the cutting of thicker steel plates to our subcontractors and the new wire cutting machine and the additional laser cutting machine we intend to acquire will enable us to undertake a larger quantity of workpieces in-house and will allow us to reduce the sub-contracting lead time and costs. The aggregate sub-contracting fees paid by us for the cutting of steel plates amounted to approximately S$0.4 million, S$0.8 million and S$0.3 million for the years ended December 31, 2019, 2020 and 2021, respectively. We believe that being able to undertake the cutting of a larger quantity of steel plate in-house and reducing the sub-contracting lead time will improve our production efficiency and allow us to have better quality control during the production process.
We believe that the above machinery and equipment with new technologies will enhance our production capabilities and enable our Group to venture into potential industries such as medical equipment, aerospace and life sciences industries, which generally require higher level of precision cleaning standard. Ownership of such machinery and equipment will also enable us to have greater control over the upkeep and maintenance, as compared to outsourcing which is usually subject to the availability of the required machinery or equipment from suppliers or sub- contractors and/or quality or maintenance issues. Possessing such machinery and equipment will also reduce our sub-contracting costs, the lead time for our production and manufacturing process, as well as mitigate potential increases in such expenses.
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Real Property
A description of our leased real properties is below:
| Location | Usage | Lease period | Annual Rent (SGD) | Approximate gross floor area (sq. ft.) | ||||||||
| JCS Facility 3 Woodlands Sector 1 Singapore 738361 | Manufacturing facility and office | To November 15, 2027, with a further term of 30 years from expiry | 36,759 | 31,223.9 | ||||||||
| Hygieia Facility 17 Woodlands Sector 1 Singapore 738354 | Centralized dishwashing facility and office | To March 15, 2044 | 52,020 | 34,276.7 | ||||||||
Production capacity and utilization rate
JCS Facility
It is difficult to quantify the production capacity and utilization rates of our JCS Facility as the cleaning systems and other equipment manufactured by us at our JCS Facility are customized depending on our customers’ specific requirements, and are therefore of varying sizes, scale and capacity. Our JCS Facility is fitted with various types of machinery and equipment and the manufacturing process for each cleaning system utilizes different types of machinery and equipment with different components, parts and materials. The production and manufacturing process will also vary between orders, depending on the complexity of design and component lead time. We periodically monitor the overall usage and capacity of the machinery and equipment at our JCS Facility.
The following table sets forth the average utilization rates of certain major machinery and equipment used at our JCS Facility in respect of the production and manufacture of cleaning systems and other equipment during the fiscal years ended December 31, 2019, 2020 and 2021:
| Year ended December 31, | ||||||||||||
| 2019 | 2020 | 2021 | ||||||||||
Average utilization rate(1)(2) (%) | Average utilization rate(1)(2) (%) | Average utilization rate(1)(2) (%) | ||||||||||
| CNC lathe machine | 136.3 | 122.1 | 103.5 | |||||||||
| Laser cutting machine | 140.3 | 121.6 | 112.5 | |||||||||
(1) For illustration purposes only, the utilization rate is calculated by dividing the number of hours of usage of the relevant machine per year by the number of operating hours of our JCS Facility for the same financial year, which is calculated based on the assumption that there are 8.5 operating hours on weekdays and 3.5 operating hours on Saturdays per working day.
(2) While the utilization rates may serve as proxies for the overall utilization rates of our JCS Facility, the production and manufacturing process for our cleaning systems will vary among orders, depending on the type of machinery and equipment utilized, the components, parts and materials required, complexity of design and component lead time. The usage time of the machines includes engineering work and machining work (i.e. cutting). Engineering work includes machine set up and pre-programming for laser cutting and machining, and jig and fixture preparation.
The average utilization rates of the above machinery and equipment used at our JCS Facility generally exceeded 100% as these machines have been operated past the normal operating hours of our JCS Facility in order to fill our orders for the cleaning systems and other equipment based on contract requirements. The average utilization rates were slightly lower in the year ended December 31, 2020, as compared to the year ended December 31, 2019, as our Group’s operations were restricted due to the safe distancing measures implemented from time to time by the Singapore government to pre-empt the trend of increasing local transmission of COVID-19, which resulted in lower average utilization rates for the affected months. The average utilization rates were lower in the year ended December 31, 2021, as compared to the year ended December 31, 2020, corresponding with the decrease in orders for cleaning systems completed in 2021. Other than the foregoing, there were no material fluctuations in the utilization rates for the above machinery and equipment during the fiscal years ended December 31, 2019, 2020 and 2021. As of the date of this Annual Report, there have been no material fluctuations in the utilization rates for the above machinery and equipment. For further details of the impact of COVID-19 on our business and operations, please refer to the paragraph headed “Business — Impact of COVID-19 on our business and operations” in this Annual Report.
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Notwithstanding that the average utilization rate of the aforesaid machinery and equipment at our JCS Facility generally exceeded 100% during the fiscal years ended December 31, 2019, 2020 and 2021, our directors are of the view that our JCS Facility has sufficient capacity to process the orders for cleaning systems and other equipment for at least the next 12 months for the following reasons:
● during the production process, the most time-consuming process is engineering. Engineering work includes machine set up and pre-programming for laser cutting and machining, and jig and fixture preparation. All the above work could generally take more than 60% of the machine’s total production lead time. The average production lead time for the production and manufacturing of bulk orders for the same cleaning system/module is shorter as less time is required to use the relevant machinery and equipment for the aforesaid engineering work. In general, our Group can reduce the engineering process time of the subsequent units by about 90% as compared to the first machine built; and
● the operating hours of our JCS Facility may be increased from time to time in order to meet the delivery schedule of the orders for cleaning systems and other equipment as needed.
As part of our Group’s business plan, we contemplate acquiring a new CNC lathe machine to replace the existing one used at our JCS Facility in the first half of 2022. The new CNC lathe machine will be equipped with higher spindle motor power to machine tougher materials and achieve a cutting speed 30% faster than the existing machine. Accordingly, it is expected that such new CNC lathe machine will have an increased production capacity of about 30% as compared to the existing machine. In addition, our Group contemplates acquiring an additional laser cutting machine in the second half of 2022, which is expected to increase the capacity by 100%. For further details of our Group’s expansion plan, please refer to the paragraph headed “Business strategies — Strengthen our production capability for cleaning systems and other equipment” in this Annual Report.
The utilization rates of the CNC lathe machine and the laser cutting machine are calculated based on 8.5 operating hours on weekdays and 3.5 operating hours on Saturdays per working day. In the event that the current hours of usage cannot meet the demand, our Directors will consider adding one or two more shifts on weekdays, and/or increase the number of working hours on weekends to increase the production capacity of the CNC lathe machine and the laser cutting machine to meet the production schedule.
The production floor at our JCS Facility has a total usable floor area of approximately 1,470.1 square meters, approximately 78.2% of which has been utilized by the existing machinery and equipment. As we intend to acquire five new machinery and equipment, including a new vertical machining center and a new CNC lathe machine to replace the existing ones which have fully depreciated, the total estimated usable floor area which will be utilized by our machinery and equipment will be 1,219.4 square meters, representing approximately 83.0% of the total usable floor area of the production floor of our JCS Facility.
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Hygieia Facility
The processing capacity and utilization rates of our Hygieia Facility in respect of our provision of centralized dishwashing services during the fiscal years ended December 31, 2019, 2020 and 2021 are as follows:
| For the year ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2019 | 2020 | 2021 | ||||||||||||||||||||||||||||||||||
Actual annual processing (tubs) | Annual processing capacity(1) (tubs) | Average daily utilization rate(2) (%) | Actual annual processing (tubs) | Annual processing capacity(1) (tubs) | Average daily utilization rate(2) (%) | Actual annual processing (tubs) | Annual processing capacity(1) (tubs) | Average daily utilization rate(2) (%) | ||||||||||||||||||||||||||||
| Halal semi-automated washing line A | 125,468 | 148,010 | 84.8 | 84,257 | 148,010 | 56.9 | 91,289 | 148,010 | 61.7 | |||||||||||||||||||||||||||
| Halal semi-automated washing line B | 153,112 | 214,614 | 71.3 | 95,237 | 214,614 | 44.4 | 78,119 | 214,614 | 36.4 | |||||||||||||||||||||||||||
| Non-Halal semi-automated washing line C | 262,983 | 310,821 | 84.6 | 175,930 | 310,821 | 56.6 | 196,110 | 310,821 | 63.1 | |||||||||||||||||||||||||||
| Halal semi-automated washing line D | 119,995 | 155,410 | 77.2 | 45,695 | 155,410 | 29.4 | 69,157 | 155,410 | 44.5 | |||||||||||||||||||||||||||
(1) For illustration purposes only, the processing capacity is determined by identifying the maximum number of tubs (which will contain the soiled dishware) we can wash per year. In this regard, the processing capacity is calculated based on the following assumptions: (a) 20.5 operating hours per working day (excluding equipment cleaning time and workers’ lunch break); and (b) 361 working days each year for the years ended December 31, 2019, 2020 and 2021 (excluding the holidays and regular maintenance).
(2) For illustration purposes only, the utilization rate is calculated by dividing the actual processing volume by the processing capacity for the same financial year, which is calculated based on the assumptions as set out above.
There was a general decrease in the utilization rates of the washing lines at our Hygieia Facility for the year ended December 31, 2020 as (i) there were reductions in fees in respect of our centralized dishwashing services from April to December 2020; (ii) lower footfall and demand for dine-in services at our customers’ food and beverage establishments due to the outbreak of COVID-19 and hence, lower volume of soiled dishware from our customers, even after dine-in services resumed; (iii) the agreements with one of our customers for the provision of centralized dishwashing services at five locations expired pursuant to the terms thereof; and (iv) two of our customers terminated our centralized dishwashing services. Please refer to the paragraph headed “Business — Impact of COVID-19 on our business and operations” in this Annual Report for further details.
There was a general increase in the utilization rates of the washing lines at our Hygieia Facility for the year ended December 31, 2021 as (i) fees for our centralized dishwashing services were increased; (ii) there was higher footfall and demand for dine-in services at our customers’ food and beverage establishments as a result of the resumption of dine-in services, which resulted in a higher volume of soiled dishware from our customers; and (iii) 16 additional customers contracted for our centralized dishwashing services.
Due to the nature of the food and beverage industry, diners usually finish their meals at approximately the same time and thus, customers of our centralized dishwashing services business generally require the soiled dishware to be washed and returned to their food and beverage establishments during the day and particularly after mealtimes, with the peak hours being from 3:30 p.m. to 9:30 p.m. on weekdays, even though our Hygieia Facility operates in three shifts and 20.5 hours per day. Thus, the average utilization rate of the Halal and non-Halal washing lines at our Hygieia Facility during peak hours reaches their full capacity of 100%. The utilization rate during the peak hours was calculated based on the number of tubs washed divided by the processing capacity of the respective washing lines. The utilization rates during peak hours reaches their full capacity of 100% as we have more tubs arriving at our Hygieia Facility than we can process during peak hours.
Impact of COVID-19 on our business and operations
Singapore Control Order Regulations
On April 3, 2020, the Multi-Ministry Taskforce of the Singapore government implemented an elevated set of safe distancing measures to pre-empt the trend of increasing local transmission of COVID-19 from April 7, 2020 (“Circuit Breaker Measures”). On April 7, 2020, the Singapore Parliament passed the COVID-19 (Temporary Measures) Act 2020 (“COVID-19 Act”) which provides the Singapore Government the legal basis to enforce the Circuit Breaker Measures, and the COVID-19 (Temporary Measures) (Control Order) Regulations 2020 (“Control Order Regulations”) under the COVID-19 Act to implement the Circuit Breaker Measures. The Control Order Regulations impose restrictions on premises and businesses in relation to the closure of premises and respective controls on essential and non-essential service providers, and the movement of people, both in public places and in places of residence. The Control Order Regulations require the closing of most physical workplace premises and suspending all business, social and other activities that cannot be conducted through telecommuting from home, save for those providing essential services and in selected economic sectors which are critical for local and global supply chains (“Essential Services”). Entities providing Essential Services were required to operate with the minimum number of staff on their premises to ensure the continued running of those services, and implement strict safe distancing measures. The Control Order Regulations could be varied or extended, depending on the assessment of the then situation by the Singapore government. The Circuit Breaker Measures were imposed under the Control Order Regulations during the period between April 7, 2020 and June 1, 2020.
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On May 19, 2020, the Multi-Ministry Taskforce announced that the Circuit Breaker Measures would end on June 1, 2020 and the Multi-Ministry Taskforce would embark on a controlled approach to resume economic and community activities and progressively lift the relevant control measures in place after June 1, 2020 over three phases, with the first phase to be implemented with effect from June 2, 2020. The three phases were (a) a “Safe Re-opening” phase, implemented from June 2, 2020 to June 18, 2020 (inclusive), where economic activities that do not pose high risk of transmission (“Permitted Services”) were resumed while social, economic and entertainment activities that carry higher risk remained closed, and everyone was advised to continue to leave home only for essential activities and to wear a mask when doing so (“Phase 1”); (b) a “Safe Transition” phase with the gradual resumption of more activities including the re-opening of more firms and business (“Permitted Enterprises”), subject to safe management measures being implemented and practiced by employers and employees in these workplaces and their ability to also maintain a safe environment for their customers and social activities in small groups of not more than five persons, which were implemented with effect from June 19, 2020 (“Phase 2”); and (c) a “Safe Nation” phase, implemented with effect from December 28, 2020, whereby social, cultural, religious and business gatherings or events were resumed, although gathering sizes still had to be limited in order to prevent large clusters from arising, and services and activities that involve significant prolonged close contact or significant crowd management risk in an enclosed space also were allowed to be re-opened, subject to their ability to implement strict safe management measures effectively (“Phase 3”).
Between May 16, 2021 and August 6, 2021, the Singapore government introduced two phases, namely the Phase 2 (Heightened Alert) and Phase 3 (Heightened Alert), along with the easing of certain measures within each of such phases. In summary, the Phase 2 (Heightened Alert) measures which were in effect from May 16, 2021 to June 13, 2021, included reductions in prevailing social gathering group size, sizes of larger scale events or activities and reinstatement of “work-from-home” as the default at workplaces to minimize workplace interactions, and the Phase 3 (Heightened Alert) measures, which were in effect from June 14, 2021 to July 19, 2021, was contemplated as a calibrated reopening and included increases in social gathering group sizes, event size and capacity limits, and subsequently the resumption of dining in at food and beverage establishments. On July 20, 2021, the Singapore government announced the reversion back to Phase 2 (Heightened Alert) measures from July 22, 2021 to August 18, 2021 which superseded the measures introduced on July 19, 2021, during which “work from home” remained the default, employers who needed staff to return to workplaces were required to ensure that there was no cross-deployment at various worksites, enforce staggered start times and flexible working hours and social gatherings at workplaces were not allowed.
On August 6, 2021, the Singapore government announced the easing of some safe management measures, with the first phase to take effect on August 10, 2021 and the second phase to take effect on August 19, 2021, which superseded those introduced on July 22, 2021 as part of Singapore’s transition towards COVID-19 resilience. The eased measures allowed for an increase in social gathering group size, event size and capacity limits for fully vaccinated individuals and easing of “work-from-home” requirements. A further easing of community measures was announced on August 19, 2021. Subsequently, given the exponential rise in COVID-19 cases from the end of August 2021, on September 24, 2021, the Singapore government announced a tightening of safe management measures during the stabilization period between September 27, 2021 and October 24, 2021, which was later extended to November 21, 2021, with a mid-point review. On November 8, 2021, the Singapore government announced calibrated adjustment of safe management measures including the easing of dine-in restrictions and updates to border measures. On December 22, 2021, in response to the global emergence of the Omicron variant, the Singapore government introduced travel restrictions for affected countries or regions and enhanced the testing requirements for travelers. Effective March 29, 2022, the Singapore government significantly eased COVID-19 restrictions by, among other things, lifting the requirement to wear masks outdoors, doubling the group size limit to 10 people and lifting the ban on alcohol sales in pubs and eateries after 10:30 p.m. It also eased testing and quarantine requirements for travelers and declared that up to 75% of employees who can work from home are allowed to return to their workplaces. Effective April 26, 2022, the Singapore government further eased COVID-19 restrictions by, among other things, (i) allowing employees to remove their masks at their workstations when they are not interacting physically with others and when they are not in customer-facing areas; (ii) removing the group size limit and safe distancing requirement between individuals or between groups; (i) allowing all employees to return to their workplaces; and (iv) removing all capacity limits.
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Impact on our suppliers and sub-contractors
Our suppliers and sub-contractors were affected by the Circuit Breaker Measures if they did not constitute providers of Essential Services and were required to suspend their businesses and operations. During the Circuit Breaker Period, our Group did not experience any material supply chain disruption (including delivery time and pricing) in respect of our sale of cleaning systems and other equipment business and our centralized dishwashing and ancillary services business. In addition, during the Circuit Breaker Period, we agreed with all our sub-contractors for on-site cleaning services for food and beverage establishment and logistics service providers on reductions in fees given that they had provided reduced manpower and/or services as our customers which are food and beverage establishments were required to suspend dine-in operations under the Circuit Breaker Measures, which had resulted in reduced sub-contracting costs for our on-site cleaning services and reduced logistics costs.
During Phase 1, entities providing Permitted Services, which included manufacturing and wholesale trade, were allowed to resume normal operations. As of April 24, 2022, (a) we had not been informed by any supplier and/or sub-contractor for our sale of cleaning systems and other equipment business that their business has not yet resumed operations or that there would be any delays in parts required for our ongoing orders; and (b) we had not encountered any disruption in the supply of rinsing aids and drying aids from our supplier for our provision of centralized dishwashing services.
Our Directors do not expect any material supply chain disruption (including delivery time and pricing) in respect of our sale of cleaning systems and other equipment business and our centralized dishwashing and ancillary services business in the long run taking into consideration the above and that the Circuit Breaker Measures had already ceased on June 1, 2020. In 2021, Singapore went through a lockdown phase and a stabilization phase and it is now proceeding with its plans to treat the virus as endemic. In essence, Singapore is adapting to living with COVID permanently and our operations have essentially returned to normal.
Impact on our business and revenue
(1) Sale of cleaning systems and other equipment business
In respect of our sale of cleaning systems and other equipment business, we were permitted under our Continued Operations Plans to continue operations for the design and manufacture of cleaning systems and other equipment for the semiconductor sector during the Circuit Breaker Period. During the Circuit Breaker Period from April 7, 2020 to June 1, 2020 (inclusive), our Group obtained four new orders for the semiconductor industry and three new orders from customers in non-semiconductor sectors for sale of cleaning systems and other equipment, with total contract value of approximately S$0.6 million, and delivered 12 orders, with total contract value of approximately S$0.4 million. In addition, where there were short delays experienced for certain contracts, the relevant customers agreed to the revised delivery schedule with no additional costs or penalties to be incurred by us, and none of our customers cancelled or terminated their orders and agreements with our Group.
During the Circuit Breaker Period, we were permitted to continue operations at our JCS Facility with a reduced workforce and with safe distancing measures in place. Notwithstanding the reduced workforce during the Circuit Breaker Period, there were sufficient employees carrying out the technical support and manufacturing function at our JCS Facility to fulfil the outstanding orders during the Circuit Breaker Period, while the rest of the employees such as those carrying out finance and accounting, and R&D and engineering functions were able to carry out their work from home. Accordingly, we were able to continue to operate with a reduced workforce physically attending work at our production facilities during the Circuit Breaker Period and fulfill outstanding orders, and to ensure continuity of our Group’s business operation, during such period.
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Since the commencement of Phase 1 and during Phase 2 and Phase 3, we generally resumed normal business operations at our JCS Facility and in respect of the sale of cleaning systems and other equipment business of our Group. During the period from January 1, 2021 to November 30, 2021, we had 53 orders for our cleaning systems and other equipment with an aggregate contract value of approximately S$7.2 million, all of which were delivered during the year ended December 31, 2021. Between April 7, 2020 (the commencement date of the Circuit Breaker Measures) and April 24, 2022, none of our customers for our sale of cleaning systems and other equipment business have cancelled or terminated or expressed their intention to cancel or terminate their contracts or agreements with our Group due to the outbreak of COVID-19.
(2) Centralized dishwashing and ancillary services business
In respect of our centralized dishwashing and ancillary services business, we experienced a decrease in revenue of not more than 80% in April and May 2020 during the Circuit Breaker Period, as compared to our revenue in February 2020, given that only 17 food and beverage establishments, for which we provided centralized dishwashing services, maintained normal operations.
As dine-in operations at food and beverage establishments continued to be suspended during Phase 1, we experienced a further decrease in revenue of approximately 62.6% in June 2020, as compared to our revenue in February 2020.
Since the commencement of Phase 2 and during Phase 3, we resumed the provision of our centralized dishwashing services and general cleaning services for most of our customers. From January 1, 2021 to April 24, 2022, we obtained new contracts for 42 food and beverage establishments, with total annual contract value of approximately S$0.4 million for our provision of centralized dishwashing and general cleaning services business. As of April 24, 2022, we had ongoing contracts with 92 food and beverage establishments for the provision of centralized dishwashing services and general cleaning services, and ongoing contracts with 16 customers for the leasing of dishwashing equipment. For the period beginning from April 7, 2020 (the commencement date of the Circuit Breaker Measures) to April 24, 2022, only 11 of our customers for our provision of centralized dishwashing and ancillary services business cancelled or terminated or expressed their intention to cancel or terminate their contracts or agreements with our Group due to the outbreak of COVID-19.
In view of the exceptional situation, we agreed on a fee reduction arrangement with our customers who requested such reduction in fees due to the lower footfall at their food and beverage establishments even though dine-in services had resumed in Phase 2 and Phase 3, and hence required less centralized dishwashing and general cleaning services from our Group. Accordingly, we experienced a decrease in revenue in respect of our provision of centralized dishwashing and ancillary services business of approximately 25.7% for the year ended December 31, 2020, as compared to our revenue for the year ended December 31, 2019.
Impact on our financial performance
Although we were able to continue operations and fulfill outstanding orders under our sale of cleaning systems and other equipment business, the global outbreak of the COVID-19 pandemic disrupted our operations, as well as the operations of our customers, suppliers and/or sub-contractors. Accordingly, during the year ended December 31, 2020, there were delays in a total of 12 orders with total contract value of approximately S$7.3 million under our sale of cleaning systems and other equipment business, of which (i) nine orders with total contract value of approximately S$4.5 million were delayed for one to three months and were subsequently delivered and the relevant revenue was fully recognized for the year ended December 31, 2020; and (ii) three orders with total contract value of approximately S$2.8 million were delayed for seven to 10 months, S$1.1 million of which were delivered during the year ending December 31, 2021and S$1.7 million of which will be delivered during the year ending December 31, 2022. The revenue from these orders will be recognized upon delivery to the respective customers. Such orders were delayed primarily due to (a) delay in delivery by the supplier of materials and components; (b) delay in finalizing the design of the products by the customer; and (c) request by the customer to delay delivery as its production facilities were not ready to receive products.
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In addition, one customer requested that three orders be expedited to meet their production schedule. These orders, which have a total contract value of approximately S$0.3 million, were originally due for delivery during the year ending December 31, 2021. Instead, we completed and delivered these three orders during the year ended December 31, 2020 and the revenue from these orders was recognized upon delivery to the customer.
Impact on our workforce
During the Circuit Breaker Period, a certain number of employees per day were permitted to carry out operations at our JCS Facility with safe distancing measures in place under our Continued Operations Plans, which were sufficient to carry out the technical support and manufacturing function at our JCS Facility and fulfil outstanding orders during such period. The rest of the employees, such as those carrying out finance and accounting, and R&D and engineering functions were able to carry out their work from home. The average daily utilization rate of our major machinery, namely the CNC lathe machine and the laser cutting machine, at our JCS Facility was approximately 122.1% and 121.6%, respectively, for the year ended December 31, 2020. During the Circuit Breaker Period, all our employees employed by Hygieia were permitted to continue carrying out operations at our Hygieia Facility with safe distancing measures in place.
Further, pursuant to announcements by the Singapore government on April 21, 2020 and May 2, 2020, daily movement of workers in and out of all dormitories (i.e., purpose built dormitories, factory converted dormitories, construction temporary quarters and temporary occupation license quarters) would no longer be allowed from April 21, 2020 to the end of the Circuit Breaker Period (i.e. June 1, 2020). Notwithstanding the foregoing, JCS received the approval from MTI on April 28, 2020 for our workers to be allowed to move between the dormitory and their worksite, and the foreign workers employed by Hygieia were unaffected by the advisory as they were not housed in the dormitories or quarters to which such advisory was applicable.
Since the commencement of Phase 1, our employees resumed work at our JCS Facility and Hygieia Facility, with the appropriate safe distancing measures in place.
Control measures
Our Group has also adopted control measures to protect our employees, workers and customers from outbreaks of infectious diseases, which is in line with the advisories issued by the Singapore Ministry of Manpower (the “MOM”) on best practices to be adopted by workplaces in Singapore, which includes the following:
● we have asked our staff and workers who interact with our suppliers and other service providers to wear personal protective equipment (such as face masks and gloves), and we will monitor the stock of personal protection equipment for our staff and workers; and
● we will evaluate our existing service contracts and our customers’ food and beverage establishments which may require increased frequency of on-site cleaning services, to ensure that our services are suitable for their enhanced cleaning needs due to COVID-19.
If any of our staff or workers or the on-site cleaning staff of our sub-contractors are suspected or confirmed to have contracted COVID-19, we may have to temporarily suspend our operations at our JCS Facilities and/or our Hygieia Facility or at some or all of our customers’ food and beverage establishments at which we provide on-site cleaning services as well as quarantine the affected staff, disinfect the affected facilities and contract sites and reallocate manpower in order to deploy additional staff to the affected contract sites. As of April 24, 2022, we had not encountered any incident where our staff and workers or the on-site cleaning staff of our sub-contractors were suspected or confirmed to have contracted COVID-19 and thus failed to report for duty. Nonetheless, we will continue to work closely with our customers to ensure that the impact of any such incidents which may occur due to unforeseen circumstances is minimized to its fullest extent, and implement our business contingency plans as outlined above in mutual agreement with our customers.
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Licenses And Permits
The following licenses are material for our Group’s operations:
| Description | Issuing Authority | Expiry Date | Issued to | |||
| License to operate a cleaning business | NEA | February 26, 2023 | Hygieia | |||
| License / Certificate issued under the Radiation Protection Act | NEA | June 30, 2023 | JCS |
Certifications
As of April 24, 2022, we have received the following certifications:
| Relevant authority/organization | Recipient | Relevant list/category | Qualification/ License/Grading | Date of grant/registration | Date of expiry | |||||
| Workplace Safety and Health Council | Hygieia | BizSAFE | Level 3 | August 7, 2021 | August 10, 2024 | |||||
| Workplace Safety and Health Council | JCS | BizSAFE | Level Star | August 23, 2017 | July 6, 2023 | |||||
| Islamic Religious Council of Singapore | Hygieia | Storage management | Halal Certificate | N/A | February 28, 2023 | |||||
| SGS | Hygieia | Food safety management | ISO 22000: 2005 | May 20, 2021 | August 5, 2022 | |||||
| SOCOTEC Certification International | JCS | Occupational Health and Safety Management | ISO 45001: 2018 | July 7, 2017 | July 6, 2023 | |||||
| SOCOTEC Certification International | JCS | Quality management system | ISO 9001: 2015 | June 23, 2017 | June 22, 2023 |
We intend to apply for the renewal of the above relevant certifications prior to their respective expiry dates and based on past experience, our Directors do not foresee any material difficulties in renewing the certifications of our Group.
Awards and Accreditations
Throughout our operating history, our Group has received a number of awards and accreditations in recognition of our performance and quality products and services. The following table sets forth the awards and accreditations we have been granted up to April 24, 2022.
| Year | Award | Organized/Granted By | Recipient | |||
| 2013 | Enterprise 50 Award | KPMG and the Business Times | JCS | |||
| 2016 | SME 1000 Ranking — Top companies ranked by sales/turnover (745th), net profit (443th) and return on equity (680th) | Experian | JCS | |||
| 2017 | SME 1000 Ranking — Top companies ranked by return on equity (631st) | Experian | JCS | |||
| 2017 | SME 1000 Ranking — Emerging 500 companies ranked by sales turnover (1134th) | Experian | JCS | |||
| 2018 | Singapore Quality Class — Recognition of Commendable Performance in Business Excellence | Enterprise Singapore | JCS | |||
| 2018 | Clean Mark Silver Award | NEA | Hygieia | |||
| 2018 | SME 1000 Ranking — Emerging 500 companies ranked by sale turnover (1118th) | Experian | JCS | |||
| 2019 | SME 1000 Ranking — Emerging 500 companies ranked by sales turnover (1490th) | Experian | Hygieia | |||
| 2021 | Clean Mark Silver Award | NEA | Hygieia |
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Competition
The precision cleaning equipment market in Singapore is niche and relatively consolidated with just over 10 companies in play comprised of a handful of larger global companies that operate offices in Singapore, as well as several small and medium-sized players, with high barriers to entry in the form of high set-up and operating costs, and track record. The Euromonitor Report has identified a trend towards consolidation in the wider precision cleaning market by industry players, as companies move towards offering total solutions in the value chain of both cleaning equipment and cleaning services in order to stand out from the competition.
Our Group has a market share of approximately 2.0% in terms of revenue for 2020 and there is an expected growth in the precision cleaning equipment industry in Singapore at a CAGR of approximately 10.7% from 2021 to 2025. For further details, please refer to the section headed “Industry Overview — Precision cleaning equipment industry in Singapore” in this Annual Report.
Our major competitors in the precision cleaning equipment market in Singapore based on 2020 market share are Crest Ultrasonics Corp., Emerson Electric Co., Kemet Far East Pte. Ltd. and Cyclosystem Pte. Ltd.
The precision cleaning manufacturing industry in Malaysia is highly consolidated, with the top five companies in the industry accounting for more than 80% of industry sales. The leading players in the industry are primarily present in the electronics industry. These manufacturers benefit from the robust growth of Malaysia’s position as a global hub for semiconductor manufacturing. Our Group has a market share of approximately 27.0% in terms of revenue for 2020 and there is an expected growth in the precision cleaning equipment industry in Malaysia at a CAGR of approximately 9.0% from 2021 to 2025.
Our closest competitors in the precision cleaning equipment market in Malaysia based on 2020 market share by revenue are Advanced Ceramics Technology (M) Sdn. Bhd., SIP Technology (M) Sdn. Bhd., Frontken Corporation Berhad and Zestron Precision Cleaning Sdn. Bhd.
The dishwashing services market in Singapore currently has a low penetration rate, and around 80% of the potential food and beverage market remains untapped and relatively consolidated to about 10 players, with four bigger companies, including our Group, dominating the market, and several other smaller players making up the remainder. In particular, there is keen competition for dishwashing services in the food and beverage industry due to low barriers to entry and low switching costs, the relatively low set-up and labor costs compared to other industries and clients being able to easily switch service providers given the relatively short span of contracts, with quality of service as the key differentiating factor.
Our Group is also one of the leading players in the centralized dishwashing services market in Singapore, with a market share of approximately 15.0% in terms of revenue for 2020. Further, there is expected growth in the dishwashing market in Singapore at a CAGR of approximately 19.7% for the years 2021 to 2025. For further details, please refer to the section headed “Industry Overview — The centralized dishwashing services industry in Singapore” in this Annual Report.
Our major competitors in the centralized dishwashing services market in Singapore based on 2020 market share by revenue are Synnovate Solutions Pte. Ltd., Clean Mark Solutions Pte. Ltd., Clean Solutions Pte. Ltd. and Micro 2000 Group.
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Sales And Marketing
As of April 24, 2022, our sales and marketing team consisted of one full-time employee based in Singapore. Our Chairman, Ms. Hong, oversees our sales and marketing department.
One of our key channels for marketing is through word of mouth as our new customers are usually referred by our existing customers or business contacts. Our Group and our Chairman, Ms. Hong, have participated in overseas exhibitions, trade shows and industry forums to promote our Group’s products and services. Our Chairman, Ms. Hong has also taken interviews from magazines and newspapers to promote our Group’s products and services. Our Group has also participated in overseas exhibitions and trade shows where we showcase our products to potential customers in order to increase our publicity and presence in the cleaning solutions industry.
Our sales and marketing team also communicates with our existing customers to understand their needs and markets trends, so as to improve our cleaning systems and equipment. We consider customer feedback a valuable tool for improving our products and services. Our sales and marketing team is also responsible for handling customers’ complaints and any complaints arising from product defects or service quality and will relay such feedback internally to the relevant teams for follow up.
Our Group relates to a few industry associations, with JCS being a member of the Singapore Precision Engineering & Technology Association and a Technology Extension Partner of Singapore Institute of Manufacturing Technology, and Hygieia being a member of the Association of Catering Professionals Singapore.
Our Group has developed a strong existing customer base in Singapore and overseas. Our customers are corporate groups with their respective group members incorporated or established in various jurisdictions, such as Malaysia, Australia, the U.S., Thailand, Belgium, Philippines, India, South Korea, Taiwan, Japan and the PRC, for our sale of cleaning systems and other equipment business during the fiscal years ended December 31, 2019, 2020 and 2021. Please refer to the paragraph headed “Our Customers — Top five customers” in this section for further details of our top five customers and their respective countries of incorporation or establishment. We have established stable business relationships with our customers, with three out of our top five customers having more than 10 years of business relationships with us. The profile of our existing customer base, coupled with the stable business relationships we have with our customers, allowed our Group (i) to secure orders from repeat customers, which contributed to approximately 93.2%, 92.7% and 100% of the total sales of our cleaning systems and other equipment for the years ended December 31, 2019, 2020 and 2021, respectively, and (ii) to gain referrals from our existing customers. Our Group also strives to maintain good customer relationships by producing high quality products and providing professional technical support, and hence it is not necessary for our Group to actively engage in significant sales and marketing efforts for maintaining such business relationships with our existing customers. In addition, as the average utilization rate of certain major machinery and equipment used at our JCS Facility in respect of the production and manufacture of cleaning systems and other equipment during the years ended December 31, 2020 and 2021 generally exceeded 100%, our Group was unable to take on a large number of new orders from new customers. Rather, we mainly focused on fulfilling orders from repeat customers to maintain our business relationships. Under such circumstances, we did not actively engage in sales and marketing activities to pursue orders from new customers and only maintained a small sales and marketing team during the fiscal year ended December 31, 2021.
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The following tables set forth the breakdown of our revenue contributed from the sale of precision and other cleaning systems and equipment from each geographical region during the fiscal years ended December 31, 2019, 2020 and 2021:
Year ended December 31, 2019
| Geographical Region | Number of Customers | Number of Completed Orders | Method of procurement | Transaction amount (SGD’000) |
% of total sales | |||||||||
| Singapore | 3 1 |
8
1 |
Order
from existing customer Trade exhibition |
1,876
32 |
17.5
0.3 |
|||||||||
| Malaysia | 1 1 |
17
1 |
Order from existing customer Referral from existing customer |
3,944
40 |
36.8
0.4 |
|||||||||
| United States | 2 | 1 | Order from existing customer | 563 | 5.2 | |||||||||
| Thailand | 2 1 |
28
2 |
Order
from existing customer Referral from existing customer |
1,423 653 |
13.3 6.1 |
|||||||||
| Belgium | 1 | 35 | Order from existing customer | 1,115 | 10.4 | |||||||||
| Philippines | 1 | 2 | Order from existing customer | 1,001 | 9.3 | |||||||||
| South Korea | 1 | 4 | Order from existing customer | 65 | 0.6 | |||||||||
| Taiwan | 1 | 2 | Order from existing customer | 11 | 0.1 | |||||||||
| Total | 15 | 101 | 10,723 | 100.0 | ||||||||||
Year ended December 31, 2020
| Geographical Region | Number of Customers | Number of Completed Orders | Method of procurement | Transaction amount (SGD’000) |
% of total sales | |||||||||
| Singapore | 4 1 |
7
3 |
Order
from existing customer Referral from existing customer |
398
246 |
2.5
1.6 |
|||||||||
| Malaysia | 2 | 46 | Order from existing customer | 11,672 | 74.0 | |||||||||
| Thailand | 2 | 36 | Order from existing customer | 1,380 | 8.7 | |||||||||
| Belgium | 1 | 32 | Order from existing customer | 1,096 | 6.9 | |||||||||
| South Korea | 1 | 7 | Order from existing customer | 77 | 0.5 | |||||||||
| Taiwan | 1 | 1 | Order from existing customer | 1 | 0.01 | |||||||||
| United States | 1 | 1 | Order from existing customer | 11 | 0.1 | |||||||||
| PRC | 1 | 1 | Referral from existing customer | 902 | 5.7 | |||||||||
| Total | 14 | 134 | 15,783 | 100.0 | ||||||||||
Year ended December 31, 2021
| Geographical Region | Number of Customers | Number of Completed Orders | Method of procurement | Transaction amount (SGD’000) |
% of total sales | |||||||||
| Singapore | 4 | 3 | Order from existing customer | 83 | 1.1 | |||||||||
| Malaysia | 1 | 13 | Order from existing customer | 4,414 | 56.5 | |||||||||
| Thailand | 1 | 42 | Order from existing customer | 1,559 | 8.6 | |||||||||
| Belgium | 1 | 27 | Order from existing customer | 1,182 | 20.0 | |||||||||
| South Korea | 1 | 4 | Order from existing customer | 73 | 0.9 | |||||||||
| Taiwan | 1 | 1 | Order from existing customer | - | - | |||||||||
| United States | 1 | 6 | Order from existing customer | 376 | 4.8 | |||||||||
| PRC | 1 | 1 | Order from existing customer | 126 | 1.6 | |||||||||
| Total | 11 | 97 | 7,813 | 100.0 | ||||||||||
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For the year ended December 31, 2019, (a) approximately 98.3% and 1.7% of the total sales to our customers in Singapore were comprised of orders from repeat customers and orders through trade exhibitions, respectively; (b) approximately 99.0% and 1.0% of the total sales to our customers in Malaysia were comprised of orders from repeat customers and referrals from existing customers, respectively; and (c) approximately 68.5% and 31.5% of the total sales to our customers in Thailand were comprised of orders from repeat customers and referrals from existing customers, respectively, for our sale of cleaning systems and other equipment.
For the year ended December 31, 2020, approximately 61.8% and 38.2% of the total sales to our customers in Singapore were comprised of orders from repeat customers and referrals from existing customers, respectively.
For the year ended December 31, 2021, 100% of the total sales to our customers in Singapore were comprised of orders from repeat customers.
Inventory
As we generally manufacture and sell our cleaning systems and other equipment to our customers on an order-by-order basis, we maintain minimal levels of raw materials and components required for the manufacture of cleaning systems and other equipment and we source for raw materials and other components and parts based on the orders made by our customers.
Intellectual Property
Our Group’s intellectual property rights are important to its business. As of the date of this Annual Report, the Group has:
● registered eight trademarks in Singapore and one trademark in Hong Kong;
● registered 24 patents in Singapore, Malaysia, the United States, Taiwan and the PRC, and applied for the registration of 9 patents in Singapore, Malaysia and Thailand; and
● registered one design in Singapore.
As of the date of this Annual Report, we were not involved in any proceedings with regard to, and we have not received notice of any claims of infringement of, any intellectual property rights that may be threatened or pending, in which we may be involved either as a claimant or respondent.
Employees
As of December 31, 2021, we employed a total of 90 persons, who were all located in Singapore, as compared to 88 as of December 31, 2020 and 95 as of December 31, 2019, who were also all located in Singapore. Employees are not covered by collective bargaining agreements. We consider our global labor practices and employee relations to be good.
Insurance
We maintain property insurance policies covering our equipment and facilities in accordance with customary industry practice. We carry occupational injury, medical, pension, maternity and unemployment insurance for our employees, in compliance with applicable regulations. We do not carry general business interruption or “key person” insurance. We will continue to review and assess our risk portfolio and make necessary and appropriate adjustments to our insurance practices to align with our needs and with industry practice in Singapore and in the markets in which we operate.
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Litigation And Other Legal Proceedings
As of the date hereof , we are not party to any significant proceedings.
Regulations in China Applicable to Our Business
This section sets forth a summary of the material laws and regulations that affect our Group’s business and operations in Singapore. Information contained in this section should not be construed as a comprehensive summary nor detailed analysis of laws and regulations applicable to the business and operations of our Group. This overview is provided as general information only and not intended to be a substitute for professional advice. You should consult your own advisers regarding the implication of the laws and regulations of Singapore on our business and operations.
Laws And Regulations Relating To Our Business In Singapore
Our business operations are not subject to any special legislation or regulatory controls other than those generally applicable to companies and businesses incorporated and/or operating in Singapore.
Environmental Public Health Act
The Environmental Public Health Act 1987 of Singapore (the “EPHA”) is administered by the NEA and regulates, among other things, the disposal and treatment of industrial waste and public nuisances. Under the EPHA, the Director-General of Public Health of Singapore (the “DGPH”) may, upon receipt of any information with respect to the existence of a nuisance liable to be dealt with summarily under the EPHA and if satisfied of the existence of a nuisance, serve a nuisance order on the person by whose act, default or sufferance the nuisance arises or continues, or if the person cannot be found, on the owner or occupier of the premises on which the nuisance arises. Some of the nuisances which are liable to be dealt with summarily under the EPHA include any factory or workplace which is not kept in a clean state, any place where there exists or is likely to exist any condition giving rise, or capable of giving rise to the breeding of flies or mosquitoes, any place where there occurs, or from which there emanates noise or vibration as to amount to a nuisance and any machinery, plant or any method or process used in any premises which causes a nuisance or is dangerous to public health and safety. If the DGPH receives any information in respect of the existence of a nuisance liable to be dealt with under the EPHA, a nuisance order may be served on the person responsible for the nuisance prescribing the measures to be taken to remedy the nuisance. Any failure to comply with the nuisance order served is an offense and such person is liable upon conviction for a fine not exceeding S$10,000 for the first offense and to a further fine not exceeding S$1,000 for every day during which the offense continues after conviction.
Cleaning Business License
The EPHA also regulates the cleaning standards and productivity of the cleaning industry through the licensing of cleaning businesses which comprises the provision of cleaning work, being work carried out in Singapore that involves, as its main or only component, the bringing of premises or any public place into, or keeping of premises or any public place in, a clean condition, and includes supervising the carrying out of such work but excludes any work that the Minister for the Environment and Water Resources declares not to be cleaning work. Any person who fails to obtain and maintain a cleaning business license while carrying on a cleaning business in Singapore will be guilty of an offense and liable on conviction for a fine not exceeding S$10,000 or to imprisonment for a term not exceeding 12 months or both, and in the case of a continuing offense, for a further fine not exceeding S$1,000 for every day or part thereof during which the offense continues after the conviction.
Prior to being licensed, cleaning businesses must meet several track record, training and salary requirements which include (a) in respect of an existing cleaning business, having at least one cleaning contract ongoing or completed in the 12 months preceding the license application (for renewal of an existing cleaning business) and in respect of new start-ups, having at least one employee with no less than 2 years of practical experience in supervising cleaning work or who has attended the requisite training modules under the Environmental Cleaning (EC) Singapore Workforce Skills Qualifications (the “WSQ”); (b) having training for its cleaning workforce, where cleaners attend at least one module under the WSQ framework or the Institute of Technical Education Skills Certificate in Housekeeping Operations (Healthcare). At the point of license application and throughout the license period, at least 50% of the cleaners are to be trained and at the point of license renewal and throughout the license period, 100% of the cleaners are to be trained; and (c) submitting and implementing a progressive wage plan for resident (i.e. Singapore citizens or permanent residents) cleaners employed.
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Progressive wage model
To obtain a cleaning business license, companies must, among other things, submit a progressive wage plan that covers employed resident cleaners (being Singapore citizens and permanent residents) whether they are full-time, part-time or casual employees, and such plan must (a) specify the basic wage for each class of cleaners; and (b) conform to the wage levels specified under the progressive wage model by the Commissioner for Labor, based on the recommendations of the Tripartite Cluster for Cleaners. A tripartite effort which is made up of seven unions, whose members are representatives from the National Trades Union Congress, Singapore National Employers Federation, Employment and Employability Institute, Building Construction and Timber Industries Employees’ Union, Environmental Management Association of Singapore, ISS Facility Services Private Limited, Integrated Property Management Pte Ltd, CapitaLand Mall Asia Limited, City Developments Limited, town councils, the Singapore Ministry of Manpower (“MOM”), the National Environmental Agency of Singapore (“NEA”) and Workforce Singapore. The progressive wage model was introduced in 2014 as a productivity-based wage progression pathway that helps to increase wages of workers through upgrading skills and improving productivity, and is regulated for the cleaning industry in Singapore by the NEA. The progressive wage model covers three broad categories of cleaning jobs: offices and commercial buildings, food & beverage establishments (which includes hawker centers and food courts), and the conservancy sector (which includes town councils and public cleansing).
In December 2016, the Tripartite Cluster of Cleaners recommended the introduction of (i) yearly wage adjustments to each wage point in the progressive wage model from 2017 to 2019; (ii) scheduled wage increases from 2020 to 2022; and (iii) an annual bonus equivalent to two weeks of basic monthly wages, for all wage points from 2020 onwards.
On June 7, 2021, the Tripartite Cluster of Cleaners recommended the introduction of a six-year schedule of sustained wage increases from July 1, 2023 to June 30, 2029, which will be reviewed in 2025.
EC WSQ Qualification
Cleaners employed by a cleaning business are required to attend at least one module under the EC WSQ framework. The WSQ is a national credentialing system. The EC WSQ is one of the 33 WSQ industry frameworks developed to date, and is designed to help workers in the cleaning industry improve their employability as well as progress in their careers. This framework caters to the training of cleaning crew, stewards and supervisors in two sub-sectors: (a) commercial and private residential cleaning; and (b) public cleaning. The types of EC WSQ qualifications available include (i) the WSQ Certificate in Environmental Cleaning, which aims to equip cleaning professionals with skills needed to perform basic cleaning activities; (ii) the WSQ Higher Certificate in Environmental Cleaning, which is suitable for cleaning professionals who want to advance their skills with in-depth training and gain the soft skills required of a cleaning steward; and (iii) WSQ Advanced Certificate in Environmental Cleaning, which aims to equip cleaning professionals with skills needed for supervisory positions. Upon the completion of each unit, the worker will be awarded a statement of attainment (“SOA”). The WSQ qualifications will be awarded after the worker completes the required number of SOAs.
To help employers meet the challenge of having to release workers for training, Workforce Singapore has introduced the Assessment Only Pathway (“AOP”) qualifying criteria, aimed at allowing workers to obtain their EC WSQ qualification through assessment without having to attend classroom training. These workers would either have some prior training in cleaning or have a number of years of relevant working experience, and will be screened before they are allowed to enroll in the AOP.
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On June 7, 2021, the Tripartite Cluster of Cleaners recommended the introduction of enhanced mandatory training requirements under the Skills Framework for Environmental Services and that the number of WSQ training modules be increased as follows:
| Job Roles | Current | By December 31, 2022 | Beyond 2025 | |||
All cleaners
Multi-skilled cleaners
Mechanical Driver
Supervisor |
Minimum of 1 WSQ module (for licensing conditions) | 2 modules in total (1 mandatory workplace safety and health related module and 1 core module that is endorsed by the Tripartite Cluster of Cleaners) | 3 modules in total
4 modules in total |
Environmental Protection and Management Act
The Environmental Protection and Management Act 1999 of Singapore and its subsidiary legislation are administered by the NEA, which provide for, among other things, laws relating to pollution control in Singapore through the regulation of various industries. Pursuant to the Environmental Protection and Management (Boundary Noise Limits for Factory Premises) Regulations (the “EPM Regulations”), the owner or occupier of any factory premises shall ensure that the level of noise emitted from his premises does not exceed the maximum permissible noise levels as set out in the First Schedule to the EPM Regulations. The permissible noise levels may vary depending on the type of affected premises, which include, among others, noise sensitive premises that require peace and quiet, residential premises and commercial premises not including factory premises. Any person who fails to comply with the requirements under the EPM Regulations is guilty of an offense and liable upon conviction for (a) a fine not exceeding S$5,000 on the first conviction, and in the case of a continuing offense, to a further fine not exceeding S$200 for every day or part thereof the offense continues after the conviction; and (b) a fine not exceeding S$10,000 on a subsequent conviction, and in the case of a continuing offense, to a further fine not exceeding S$300 for every day or part thereof during which the offense continues after conviction.
Radiation Protection Act
The Radiation Protection Act 2007 of Singapore (the “RPA”) controls and regulates, among other things, the possession and use of radioactive materials and irradiating apparatus. The RPA provides that no person shall, except under and in accordance with a license, have in his possession or under his control or use or otherwise deal in any radioactive material or irradiating apparatus. Any person who contravenes the aforementioned requirement under the RPA is guilty of an offense and liable upon conviction for a fine not exceeding S$100,000 or imprisonment for a term not exceeding five years or both.
Such licenses are issued by the Radiation Protection and Nuclear Science Department under the RPA and its subsidiary legislation, such as the Radiation Protection (Non-Ionizing Radiation) Regulations of Singapore (the “Non-Ionizing Radiation Regulations”), which regulate, among other things, the licenses and requirements for the manufacture or dealing with, keeping or possession for use and the import of a consignment of certain controlled irradiating apparatus, such as ultrasound apparatus and high power lasers. Ultrasound apparatus means any industrial apparatus designed to generate and emit ultrasonic power at acoustic frequencies above 16kHz. High power lasers means any laser apparatus from Class 3b and Class 4 based on the classification set out in the Second Schedule of the Non-Ionizing Radiation Regulations, being those emitting visible and/or invisible laser radiation with specified maximum accessible emission levels and those exceeding the accessible emission limits respectively.
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The Non-Ionizing Radiation Regulations further set out the requirements for (a) ultrasound apparatus, including the requirement that every ultrasound apparatus shall be designed and constructed in such a manner that all marks, labels and signs are permanently affixed thereon and clearly visible and all user controls, meters, lights or other indicators are clearly visible, readily discernible and clearly labelled to indicate their function; and (b) high power lasers, including the requirement that every high power laser shall have a protective housing that prevents human access during operation to laser and collateral radiation that exceed the specified accessible emission limits, a safety interlock for each portion of the protective housing that is designed to be removed or displaced during operation or maintenance, a readily available remote control connector, a key-actuated master control and an emission indicator which provides a visible or audible signal during emission of accessible laser radiation in excess of the specified accessible emission limits. Any person who contravenes any of the provisions of the Non-Ionizing Radiation Regulations is guilty of an offense and liable on conviction for a fine not exceeding S$2,000 or imprisonment for a term not exceeding six months or both.
Our subsidiary, JCS, has a license issued under the RPA for the possession of four industrial ultrasound apparatus and one high powered industrial laser.
Workplace Safety and Health Act
The Workplace Safety and Health Act 2006 of Singapore (the “WSHA”) provides that every employer has the duty to take, so far as is reasonably practicable, such measures as are necessary to ensure the safety and health of its employees at work. These measures include providing and maintaining for the employees a work environment that is safe, without risk to health, and adequate with regards to facilities and arrangements for employees’ welfare at work, ensuring that adequate safety measures are taken in respect of any machinery, equipment, plant, article or process used by the employees, ensuring that the employees are not exposed to hazards arising out of the arrangement, disposal, manipulation, organization, processing, storage, transport, working or use of things in or near their workplace and under the control of the employer, developing and implementing procedures for dealing with emergencies that may arise while those persons are at work and ensuring that the employees at work have adequate instruction, information, training and supervision as is necessary for them to perform their work. The relevant regulatory body is the MOM.
Any person who breaches his duty under the WSHA is guilty of an offense and will be liable on conviction, in the case of a body corporate, to a fine not exceeding S$500,000 and if the contravention continues after the conviction, the body corporate shall be guilty of a further offense and will be liable to a fine not exceeding S$5,000 for every day or part thereof during which the offense continues after conviction. For repeat offenders, where a person has on at least one previous occasion been convicted of an offense under the WSHA that causes the death of any person and that person is subsequently convicted of the same offense that causes the death of another person, the court may, in addition to any imprisonment, if prescribed, punish the person, in the case of a body corporate, with a fine not exceeding S$1 million and, in the case of a continuing offense, with a further fine not exceeding S$5,000 for every day or part thereof during which the offense continues after conviction.
Under the WSHA, it is the duty of any person who manufactures any machinery, equipment or hazardous substance (“MEHS”), which includes, among other things, welding equipment, for use at work to ensure, so far as is reasonably practicable, that (a) information regarding the safe use of the MEHS is supplied for use at work (which should include precautions to be taken for the proper use and maintenance of such MEHS, the health hazards associated with the MEHS and the information relating to and the results of any examinations or tests of the MEHS that are relevant to its safe use); (b) the MEHS are safe, and without risk to health, when properly used; and (c) the MEHS are examined and tested in compliance with the obligation imposed by paragraph (b). The duties imposed on any person in respect of the aforementioned shall (i) apply only if the MEHS are manufactured or supplied in the course of a trade or business carried on by the person (whether for profit or not); (ii) apply whether the MEHS are exclusively manufactured or supplied for use by persons at work; (iii) extend to the supply of the MEHS by way of sale, transfer, lease or hire and whether as principal or agent, and to the supply of the MEHS to a person for the purpose of supply to others; and (iv) not apply to a person by reason only that the person supplies the machinery or equipment under a lease-purchase agreement, conditional sale agreement or credit-sale agreement to another (“customer”) in the course of a business of financing the acquisition of the machinery or equipment by the customer from others. In the event any person contravenes the relevant provision in the WSHA that imposes the aforementioned duty on such person, that person is guilty of an offense, and liable on conviction (in the case of a natural person) for a fine not exceeding S$200,000 or imprisonment for a term not exceeding two years or both, or (in the case of a body corporate) for a fine not exceeding S$500,000.
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Further, the Commissioner for Workplace Safety and Health (the “CWSH”) may serve a remedial order or a stop-work order in respect of a workplace if he is satisfied that (a) the workplace is in such condition, or is so located, or any part of the machinery, equipment, plant or article in the workplace is so used, that any work or process carried on in the workplace cannot be carried on with due regard to the safety, health and welfare of persons at work; (b) any person has contravened any duty imposed by the WSHA; or (c) any person has done any act, or has refrained from doing any act which, in the opinion of the CWSH, poses or is likely to pose a risk to the safety, health and welfare of persons at work. The remedial order shall direct the person served with the order to take such measures, to the satisfaction of the CWSH, to, among other things, remedy any danger so as to enable the work or process in the workplace to be carried on with due regard to the safety, health and welfare of the persons at work, whereas a stop-work order will direct the person served with the order to immediately cease to carry on any work or process indefinitely or until such measures as are required by the CWSH have been taken, to the satisfaction of the CWSH, to remedy any danger so as to enable the work or process in the workplace to be carried on with due regard to the safety, health and welfare of the persons at work, and shall specify the date on which such order is to take effect.
Pursuant to the Workplace Safety and Health (Noise) Regulations 2011 of Singapore (the “WSHNR”), the occupier of a workplace must take reasonably practicable measures to reduce or control the noise from any machinery or equipment used or from any process, operation or work carried out by him in the workplace, so that no person at work in the workplace is exposed or likely to be exposed to excessive noise. This may include replacing noisy machinery, equipment, processes, operations or work with less noisy machinery, equipment, processes, operations or work, and such other measures as prescribed under the WSHNR. Where it is not practicable to reduce the noise, the occupier of a workplace shall limit the duration of time persons at work are exposed to the noise in accordance with the time limits prescribed in the Schedule under the WSHNR. Any person who contravenes the aforementioned is guilty of an offense and is liable on conviction for a fine not exceeding S$10,000, and in the case of a second or subsequent conviction, for a fine not exceeding S$20,000 or imprisonment for a term not exceeding six months or both.
Pursuant to the Workplace Safety and Health (Risk Management) Regulations, the employer in a workplace is supposed to, among other things, conduct a risk assessment in relation to the safety and health risks posed to any person who may be affected by his undertaking in the workplace, take all reasonably practicable steps to eliminate or minimize foreseeable risks, implement measures or safety procedures to address the risks, and to inform workers of the same, maintain records of such risk assessments and measures/safety procedures for a period of not less than three years and submit such records to the CWSH when required by the CWSH from time to time. Any employer who fails to comply with the aforementioned requirements is guilty of an offense and is liable on conviction for a fine not exceeding S$10,000 for the first offense, and for a fine not exceeding S$20,000 for a subsequent offense or imprisonment for a term not exceeding six months or both.
Work Injury Compensation Act
The Work Injury Compensation Act 2019 of Singapore (The “WICA”), which is regulated by the MOM, applies to all employees who are engaged under a contract of service or apprenticeship with an employer