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Creative Technology announces intent to expand into eldercare, says OEM plans delayed by ’draconian measures’ in China

Lim Hui Jie
Lim Hui Jie10/10/2022 11:56 PM GMT+08  • 4 min read
Creative Technology announces intent to expand into eldercare, says OEM plans delayed by ’draconian measures’ in China
Creative has reported three years of pre-tax losses. Photo: Creative Technology
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Creative Technology has announced in its annual report that the company is looking at expanding into other electronics products, such as the Internet-of-Things and elderly care segments.

In its annual report, Creative chairman and CEO Sim Wong Hoo says “we will be leveraging a revolutionary yet highly affordable visual infra-red sensor from an investee company which we have incubated for several years, to create new and exciting products for various sectors.”

This is in light of the company’s losses for FY2022 ended June increasing to an US$11 million ($15.76 million) loss, up from US$8 million in the same period a year ago.

Sim describes FY2022 as an “extremely difficult and challenging year for Creative.” Revenue also dropped by 27.3% from US$84 million in FY2021 to US$61 million in FY2022. This has led to the company issuing a notice for three consecutive years of pre-tax losses.

Companies will be included on the SGX Watchlist if records pre-tax losses for the three most recently completed consecutive financial years (based on audited full-year consolidated accounts) and an average daily market capitalisation of less than $40 million over the last six months.

Sim says that Creative’s business was adversely affected by some major changes in the global economic environment for its 1HFY2022 ended December 2021, as operating results were initially affected by shipping delays, skyrocketing increases in freight costs and the global shortage of semiconductors.

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This resulted in Creative facing spikes in prices of certain semiconductor components and shortages of certain products.

In the second half year, the company was impacted by “unexpected global events”, Sim says.

This included pandemic-related lockdowns in China that added to the ongoing supply chain disruptions, the Russia-Ukraine war, as well as related sanctions.

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This contributed to the spike in energy costs and inflation rates, and in turn, affected the business environment in many markets for Creative’s products.

“Under these circumstances, the overall market for discretionary products, especially consumer electronics products, was difficult and unpredictable, resulting in a decline in sales,” he says

In the message, Sim also revealed that Creative’s Super X-Fi technology, which was planned to be incorporated into OEM technologies, has been delayed by pandemic-related constraints in the past two years. Its sales and design cycles, he says, “are much longer”.

Sim says, “While we had restarted many of the processes in the earlier part of the fiscal year and started to make some progress, this has again been further disrupted by continuing pandemic-related constraints and more draconian measures within China, where these OEM prospects are located.”

Last year, in his FY2021 message, Sim says that “we have started to make significant progress,” revealing that one of the prospects, working with Creative in the final phase, is a well-known consumer electronics maker. “When this is successful, we expect other manufacturers to follow suit.”

However, in his outlook for FY2022, he notes that the outlook for the global economy remains highly uncertain with the heightened geopolitical tensions, the on-going Russia-Ukraine war, high energy costs and rising inflation rates.

In addition, the possibility of further pandemic-related lockdowns in China and its potential disruptive impact on the global supply chain has also added to the level of uncertainty for Creative.

“While Creative continues to work towards re-growing our business and improving our financial performance, there is presently little visibility of achieving this in the near term, given the current challenging market conditions which are expected to continue to have a significant impact on the results for the year,” Sim writes.

Creative shares closed at $1.66 per share on Oct 10, valuing the company at $124.5 million.

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