JE Cleantech(US:JCSE)2025-05-15 15:24PART I Key Information This section outlines principal business and securities risks, including customer concentration, management reliance, stock volatility, and governance as a controlled foreign private issuer Risk Factors The company faces risks from customer concentration, key management reliance, raw material costs, stock volatility, and governance exemptions - The company has a significant customer concentration risk. In fiscal year 2024, the top five customer groups accounted for approximately 70.1% of total revenue, with the largest customer group representing 40.4% of revenue2628 - The business is highly dependent on its key management team, especially Ms. Hong Bee Yin, the Chairman, Executive Director, and CEO. The loss of her services could materially and adversely affect the company's business and future plans3839 - The company has previously faced delisting risk from Nasdaq for failing to meet the $1.00 minimum bid price requirement. Although compliance was regained as of August 2024, future non-compliance remains a risk828385 - As a 'controlled company' with CEO Ms. Hong Bee Yin beneficially owning approximately 66.5% of shares, the company is exempt from certain Nasdaq corporate governance requirements, such as having a majority of independent directors105106 - The company is a 'foreign private issuer' and an 'emerging growth company', which allows it to follow home country (Cayman Islands) governance practices and take advantage of reduced reporting requirements, potentially providing less information and protection to investors compared to U.S. domestic issuers108117119 Information on the Company JE Cleantech operates in industrial cleaning systems and dishwashing services, facing high customer concentration and extensive Singaporean regulations History and Development of the Company Founded in 1999, the company expanded into cleaning systems and dishwashing, with key milestones including its 2022 Nasdaq IPO and 2023 share consolidation - The company completed its Initial Public Offering on April 22, 2022, raising gross proceeds of approximately $12 million128 - A 1-for-3 share consolidation was effected on October 13, 2023, to regain compliance with Nasdaq's minimum bid price requirement, reducing outstanding shares from 15,020,000 to 5,006,666132133 - A stock repurchase program of up to $1,000,000 was authorized on September 6, 2023. As of the report date, 46,406 shares have been repurchased for a total of US$47,334.12136 Business Overview The company operates in cleaning systems (62.1% of FY2024 revenue) and dishwashing services, characterized by high customer concentration and reliance on existing relationships Revenue by Business Segment (FY2022-2024) | Business Segment | 2022 Revenue (SGD thousands) | 2023 Revenue (SGD thousands) | 2024 Revenue (SGD thousands) | % of Total 2024 Revenue | | :--- | :--- | :--- | :--- | :--- | | Sale of cleaning systems and other equipment | 11,400 | 11,000 | 12,000 | 62.1% | | Provision of centralized dishwashing and ancillary services | 7,800 | 7,000 | 7,300 | 37.9% | Top 5 Customer Concentration (% of Total Revenue) | Year | Top 5 Customers' % of Revenue | Largest Customer's % of Revenue | | :--- | :--- | :--- | | 2022 | 68.1% | 22.0% | | 2023 | 66.1% | 24.2% | | 2024 | 75.9% | 40.4% | - The company's business strategy includes expanding its product portfolio with automated and robotic cleaning solutions, such as an autonomous robot floor scrubber, to align with Industry 4.0 trends235236237 - All revenue from the sale of cleaning systems and equipment for the fiscal years 2022, 2023, and 2024 was generated from existing customers, highlighting a strong reliance on repeat business262266 Laws And Regulations Relating To Our Business In Singapore The company's Singapore operations are subject to extensive regulations, including environmental, workplace safety, foreign manpower, and radiation protection laws - The company must hold a cleaning business license under the Environmental Public Health Act (EPHA), which requires meeting specific track record, training, and progressive wage plan requirements for its cleaners276277278 - Under the Workplace Safety and Health Act (WSHA), the company has a duty to ensure the safety of its employees and the safe design of the machinery it manufactures, with significant penalties for non-compliance289290291 - The employment of foreign workers is regulated by the Employment of Foreign Manpower Act (EFMA), which requires valid work passes and adherence to sector-specific quotas and levies307308311 - The company holds a license under the Radiation Protection Act (RPA) for the possession and use of industrial ultrasound apparatus and high-powered lasers in its manufacturing process285288 Operating and Financial Review and Prospects FY2024 revenue grew 6.9% to SGD 19.3 million, but net income sharply declined due to a 54% surge in G&A expenses, despite improved gross margin and positive operating cash flow Results of Operations FY2024 revenue increased 6.9% to SGD 19.3 million, but net income plummeted to SGD 32,000 due to a 54.5% surge in G&A expenses, despite gross profit margin improvement Consolidated Statement of Operations (FY2022-2024, in SGD thousands) | | 2022 (SGD thousands) | 2023 (SGD thousands) | 2024 (SGD thousands) | | :--- | :--- | :--- | :--- | | Revenues | 18,631 | 18,032 | 19,279 | | Cost of revenues | (13,503) | (13,666) | (14,085) | | Gross profit | 5,128 | 4,366 | 5,194 | | Gross Profit Margin | 27.5% | 24.2% | 26.9% | | Total operating expenses | (3,364) | (3,356) | (5,224) | | Income (loss) from operations | 1,764 | 1,010 | (30) | | Net income | 1,192 | 519 | 32 | - Revenue increased by 6.9% in FY2024, driven by a SGD 1.8 million (26.6%) increase in sales of precision cleaning systems, particularly to a customer group in Malaysia expanding its production facilities380 - General and administrative expenses increased by SGD 1.8 million (54.5%) in FY2024, primarily due to a revision of the CEO's remuneration package, share-based compensation, and special bonuses for key management393394 Adjusted EBITDA (Non-US GAAP, in SGD thousands) | | 2022 (SGD thousands) | 2023 (SGD thousands) | 2024 (SGD thousands) | | :--- | :--- | :--- | :--- | | Net income | 1,192 | 519 | 32 | | Depreciation and amortization | 672 | 702 | 980 | | Interest expense | 336 | 511 | 516 | | Share-based compensation | - | - | 466 | | Income tax expense | 235 | 111 | 250 | | Adjusted EBITDA | 2,435 | 1,843 | 2,244 | Liquidity and Capital Resources As of Dec 2024, the company maintained SGD 15.6 million working capital and SGD 5.7 million cash, with operating cash flow improving to SGD 2.1 million Key Balance Sheet Items (as of Dec 31, in SGD thousands) | | 2023 (SGD thousands) | 2024 (SGD thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 5,089 | 5,742 | | Accounts receivable, net | 4,775 | 4,488 | | Inventory | 14,073 | 12,644 | | Total current assets | 26,659 | 25,681 | | Total current liabilities | 13,757 | 10,069 | | Working Capital | 12,902 | 15,612 | | Total Assets | 35,493 | 35,114 | | Total Liabilities | 18,780 | 18,621 | | Total Shareholders' equity | 16,713 | 16,493 | Consolidated Cash Flows (FY2023-2024, in SGD thousands) | | 2023 (SGD thousands) | 2024 (SGD thousands) | | :--- | :--- | :--- | | Net cash generated from operating activities | 1,375 | 2,053 | | Net cash used in investing activities | (211) | (1,495) | | Net cash (used in)/generated from financing activities | (2,567) | 122 | | Net change in cash and cash equivalents | (1,472) | 653 | - Average accounts receivable turnover days improved to 87.7 days in 2024 from 96.7 days in 2023, while average inventory turnover days remained high at 346.2 days in 2024, comparable to 346.7 days in 2023436442 Directors, Senior Management and Employees Led by CEO Ms. Hong Bee Yin, the company's board includes independent directors, with aggregate compensation increasing significantly in 2024 due to CEO remuneration and new committee policies - The company is led by founder Ms. Hong Bee Yin (Chairman, CEO) and Mr. Long Jia Kwang (CFO). The board includes three independent directors: Singh Karmjit, Tay Jingyan, Gerald, and Khoo Su Nee, Joanne472 - Total compensation for directors, executive officers, and key employees increased to SGD 1,490,000 in FY2024 from SGD 952,000 in FY2023. This was mainly due to a revision in the CEO's remuneration package, share-based compensation, and a special bonus for key management509 - The CEO's employment agreement was amended effective January 1, 2024, increasing her total annual remuneration to SGD 630,000 and revising her performance bonus to a tiered percentage of the Group's profit before tax (PBT)516 - The company has established audit, compensation, and nomination committees. Recent charter amendments include adding cybersecurity oversight to the audit committee and a compensation recovery (clawback) policy to the compensation committee charter495498502 - As of December 31, 2024, the company had 95 employees, all located in Singapore526 Major Shareholders and Related Party Transactions CEO Ms. Hong Bee Yin controls the company with 66.5% beneficial ownership, influencing major decisions, with significant related party transactions including compensation and dividends Beneficial Ownership (as of Dec 31, 2024) | Name of Beneficial Owner | Ordinary Shares Beneficially Owned | Percent of Class | | :--- | :--- | :--- | | Hong Bee Yin | 3,500,000 | 66.5% | | JE Cleantech Global Limited | 3,200,000 | 60.8% | - Ms. Hong Bee Yin's controlling interest will persist even if the 800,000 shares recently registered for resale are sold, as her ownership would remain at approximately 51.3%534 Related Party Transactions with Controlling Shareholder (FY2024, in SGD thousands) | Transaction Nature | Name | 2024 Amount (SGD thousands) | | :--- | :--- | :--- | | Shares issued as stock-based compensation | Ms. Hong Bee Yin | 466 | | Dividend paid | Ms. Hong Bee Yin | 425 | Financial Information This section directs readers to Item 18 for the company's audited Consolidated Financial Statements - The company's Consolidated Financial Statements are provided under Item 18 of this report538 The Offer and Listing The company's Ordinary Shares began trading on Nasdaq Capital Market under 'JCSE' on April 22, 2022 - The company's Ordinary Shares are listed on the Nasdaq Capital Market under the ticker symbol 'JCSE'540 - The transfer agent for the company's shares is VStock Transfer, LLC541 Additional Information This section details the company's Cayman Islands corporate structure, share rights, and U.S. tax considerations, including PFIC risk and dividend policy - The company is an exempted company incorporated in the Cayman Islands, which provides certain exemptions from standard corporate requirements, such as not having to file an annual return of shareholders with the Registrar558561 - The company paid a cash dividend of US$0.09 per share in December 2024, totaling approximately SGD 643,000 (US$471,000). However, there is no policy for regular future dividend payments100589 - The company discusses the risk of being classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes. While it does not expect to be a PFIC, it acknowledges that the determination is made annually and is subject to fluctuations in income, assets, and share price601602 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks including interest rate, credit (due to customer concentration), liquidity, and foreign exchange risk from USD-SGD fluctuations - The company is exposed to interest rate risk on its short-term bank loans, which are subject to rate changes upon renewal613 - Credit risk is a key concern due to the concentration of sales among a few major customers. The company monitors customer creditworthiness to mitigate this risk614 - The company faces foreign exchange risk as its reporting currency is the US Dollar, but its operational revenues and costs are primarily in Singapore Dollars (SGD)616 PART II Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2024, with no material weaknesses - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2024620 - In its assessment of internal control over financial reporting, management determined that there were no control deficiencies that constituted material weaknesses as of December 31, 2024621622 Corporate Governance and Other Disclosures This section covers audit committee expertise, audit fees, and the company's cybersecurity risk policy, noting no material breaches in 2024 - The Board of Directors has designated Ms. Khoo as the 'audit committee financial expert'624 Principal Accountant Fees (USD) | Fee Type | FY 2023 (USD) | FY 2024 (USD) | | :--- | :--- | :--- | | Audit Fees | $128,000 | $128,000 | | All Other Fees | - | - | | Total | $128,000 | $128,000 | - The company has adopted a cybersecurity risk policy, with oversight provided by the Audit Committee. No material cybersecurity breaches occurred during the year ended December 31, 2024632633635 PART III Financial Statements This section presents the audited consolidated financial statements for the three-year period ended December 31, 2024, with an unqualified auditor's opinion Consolidated Balance Sheets (As of Dec 31, in SGD thousands) | | 2023 (SGD thousands) | 2024 (SGD thousands) | | :--- | :--- | :--- | | Total current assets | 26,659 | 25,681 | | Total non-current assets | 8,834 | 9,433 | | TOTAL ASSETS | 35,493 | 35,114 | | Total current liabilities | 13,757 | 10,069 | | Total non-current liabilities | 5,023 | 8,552 | | TOTAL LIABILITIES | 18,780 | 18,621 | | Total shareholders' equity | 16,713 | 16,493 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 35,493 | 35,114 | Consolidated Statements of Operations (For the year ended Dec 31, in SGD thousands) | | 2022 (SGD thousands) | 2023 (SGD thousands) | 2024 (SGD thousands) | | :--- | :--- | :--- | :--- | | Revenues | 18,631 | 18,032 | 19,279 | | Gross profit | 5,128 | 4,366 | 5,194 | | Income (loss) from operations | 1,764 | 1,010 | (30) | | Net income | 1,192 | 519 | 32 | | Basic and diluted EPS (SGD) | 0.25 | 0.10 | 0.00 | Consolidated Statements of Cash Flows (For the year ended Dec 31, in SGD thousands) | | 2022 (SGD thousands) | 2023 (SGD thousands) | 2024 (SGD thousands) | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | (5,239) | 1,375 | 2,053 | | Cash used in investing activities | (797) | (211) | (1,495) | | Cash provided by/(used in) financing activities | 11,487 | (2,567) | 122 | | Net change in cash and cash equivalents | 5,453 | (1,472) | 653 | | Cash and cash equivalents at end of year | 6,561 | 5,089 | 5,742 | Exhibits This section lists all exhibits filed with the annual report, including corporate governance documents and officer certifications - The report includes key corporate governance documents as exhibits, such as the Amended Audit Committee Charter, Amended Compensation Committee Charter (which includes the compensation recovery policy), Code of Ethics, and Insider Trading Policy756