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Datapulse 'committed' to good governance amid diversification plans, say directors
DATAPULSE Technology directors on Monday evening sought to assure minority shareholders that the board was "committed" to good governance even as it seeks corporate recovery by diversifying from the loss-making media storage business.
Low Beng Tin, non-executive chairman of Datapulse, said: "The board stands by its decision to acquire Wayco and the merits of the acquisition. We acknowledge that media reports of the circumstances of the Wayco acquisition may have raised concern among some shareholders and hope that the dialogue session has helped to clarify concerns."
All four directors (one executive and three independent) had met about 70 minority shareholders on Monday night at a dialogue with the Securities Investors Association Singapore (SIAS), chaired by David Gerald, founder, president and CEO of SIAS.
During the dialogue, the directors fielded questions from shareholders, clarifying media reports and corporate actions. The directors told shareholders that following the sale of the Tai Seng factory in January this year, the business of manufacturing media storage products is dormant.
The company's financial position remains healthy with a net cash position of S$87.1 million as at end-January 2018 after selling the Tai Seng property. The gain on disposal of S$44.6 million also boosted the company's H1 FY18 net profit more than six times to S$36.8 million. Excluding this gain, the company would have recognised a loss before tax of S$7.4 million arising from the media storage business.
The board said that it believes that the existing primary business of media storage products offers limited prospects for growth given the increasingly challenging operating conditions. Hence, it is proposing that the company undertake a diversification into the consumer business, as well as re-explore the proposed property business, which shareholders had previously mandated to venture into as part of its core business.
Datapulse intends to use Wayco as a platform to diversify into the hair-care products market. The company will consider venturing into distribution, direct sales and marketing of such products to retailers and/or end customers to expand its business.
Ernst & Young Solutions has done a strategic review commissioned by the board, and concluded that while Wayco is profitable based on its last audited accounts, the longer-term sustainability of its business will require Wayco to shift from a standalone manufacturing business to a manufacturing and distribution business, with multiple brands and products through the value chain.
The vendor of Wayco has given an undertaking that Datapulse can require it to buy back Wayco at the same price paid by the company. This right can be exercised by December 2018 if Datapulse discovers any material adverse events relating to its business of Wayco.
The company will hold an extraordinary general meeting on April 20, 2018 for shareholders to vote on the proposed diversification and resolutions under requisition notices seeking proposed changes to the board.