Dear Shareholders,

On behalf of the Board of Directors (the "Board") of mDR Limited (the "Company", and together with its subsidiaries, the "Group"), I am pleased to present to you our annual report for the financial year ended 31 December 2016.

Global economic growth remained sluggish in 2016. Singapore's full-year GDP registered a modest growth of 1.8%. This is the weakest annual growth rate the Republic has recorded since 2009. Against this backdrop, the Group nevertheless performed better than expected in FY2016. This was made possible because of the resilience demonstrated by management and staff in the face of heightened competition, the strong relationships with our principals, and continued operational and cost efficiencies across both the local and overseas operations.

Financial Review

The Group's year-on-year revenue remained relatively unchanged at $318.9 million. Revenue contribution from the Group's core business, the Distribution Management Solutions ("DMS") division stood at $280.5 million, or 88% of the Group's total revenue. This was 3% lower than the FY2015 DMS revenue of $290.0 million, with the decline due mainly to retail operations.

The decline in DMS revenue was mitigated by higher revenue from the After Market Services ("AMS") and Digital Inkjet Printing for Out-Of-Home Advertising Solutions ("DPAS") divisions. In FY2016 AMS revenue grew by 38% to $30.7 million, arising from a higher repair volume. DPAS revenue grew by 12% from $6.8 million to $7.6 million in FY 2016, on the back of steady and sustained demand for Pixio's high quality products from existing and new customers.

The Group registered net profit after tax of $3.1 million for FY 2016.

The financial position of the Group has strengthened further, with net tangible assets of $61.5 million as at 31 December 2016 (FY2015: $59.8 million). Working capital of the Group registered an increase from $54.7 million to $55.8 million as at 31 December 2016, with a healthy cash position of $30.8 million and no bank borrowings.


Singapore operations

The DMS division currently operates 11 Singtel stores, 9 M1 stores, 3 GadgetWorld stores and 4 concept stores (3 Samsung stores and 1 Huawei store).

In September last year, we opened a Singtel experiential lite store at Compass One mall. This store is the "goto store" for Singtel products and services, offering customers a personalised shopping experience. Riding on the tremendous positive customer response at Compass One, we will convert our existing Singtel store at ION into a larger Singtel experiential store from April this year.

In addition to the "bestselling" phone models, since last year we have also expanded the portfolio of brands on offer for sale to include OEMs, such as Leagoo, Meizu, OnePlus and ZTE. These brands have their own following with specific customers and the response has been encouraging.

The Group will continue to work closely with our principals to bring new retail concepts and experience, and the suite of brands to offer wide ranging choices to our customers.

Overseas operations

Pixio recently completed the purchase of a 66,548 square feet factory at Section 51A Petaling Jaya, Malaysia. Pixio's existing premises are no longer sufficient to house its current operations, and its existing lease is due to expire in March 2017. The purchase of the factory is in line with Pixio's plan to acquire its own premises to house its expanding business needs, as the company enters into new growth areas such as 3D products, which require large operating spaces. With its own premises, Pixio is no longer dependent on a third party for rental premises.

Pixio will continue to grow its core business in Malaysia; although the weak ringgit, political and economic uncertainties were key challenges, Pixio continues to be profitable and grew its revenue in FY 2016, as it capitalized on its established reputation as a fast, reliable and quality service provider to gain new customers and grow its existing customer volume.

As announced previously, Ooredoo changed its business model in Myanmar in March 2017, which is that of the appointment of many small distributors compared to several large distributors in the past to sell its prepaid cards. The management of MDR Golden Myanmar Sea Co. Ltd. ("MDR Golden") was of the view that it was not feasible for MDR Golden to operate in the new business model adopted by Ooredoo.

The Group also assessed and considered the continued presence of Pixio Myanmar Co. Ltd. ("Pixio Myanmar") in Myanmar. Pixio Myanmar's business was still in an infancy stage. Substantial additional investments would have been required for the business to achieve an economy of scale in business volume. In view of the above, the Group decided that it would not be prudent for Pixio Myanmar to commit to further costs of extending its lease and maintaining a printing operation in Myanmar.

The decision to exit from Myanmar market was painful. However, in the foreseeable future, growth prospects in Myanmar appears limited. The Group's operating performance in the past was tempered by the Myanmar businesses. We believe that with the exit from Myanmar, the Group's overall performance should improve in the future.

Note Of Appreciation

I express my sincere thanks to our business partners, shareholders and customers for their support and continued trust. My heartfelt thanks also to my fellow Directors, management and staff for their dedication and efforts.


The Board is pleased to propose a first and final dividend amount of up to $1.3 million for shareholders' approval at the forthcoming annual general meeting. The dividend translates to about 42.6% of the Group's net profits in FY2016, and is 30% higher than the last year dividend. Upon approval, the dividend will be paid to shareholders on 23 May 2017.

Future Outlook

Consumer patterns are showing major headwinds in this age of digital disruption. However, mobile devices are increasingly becoming more and more important, immersive and futuristic, with a single device now mostly used for personal and business communication, photography, gaming, virtual reality, shopping and payments. As such, we believe that the mobile distribution and AMS business will continue to be relevant. We will maintain a lean but strategic retail footing and follow a disciplined cost and inventory management. The DPAS business will continue to venture into new growth areas and products.

The uncertain global economy will continue to exert pressure on the Group's profitability. Nonetheless, we remain committed to our on-going strategy to build new revenue streams and markets, by continuing to explore merger and acquisition opportunities both within and outside of Singapore. We look forward to steer the Group to achieve better performance this year.