SINGAPORE: After seeing its sales revenue plummet by 40 per cent in 2019 due to protracted international trade tensions, Certact Engineering was bracing for even more pain this year with the COVID-19 pandemic.
But a shift to focus more on the niche segment of plastic engineering has since worked out for the precision engineering firm, with new orders flowing through in recent months. It now expects its annual sales revenue for this year to double from a year ago to about S$8 million.
Certact Engineering made the “risky move” when it was approached by a customer that required plastic parts to produce more DNA sequencing machines, said its managing director Ellis Eng.
This was both an opportunity and a challenge for the local firm whose core business lies in producing metal parts for semiconductor manufacturers. While it had plastic engineering as part of its business, it was a “small department” that made up just 10 per cent of sales revenue.
“But with our sales coming down, we know that we will face even more challenges if we don’t go into this,” said Ms Eng.
The local firm, which was established in 1968, quickly got down to action by redeploying its manpower but the real test came in April when the “circuit breaker” was imposed.
“That was when we had to increase production but one of our suppliers handling the secondary process for us was not allowed to operate. So we decided to quickly start our own process and production line.”
An employee checks on the plastic component parts needed for a DNA sequencing machine, which is used in efforts to combat COVID-19. (Photo: Certact Engineering)
With no time to lose, the firm bought new machines and its employees ran trials to work out the new processes, all within a week.
“If we lose more time, we will lose the customer,” Ms Eng told CNA. “We have no choice.”
Altogether, Certact Engineering invested almost S$150,000 into pivoting its business – a rather “big sum” for a small and medium-sized enterprise (SME), it said – but it has paid off.
The company’s ability to invest in new capabilities has instilled confidence in customers, according to Ms Eng. It has since received new contracts from a local developer of X-ray test equipment and another S$2 million order from a company looking to manufacture data storage equipment.
“I was very worried initially because of the trade war and then with the pandemic, I thought we will be in deep trouble,” said Ms Eng.
Citing a Chinese idiom that meant seeking out opportunities in times of crisis, she added: “COVID-19 was a catalyst to get us to transform and we are glad we did.”
Moving forward, Certact Engineering plans to grow its plastic engineering business to account for 60 per cent of sales revenue.
READ: ‘We are not returning to a pre-COVID-19 world’: Chan Chun Sing maps out ‘new path’ for Singapore
RETAIL, TRAVEL FIRMS EXPLORE NEW BUSINESSES
Elsewhere in the retail and travel sectors, two companies are also diversifying as the coronavirus outbreak annihilated their industries.
With the tourism industry at a standstill, Nam Ho Travel is gearing up to launch virtual tours and an online store for consumers to purchase “trending” snacks and produce from overseas.
“As domestic travel is now possible in several countries, we are planning to do livestreams with our overseas presenters visiting hidden gems and … introducing not only the place(s), but also what the viewers can buy there,” said its director Marshall Ooi.
“With Singapore’s borders not opening any time soon, we can assist viewers in doing certain purchases.”
The online store, Buy Beyond Borders, had a soft launch earlier this month and the final details are being worked on.
Meanwhile, Nam Ho’s inbound travel arm, Nam Ho DMC, has turned more than 10 of its mini vans, which used to ferry tourists around Singapore, into school buses and delivery vans since March.
It plans to venture deeper into logistics and warehousing services moving forward, said co-founder Mahesh Pawanaskar, noting “huge” longer-term demand in these areas where the company can “integrate both (its) old and new business together”.
Mr Pawanaskar added that the firm is in the midst of signing an agreement for a warehouse in Woodlands, and plans to build up a fleet of heavy vehicles by October.
These new business plans have since required employees at the travel firm to take on very different tasks. As such, Nam Ho has sent most employees to attend courses, such as the Singapore Workforce Skills Qualification (WSQ), in recent months.
“Our drivers went from sending passengers to picking up school children and doing deliveries for logistics and shopping platforms. Our staff, who used to be marketing travel products, are now sourcing for trending items that we can feature on our online platform, helping with packaging and doing deliveries.
“Change is not easy but everyone knows we have to do something,” said Mr Ooi, who noted that Nam Ho’s revenue in Singapore has seen “a sharp drop” since the coronavirus outbreak. Previously, its annual revenue in Singapore was more than S$55 million, with equal contribution from inbound and outbound travels.
Thus far, the travel firm has invested S$200,000 into purchasing products for its online store. It estimates that its venture into logistics and warehousing will require a heftier investment of more than S$1 million.
“We have applied and will be applying for some grants from both Enterprise Singapore and Singapore Tourism Board in assisting us … on our new business ventures,” said Mr Ooi.
Meanwhile, fashion retailer FJ Benjamin announced its foray into the health and wellness business last week, with an exclusive distributorship agreement with Portugese air purifier maker Airfree.
Describing health and wellness as “an industry with long-term growth potential”, the Singapore-listed retail group and luxury brand distributor said it is on the lookout for other brands to broaden its offerings.
“While the COVID-19 pandemic has made the move very timely and appropriate given the renewed consumer interest in health and wellness, the diversification is part of a larger strategy we have been working on for some time now to ensure long-term growth outside our core business of fashion retail,” said Group CEO Nash Benjamin.
He added that the company decided to partner Airfree as the Portugese manufacturer is a trusted brand with distributions in more than 60 countries.
Asked how the company plans to break into the new market, Mr Benjamin referred to the product’s unique characteristics, as well as the company’s plans to use both online and offline channels including online marketplaces, chain stores such as Mothercare and Motherswork, and other brick-and-mortar channels.
POSITION FOR A POST-PANDEMIC WORLD
As the COVID-19 pandemic continues to wreck havoc on economies around the world, including Singapore’s, businesses have been urged to persevere with transformation.
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Such nimbleness will help when it comes to seizing new opportunities, said Deputy Prime Minister Heng Swee Keat in his ministerial statement on Monday (Aug 17) where he cited Certact Engineering as an example of a company doing so.
In the same speech, where he also announced a further extension of wage subsidies among other support measures, Mr Heng said Singapore has to continue with its economic transformation given how it “will not be business-as-usual” in a post-pandemic world.
One expert that CNA spoke with pointed out a pitfall that businesses should take note of when attempting to transform.
“Businesses are doing all they can to keep the lights on and to keep employees on the payroll. These are commendable but they also need to ask themselves, will this be a sustainable solution? Can they do it permanently?” said EY’s Asean strategy and transactions leader Vikram Chakravarty.
He added that the larger challenge remains for local firms to make an intrinsic shift.
“Despite everything, the operating model has not changed and they have not embraced digital for example. Everyone thinks ‘Yes, we are doing something in digital analytics but actually it’s all peripheral stuff.’ Has it fundamentally changed the company is what businesses need to ask themselves.”
Mr Tan Chee Wei, KPMG Singapore’s head of consumer tax and retail, said there is urgency for businesses to identify new trends, opportunities and develop the right strategies with the world unlikely to return to pre-COVID-19 days.
He added that the extended wage subsidies under the Jobs Support Scheme (JSS), while helpful for the survival of businesses, may not be sufficient for such transformation in a post-pandemic economy.
“A supplementary top-up of SkillsFuture credit would have been a great complement to the JSS extension in reskilling and retraining employees,” Mr Tan added.
READ: Extension of Jobs Support Scheme among S$8 billion worth of measures announced by Heng Swee Keat
The revised JSS will see support extended to wages paid up to next March for most sectors, and up to December this year for sectors which are managing well.
The tweaks in wage subsidies are made based on the projected recovery of the different sectors, said Mr Heng, who is also Finance Minister.
Precision engineering is among the sectors that will see wage support end in December.
For Certact Engineering, any form of support will be useful. While the earlier payouts under JSS helped to alleviate the pressure it had in adjusting its business, it acknowledged that companies “cannot keep depending on the Government”.
“If the car engine is dead, you cannot keep pushing the car. You need to change the engine,” said Ms Eng.
“We need to sustain through this pandemic by finding ways to transform our business, improve or cut costs. After that, there will be opportunities.”
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