SINGAPORE (May 30): Courts Asia, the retailer of IT, household electrical and furniture goods, reported earnings of $8.1 million for FY17/18, down 66.1% from its FY17/16 earnings of $23.7 million a year ago on lower gross profit margin and an overall revenue decline due to buisiness headwinds faced in Malaysia.
For the latest quarter ended March, the group swing into 4Q losses of $3 million from $4 million in earnings in the same period a year ago.
Revenue for the full year fell 3.7% to $713.1 million from $740.5 million previously due to lower contributions from its outlets in Malaysia, due to lower sales of goods and earned service charged income.
The group nonetheless posted positive revenue growth from Singapore and Indonesia, with the former due to higher sales of good from the relaunch of Courts’ online platform and the re-opening of the Tampines megastore in Nov 2017, while the latter came from contributions from newly-opened stores.
While distribution & marketing as well as finance expenses remained relatively stable, administrative expenses notably grew 5.4% to $45.4 million due to higher allowance for the impairment of trade receivables.
This was offset in part by lower branch occupancy costs in Singapore and Malaysia.
Notwithstanding a challenging retail environment over the short term, Courts says it is investing with a longer-term outlook and will continue to focus on optimising costs, refreshing its store experience and enhancing its omni-channel customer experience.
Geographically, the group says it is encouraged by the outlook in Singapore but remains cautiously optimistic in Malaysia.
It adds that it remains committed to the Indonesian market where it will focus on managing its credit collections costs before resuming expanding its store network in the country.
Terence O’Connor, executive director and group CEO, attributes the latest year’s drop in profitability to the headwinds faced in Malaysia due to the introduction of the Consumer Protection (Credit Sale) Regulations 2017.
“Interest rates were capped at 15% per annum along with new compliance processes which led to a revenue drop. In addition, faced with a more challenging collections environment in Malaysia, the impairment allowance for trade receivables increased by $9.7 million over the previous year. The fall in revenue, coupled with an increased credit cost and a more prudent credit sanctioning approach in Malaysia, affected our group’s profitability,” says O’Connor.
Nonetheless, the CEO underscores Courts’ healthy cash position and says the group will continue to “keep a tight lid” on cost management to steer through the near-term.
Shares in Courts closed 2.3% higher at 22 cents on Wednesday.
