Results Briefing. Results for the Second Quarter ended 30 September 2017

Transcription

1 Results Briefing Results for the Second Quarter ended 30 September 2017

2 Agenda 2 Executive Summary 1 2 Financial Highlights Operational Updates 3

3 EXECUTIVE SUMMARY

4 Executive summary 4 1 Steady revenue of S$363.0m for H1 FY17/18 despite a lacklustre retail environment Singapore remains committed to investing in store enhancement as well as omni-channel experience; online store and COURTS Megastore launch 8 Nov and 11 Nov respectively Malaysia undertakes a cost-efficiency exercise to right-size business; pulls back expansion ambition in view of sustained soft retail environment and upcoming legislative changes Indonesia continues to build scale with pop-up store strategy; 9 stores and 15 pop-up locations to date

5 FINANCIAL HIGHLIGHTS

6 Financial summary and key financial ratios 6 (S$m unless otherwise stated) Income statement H1 FY H1 FY Revenue Gross profit Net profit Basic EPS (cents) Fully diluted EPS (cents) As at As at Balance sheet 30 Sep Mar 2017 Cash and bank balances Trade and other receivables Unearned service charges Deferred revenue (net) Borrowings NAV per ordinary share (cents) Statement of cash flows 4 4 H1 FY1718 H1 FY Net cash generated from / (used in) operating activities (4.4) Net cash used in investing activities (1.9) (1.1) (3.0) (3.8) Net cash (used in) / provided by financing activities (13.0) 0.2 (16.5) (61.3) Notes: Q2, FY: Refers to the second(2nd) quarter from 1 July to 30 September and financial year from 1 April to 31 March respectively H1: Refers to the first (1st) half from 1 April to 30 September 1: Basic earnings per share is calculated by dividing the Group's profit after tax attributable to shareholders by the weighted average ordinary shares during the three months ended 30 September 2017 and the same period last year of 515,866,119 and 516,936,029 respectively. 2: Diluted earnings per share is calculated by dividing the Group's profit after tax attributable to shareholders by the weighted average ordinary shares during the three months ended 30 September 2017 and the same period last year of 521,724,419 and 521,502,029 respectively. 3: Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares of the issuer at the end of the current financial year reported on and immediately preceding financial year of 515,056,377 and 513,722,888 for respective period ends. 4: The Q2 FY16/17 comparative figures have been restated from what was previously announced to take into account (i) the retrospective adjustments arising from the adoption of FRS 115 Revenue From Contracts With Customers; and (ii) the reclassification of expense line items which has no impact on Group s profit before tax or net profit arising from these reclassification

7 Axis Title Revenue [4: Comparative figures have been restated been restated to take into account the retrospective adjustments arising from the adoption of FRS 115 Revenue From Contracts With Customers to be consistent with the presentation of the Group for the period ended 31 March ] 7 Revenue and EBIT margin Revenue (S$m) EBIT margin - % 5.0% 7.1% 7.2% 4.4% Singapore^ Malaysia S$m % 5.1% 6.1% Revenue EBIT % Notes: Q2: Refers to the second(2 nd ) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March ^ Singapore Revenue and EBIT margin includes COURTS Singapore and Home Lifestyle [Q4: Refers to the forth(4th) quarter from 1 January to 31 March] 3.0% MYR 7.9% 8.6% 8.1% 6.5% Revenue EBIT %

8 Revenue 8 Revenue by geography Revenue cash/credit mix % 34.9% 33.8% 30.6% % 65.1% 66.2% 69.4% S$m Singapore Malaysia Indonesia Total Sale of goods - credit and earned service charge income % Notes: Sale of goods - cash % Q2: Refers to the second(2nd) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March The Q2 FY16/17 comparative figures have been restated from what was previously announced to take into account (i) the retrospective adjustments arising from the adoption of FRS 115 Revenue From Contracts With Customers and (ii) the reclassification of expense line items. [Q4: Refers to the forth(4th) quarter from 1 January to 31 March]

9 9 Product range focused on 4 key segments Electrical Products IT Products Furniture Other Services % of sale of goods 48.6% (LY:45.7%) Major White Goods Vision Small appliances Audio 29.9% (LY:31.6%) Computers Accessories Photography Mobile 15.6% (LY:17.1%) Mattresses Bedroom furniture Dining room furniture Living room furniture Home office products 5.9% (LY:5.6%) Other services - Product replacement services - Cleaning - Installation - Repairs Warranty sales Connect Telco subscription plans Revenue cash/credit mix Indonesia* Singapore Malaysia Indonesia* 16.7% 18.2% 18.2% 15.3% 71.0% 71.4% 67.4% 71.0% 27.8% 35.0% 31.7% 48.7% 83.3% 81.8% 81.8% 84.7% 29.0% 28.6% 32.6% 29.0% 72.2% 65.0% 68.3% 51.3% Sale of goods - credit and earned service charge income % Sale of goods - cash % Sale of goods - credit and earned service charge income % Sale of goods - cash % Sale of goods - credit and earned service charge income % Sale of goods - cash % Notes: Q2: Refers to the second(2nd) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March * Sales for Indonesia commenced in Q3 FY1415. [Q4: Refers to the forth(4th) quarter from 1 January to 31 March]

10 Operating metrics 10 Sales per sq. ft. 1 Like-for-like sales growth 2 S$ 1,079 1,041 Singapore Singapore Singapore 5.1% 4.1% 2.3% % -1.0%-0.8% -3.1% -4.4% Exclude Corporate Sales Malaysia Include Corporate Sales MYR Malaysia 17.6% 7.8% %-4.1% -14.5%-13.0% Exclude Corporate Sales -29.1% -32.4% Include Corporate Sales Notes: Q2: Refers to the second(2nd) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March 1: Based on weighted average retail square footage and total net sale for each period 2: Like-for-like sales growth (comprising of net merchandise sales and current year service charge income generated) for a financial year is calculated based on stores which have been operating for the entire year/period over that preceding year/period. like-for-like sales is based on previously reported sales figures of Q2FY1617 and Q2FY1516. Q2FY1718 like-for-like sales is based on Q2FY1718 sales figures compared with restated sales figures. Indonesia not significant

11 Operating metrics 11 Gross profit and margin 33.8% 36.3% 35.9% 34.2% S$m Note: Q2: Refers to the second(2nd) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March The Q2 FY16/17 comparative figures have been restated from what was previously announced to take into account (i) the retrospective adjustments arising from the adoption of FRS 115 Revenue From Contracts With Customers and (ii) the reclassification of expense line items which has no impact on Group s profit before tax or net profit arising from these reclassification

12 Service charge income 12 Earned SCI Group Unearned SCI Group % 12.6% 12.5% 12.4% S$m % of net sales Mar Mar Sep-17 Earned SCI Singapore 1 5.2% 6.0% 5.7% 5.5% Earned SCI Malaysia 24.5% 27.8% 27.3% 31.4% 9.9% 6.6% Earned SCI Indonesia % 17.1% S$m S$m % of net sales % of net sales Notes: Q2: Refers to the second(2nd) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March 1. Excludes Net Sales from Home Lifestyle as there is no earned service charge income for Home Lifestyle S$m % of net sales Indonesia has yet to announce the adoption of FRS115 Revenue from Contracts with Customers. Adjustment is made at consolidation level to be aligned with the Group s accounting standards.

13 Deferred revenue (net) 13 Group S$m Mar-16 Mar-17 Sep-17 Singapore Malaysia S$m S$m Mar-16 Mar-17 Sep-17 Mar-16 Mar-17 Sep-17 Notes: Month-Year: Refers to the financial position of each balance sheet item as at each period end Indonesia s deferred revenue (net) is not significantq4: Refers to the forth(4th) quarter from 1 January to 31 March

14 Breakdown of expenses and EBITDA 14 Breakdown of expenses S$m S$m Others Depreciation & amortisation Bank Charges Tracing & referencing Interest expenses on borrowings Impairment loss on trade receivables Salaries and wages Rental on operating leases Distribution and marketing Note: There is reclassification of expense line items in Q2FY1617 which has no impact on Group s profit before tax or net profit arising from these reclassification 6.4% 48 Notes: Q2: Refers to the second(2nd) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March 63 EBITDA 2 Segment result by geographical location 3 8.5% 8.6% 15 EBITDA EBITDA margin (%) 5.7% 10 S$m (8) (11) (3) (2) Singapore Malaysia Indonesia 1: Others include head office costs and other expenses 2: EBITDA calculated as profit before tax add finance expense and depreciation and amortisation expense 3: Segment results are profit before other income, income tax and finance expense.

15 Jul 07 Nov 07 Mar 08 Jul 08 Nov 08 Mar 09 Jul 09 Nov 09 Mar 10 Jul 10 Nov 10 Mar 11 Jul 11 Nov 11 Mar 12 Jul 12 Nov 12 Mar 13 Jul 13 Nov 13 Mar 14 Jul 14 Nov 14 Mar 15 Jul 15 Nov 15 Mar 16 Jul 16 Nov 16 Mar 17 Jul 17 Delinquency rates and allowance for impairment loss on trade receivables 15 Jul % Jul % Singapore Note: PTCRI not significant 180+ days delinquency rates Malaysia Sep % Sep % The local credit environment in Malaysia remains challenging and we have stepped up aggressively on our collections efforts and tightened credit granting to manage the overall portfolio risk and mitigate the impact from impairment losses S$m Credit book assets - Gross Mar Mar Sep-17 Allowance for impairment loss on trade receivables 2.9% Singapore Malaysia Indonesia 2.3% 2.4% Mar-16 Mar-17 Sep-17 Allowances for impairment loss on trade receivables (S$m) % of trade receivables at balance sheet date Notes: Month-Year: Refers to the financial position of each balance sheet item as at each period end Mar-16 Mar-17 Sep-17 Allowances for impairment loss on trade receivables (S$m) % of trade receivables at balance sheet date 0.2 Mar Mar Sep-17 Allowances for impairment loss on trade receivables (S$m) % of trade receivables at balance sheet date

16 Impairment loss on trade receivables charged to Income Statement 16 Singapore Malaysia 5.5% Indonesia 3.4% 15.4% 2.0% 0.8% 0.6% 3.2% % 4.1% 5.6% % 1.3% Impairment loss charged to Income Statement (S$m) Impairment loss on trade receivables as a percentage of average portfolio Impairment loss charged to Income Statement (S$m) Impairment loss on trade receivables as a percentage of average portfolio Impairment loss charged to Income Statement (S$m) Impairment loss on trade receivables as a percentage of average portfolio Notes: Q2: Refers to the second(2nd) quarter from 1 July to 30 September. FY: Refers to the financial year from 1 April to 31 March

17 Working capital management 17 Trade payable days Inventory days 100 Days 100 Days Mar-16 Mar-17 Sep Mar-16 Mar-17 Sep-17 Notes: Month-Year: Refers to the turnover days for each period end

18 Borrowings Facility Facility amount Amount drawn down as at 31 Mar 17 Amount drawn down as at 30 Sep 17 Available headroom As at 30 Sep 17 Multicurrency Medium Term Note (CAL) Expiry: 15th Mar 2019 S$ 500 mil S$ %p.a. S$ %p.a. S$ 425 mil Asset Securitisation Programme (CSPL) (1) Revolving Period expiring: Jan 2019 (with possibility of 1 year extension at lenders option) Amortisation Period: 2 years after end of Revolving Period S$ 150 mil S$ 59.4 mil S$ 57.5 mil S$92.5 mil Syndicated Senior Loan (CMSB) (2) Revolving Period expiring: Feb 2019 Amortisation Period: 3 years after end of Revolving Period RM 600 mil RM 456 mil RM 459 mil RM 141 mil Various Term Loans (PTCRI) Various expiry dates ranging from 2019 to 2020 IDR bil IDR263.7 bil IDR267.2 bil _ 1 CSPL Asset Securitisation : 1-mth SOR is hedged with Interest Rate Cap (strike rate of 2.5%) for notional amount of SGD70M 2 CMSB Syndicated Senior Loan: RM300M is fixed at 6.3% p.a

19 OPERATIONAL UPDATES

20 Grand Opening of COURTS Jurong Point in Singapore 20 Grand opening of COURTS Jurong Point on 23 September 2017, one of the first stores in COURTS Singapore s S$10m investment in store refurbishments

21 COURTS Megastore Transformed 21 Grand opening on 11 November 136,000 square feet of brand new retail concepts, end-to-end home solutions and the widest range of products for every Singapore apartment home Reinforced price promise with Better Living, Better Prices brand campaign

22 COURTS Online Now Larger & Faster 22 17,000 SKUs at launch Intuitive search Faster check-out Now with GURU Singles Day, Black Friday and Cyber Monday Promotions

23 GURU by COURTS Services. Warranties. Repairs. 23 Over 100 services, including smart homes link-up, mobile phone and laptop repair, sofa cleaning and washing machine servicing Professional and certified service Competitive up to 90 days warranty Available on COURTS Online

24 Furniture Transformation 24 International styles at affordable prices Unprecedented degree of customisation across categories, at no premium Tailored for modern HDB apartment living with space saving and multi-functional designs

25 Malaysia Halt Expansion Plans, Focus on Productivity Drive 25 Continued weak consumer sentiment for retail sector Prudent approach towards credit sales, given legislative changes under the Consumer Protection (Credit Sale) Regulations 2017 which will be in operation from January 2018, as well as challenging collections environment

26 Indonesia Continues with pop up store strategy to build scale 26 Opening of COURTS Tamini Square, 12,000 square feet of affordable IT, electrical and furniture products Six pop-up stores opened in Q2 FY17/18, bringing the total to 15 Now present in 24 locations

27 APPENDIX

28 Unaudited Results for the Second Quarter ended 30 September 2017 Group s revenue of $176.4 million for Q2 FY17/18 was 1.4% or $2.6 million lower than Q2 FY16/ Group Q2 Q2 % FY17/18 FY16/17 Change (Restated*) S$'000 S$'000 Revenue 176, ,015 (1.4) Cost of sales (116,020) (114,711) (1.1) Gross profit 60,430 64,304 (6.0) Other income and other gains/(losses) - net 1,442 1, Expenses - Distribution and marketing (13,472) (14,012) Administrative (40,685) (38,396) (6.0) - Finance (4,991) (5,236) 4.7 Profit before income tax 2,724 7,735 (64.8) Income tax expense (1,214) (1,755) 30.8 Net profit 1,510 5,980 (74.7) * The Q2 FY16/17 comparative figures have been restated from what was previously announced in the Q2 FY16/17 announcement, to take into account (i) the retrospective adjustments arising from the adoption of FRS 115 Revenue From Contracts With Customers ( FRS 115 ) and (ii) reclassification of expense line items as detailed in Note 5 of Q4 FY16/17 announcement. Singapore revenue, which contributed 71.1% of the Group s revenue in Q2 FY17/18, reported an increase of 5.9% compared to Q2 FY16/17, mainly due to higher sales of goods. Malaysia revenue, which contributed to 25.1% of the Group s revenue, reported a 19.7% (in presentation currency) decrease and a 15.9% (in RM currency) decrease in Q2 FY17/18 as compared to Q2 FY16/17 mainly due to lower sales of goods and earned service charge income. Indonesia revenue, which contributed to 3.8% of the Group s revenue, registered a 24.6% (in presentation currency) and 26.0% (in Rupiah currency) increase in Q2 FY17/18 compared to Q2 FY16/17 mainly due to contributions from newly opened stores. Gross profit for Q2 FY17/18 decreased by 6.0% or $3.9 million, resulting from lower revenue and gross profit margin compared to Q2 FY16/17. Gross profit margin decrease from 35.9% in Q2 FY16/17 to 34.2% in Q2 FY17/18 mainly due to lower merchandise margin across all product categories in Singapore from pre-renovation sale promotions and lower credit sales mix across the Group. This is offset by higher gross profit margins in Malaysia and Indonesia. Distribution and marketing expenses decreased by $0.5 million to $13.5 million in Q2 FY17/18 from $14.0 million in Q2 FY16/17. This decrease was mainly due to lower advertising cost in Singapore and Malaysia and is partially offset by higher branch salaries for newly opened stores in Indonesia. As a percentage of revenue, distribution and marketing expenses decreased to 7.6% in Q2 FY17/18 from 7.8% in Q2 FY16/17. Administrative expenses increased by by $2.3 million to $40.7 million in Q2 FY17/18 from $38.4 million in Q2 FY16/17. The increase was mainly due to higher allowance for impairment of trade receivables and one-time recognition of a reversal of overpayment on GST as previously announced in Q2 FY16/17 announcement. Finance expenses decreased by S$0.2 million to $5.0 million in Q2 FY17/18 from $5.2 million in Q2 FY16/17 mainly due to lower interest expenses in Malaysia and Indonesia. Income tax expenses decreased by $0.6 million to $1.2 million in Q2 FY17/18 from $1.8 million in Q2 FY16/17. This was mainly due to lower taxable profits and non-tax deductible expenses from Singapore and Malaysia.

29 Unaudited Balance Sheet as at 30 September 2017 Group 30 Sep Mar 17 ** S$'000 S$'000 ASSETS Current assets Cash and bank balances 91,123 98,728 Trade and other receivables 197, ,800 Deferred costs 8,275 8,284 Inventories 84,293 78,780 Current income tax recoverable , ,592 Cash and bank balances decreased by $7.6 million to $91.1 million as at 30 September 2017 from $98.7 million as at 31 March The decrease is mainly as a result of payment of dividends in August The Group s trade and other receivables (current and non-current) increased by $14.4 million to $501.4 million as at 30 September 2017 from $487.0 million as at 31 March 2017 due to credit sales in first half of FY17/18. Allowance for impairment of trade receivables as at 30 September 2017 was $27.8 million, representing 5.5% of trade receivables, as compared to $26.1 million as at 31 March 2017 representing 5.4% of trade receivables. 29 Non-current assets Derivative financial instruments Trade and other receivables 303, ,246 Deferred costs 12,468 11,271 Investments in subsidiaries - - Property, plant and equipment 19,258 20,906 Intangible assets 23,130 23,231 Deferred income tax assets 20,953 20, , ,455 Total assets 761, ,047 LIABILITIES Current liabilities Derivative financial instruments Trade and other payables 153, ,336 Deferred revenue 27,215 27,167 Current income tax liabilities 2,930 5,347 Borrowings Deferred income 3,878 2, , ,242 Non-current liabilities Derivative financial instruments Trade and other payables Deferred revenue 40,396 37,604 Borrowings 305, ,468 Deferred income 1,797 1,733 Deferred income tax liabilities 3,053 2, , ,275 The Group s inventories increased to $84.3 million as at 30 September 2017 from $78.8 million as at 31 March 2017 stocking up for upcoming trade shows. Deferred costs relate to the incremental costs incurred by the Group to obtain or fulfil other services contracts which are capitalised as assets. The deferred costs balance would be amortised and recognised as expenses on a basis consistent with the revenue recognition of the other services to which the costs relates. Costs which are not incremental to the other services contracts are expensed as incurred. Total deferred costs increased to $20.7 million as at 30 September 2017 from $19.6 million as at 31 March 2017 due to sales of other services during the financial year. Deferred revenue relates to unearned revenue on other services contracts for which the other services have yet to be rendered. The deferred revenue balance would be recognised as revenue as the related services are rendered. Total deferred revenue increased to $67.6 million as at 30 September 2017 from $64.8 million as at 31 March 2017 due to sales of other services during the financial year. Derivative financial instruments represent the carrying amount of interest rate cap and currency swaps that the Group has entered into to hedge its exposure to floating interest rate and exchange rate fluctuations on its bank borrowings. The Group has adopted hedge accounting in respect of the currency swaps. The derivative financial instruments is in a net asset position with lower fair value loss in first half of FY17/18 mainly attributed to the strengthening of Singapore dollar against Indonesia rupiah during the financial reporting period. Total liabilities 539, ,517 NET ASSETS 221, ,530 EQUITY Share capital 265, ,332 Treasury shares (19,103) (19,669) Other reserves (42,400) (44,350) Retained profits 18,136 17,217 Total equity 221, ,530 The total borrowings of $305.9 million as at 30 September 2017 remains consistent compared to $304.0 million as at 31 March The total borrowings mainly consist of S$75 million three-year unsecured fixed rate notes and term loans in COURTS Asia Ltd ( CAL ), the Asset Securitisation Programme 2016 in Singapore, Syndicated Senior Loan in Malaysia, and term loans in Indonesia. The increase in net deferred income tax assets as at 30 September 2017 was mainly due to the recognition of tax losses from Indonesia subsidiary. [** The 31 March 2017 comparative figures, as previously announced in the Q4 FY16/17 announcement, has taken into account reclassification of trade and other receivables between current and non-current assets.]

30 Unaudited Statement of Cash Flows for the Second Quarter ended 30 September 2017 Group Group Q2 Q2 H1 H1 FY17/18 FY16/17 FY17/18 FY16/17 S$'000 S$'000 S$'000 S$'000 Cash flows from operating activities: Net profit 1,510 5,980 7,560 14,827 Adjustments for: Income tax expense 1,214 1,755 2,440 5,025 Depreciation and amortisation 2,913 3,180 5,840 6,542 Amortisation of deferred income (623) (704) (1,206) (1,331) Interest expense 4,321 4,518 8,652 9,282 Interest income (822) (650) (1,215) (1,499) Borrowing costs ,531 1,367 Loss on disposal of property, plant and equipment and intangible assets (net) Share-based compensation Changes in fair value of derivative financial instruments Foreign currency translation differences (104) Operating cash flow before working capital changes 9,625 15,296 24,455 34, Changes in working capital - Inventories 994 1,133 (5,230) (8,826) - Trade and other receivables 4,963 (10,134) (9,852) (30,059) - Deferred costs (449) (311) (1,077) (592) - Trade and other payables 10,450 11,034 7,434 1,675 - Deferred revenue 324 1,147 2,356 2,315 Cash generated from operations 25,907 18,165 18,086 (558) Income tax paid (net) (3,127) (2,076) (5,595) (3,863) Net cash generated from / (used in) operating activities 22,780 16,089 12,491 (4,421) Cash flows from investing activities Additions to property, plant and equipment (2,245) (1,429) (3,635) (4,759) Acquisition of intangible assets (476) (332) (525) (551) Proceeds from sale of property, plant and equipment Interest received ,204 1,476 Net cash used in investing activities (1,907) (1,100) (2,956) (3,819) Cash flows from financing activities Repayment of bond issue (125,120) Repayment of finance lease liabilities (26) (177) (62) (402) Proceeds from term loan ,894 Repayment of term loan (116) (115) (235) (230) (Repayment of) / proceeds from syndicated senior loan (122) 3,155 1,291 5,384 (Repayment of) / proceeds from loan on asset securitisation (45) 10,829 (1,892) 69,207 (Decrease) / increase in fixed deposits pledged as securities for banking facilities (375) Purchase of treasury shares - (1,152) - (2,384) Payment of borrowing cost (429) (413) (1,023) (865) Interest paid (5,207) (5,403) (8,463) (9,093) Dividends paid (6,641) (6,671) (6,641) (6,671) Net cash (used in) / provided by financing activities (12,961) 218 (16,496) (61,321) For the purposes of the consolidated statement of cash flows, the cash and cash equivalents comprise the following:- 30-Sep-17 S$' Sep-16 S$'000 Cash and bank balances 49,997 52,726 Fixed deposits 41,126 23,870 91,123 76,596 Less: Fixed deposits pledged as securities for banking facilities (4,383) (4,780) Cash and cash equivalents per consolidated statement of cash flows 86,740 71,816 Net Increase / (decrease) in cash and cash equivalents 7,912 15,207 (6,961) (69,561) Cash and cash equivalents as at beginning of financial period 79,016 56,660 93, ,770 Effects of currency translation on cash and bank balances (188) (51) (116) (393) Cash and cash equivalents as at end of financial period 86,740 71,816 86,740 71,816

31 Q & A To access the results presentation and briefing which will be available by 16 November 2017, visit: 31