: To submit the Management Discussion and Analysis for the financial statements for the year ended 30 June 2011

Size: px

Start display at page:

Download ": To submit the Management Discussion and Analysis for the financial statements for the year ended 30 June 2011"

Julia Gilmore
5 years ago
Views:

1 MBK /12 26 August 2011 Subject Attention : To submit the Management Discussion and Analysis for the financial statements for the year ended 30 June 2011 : The President of the Stock Exchange of Thailand Reference : The Company letter no. MBK /12 dated 26 August 2011 Referring to the financial statements for the year ended 30 June 2011 that were submitted to you as per our letter above, MBK Public Company Limited would like to submit our Management Discussion and Analysis for the financial statements for the year ended 30 June 2011 as attached. Yours sincerely, (Mr.Suvait Theeravachirakul) President and CEO MBK Public Company Limited and its subsidiaries

2 Management discussion and analysis of the financial statements For the year ended 30 June Business highlight Acquisition of new subsidiaries 1.1 On 25 November 2010, MBK Public Company Limited ( the Company ) invested in the establishment of a new company, named X-Gen Premium Company Limited, amounting to Baht 1.0 million. The Company wholly owned its share capital. The new company engages in a motorcycle dealer business in order to support the motorcycle hire-purchase business which operates by a subsidiary. 1.2 On 21 February 2011, the Company acquired ordinary shares in Siam Delice Company Limited from an associate, representing 65.36% of direct and indirect holdings. The Company paid for the purchase of shares and repaid for the loans on behalf of such company for a total amount of Baht 39.1 million. The Company is able to exercise control over the financial and operating policies of this company, making such company as a subsidiary. The acquisition of the subsidiary is to expand the business of shopping center and property for lease which is the core business of the Group. Currently, the project is under a designing process for construction as a new shopping center. 1.3 On 1 April 2011, the Company acquired the entire ordinary shares in Lanta Land Development Company Limited, a subsidiary, which operates hotel business under Layana Resort and Spa on Koh Lanta in Krabi. The Company paid for the purchase of shares amounting to Baht million. The purchase of this subsidiary is to expand the group hotel business. The operating results of the three subsidiaries as mentioned above for the period ended 30 June 2011 do not significantly impact the Group consolidated net income. 2 Analysis of operating results

3 2.1 Overall Revenue The operating results of MBK Public Company Limited and its subsidiaries ( the Group ) for the years ended 30 June 2011 and 2010 are as follows: (Unit: Million Baht) For the years ended 30 June Increase/(Decrease) From normal operations 8, , , % Gain on sales of investments 5.4 2,233.5 (2,228.1) (99.8%) Total revenue 8, , % 1) Continuing operations - From normal operations 1, % - Gain on sales of investment net tax 3.8 1,582.2 (1,578.4) (99.8%) Total 1, ,578.0 (1,288.2) (50.0%) 2) Discontinued operations 3.7 (31.2) % Total net income 1, ,546.8 (1,253.3) (49.2%) Earnings per share (Baht) (8.28) (49.2%) Revenue The total revenue from normal operations (excluded gain on sales of investments) for the year ended 30 June 2011 increased significantly by Baht 2,271.3 million or 38.6% due to the growth in revenue of all business units. The major factors were as follows: The rice business increased its revenue by Baht million because of the higher sales volume, particularly in export market. After the grand opening of Paradise Park Shopping Center in August 2010, the revenue increased by Baht million. MBK Shopping Center increased its revenue by Baht million mainly due to the increase in annual rental rate adjustment and the discount for rental and service granted to the tenants who were affected by the unrest political situation during the fourth quarter of last year. The hotel business increased its revenue by Baht million because in last year, the hotel business was affected by the major renovation of Pathumwan Princess Hotel and the unrest political situation. The golf business increased its revenue by Baht million

4 due to the opening of Reverdale Golf and Country Club in Pathumthani since June The real-estate development for sales increased its revenue by Baht 58.2 million which mainly derived from the residential project The Indy II in Phuket. Finally, the acquisition of two new subsidiaries in May 2010 and December 2010, who engage in the hire purchase of motorcycle business and a motorcycle dealer business, boosted revenue of the Group increased by Baht million and Baht 69.2 million, respectively Net income The net income attributable to equity holders of the parent from normal operations for the years ended 30 June 2011 and 2010 were Baht 1,293.5 million and Baht 2,546.8 million, respectively, which decreased by Baht 1,253.3 million or 49.2%. The main factor was that, the same period of last year, the Group recognized gain on sales of investment in marketable securities available for sales (net of related tax impact) amounting to Baht 1,582.2 million. However, if the net income excludes such gain on sale of investment, the net income would increase by Baht million or 33.7%. In overall, the performance of all business units satisfactorily improved, whereas the operating results of the hotel business decreased due to the higher depreciation charge from the costs of major room renovation of Pathumwan Princess Hotel Discontinued operations On 30 August 2010, the Group discontinued the businesses of bran oil plant and power generation plant because the husk which is the main raw material cost of production increased dramatically. As a result, the discontinued operations were one of the factors that improved the group performance. The significant movements in revenue and expenses for the years ended 30 June 2011 in comparison with 2010 were as follows: 2.2 Revenue The main revenue of the Group are divided into 4 categories, which are revenue from sales, revenue from service and rental, revenue from hotel operations, and revenue from hire purchase. The details of significant movements were as follows:

5 (a) Revenue from sales Revenue from sales mainly comprised of the revenue from the subsidiaries in the businesses of rice, real-estate development for sales, retail business in shopping center, and sales of food and beverage. Revenue from sales for the year ended 30 June 2011 increased sharply by Baht 1,056.7 million or 50.8% due to the major factors as follows: The rice business increased in revenue by Baht million due to the increase in sales volume, especially the export of rice to foreign countries. The retail business in Paradise Park Shopping Center commenced its business operations since June 2010 and the grand opening was held in August Therefore, sales of goods increased by Baht million when compared to last year. The revenue from real-estate development for sales in Phuket increased by Baht 58.2 million which was mainly from the revenue recognition of the residential project The Indy II in the first quarter period ended 30 September The new subsidiary who engages in a motorcycle dealer business generated revenue for the current period amounting to Baht 69.2 million. (b) Revenue from service and rental Revenue from service and rental principally comprised of the revenue from property for lease and service, and from the golf course businesses. Revenue from service and rental for the year ended 30 June 2011 increased by Baht million or 30.9%. The major reasons were as follows:

6 The grand opening of Paradise Park Shopping Center resulted in higher revenue from service and rental by Baht million. MBK Shopping Center increased its revenue by Baht million due to the annual rental rate adjustment in accordance with the economic condition. In addition, MBK Shopping Center Center were affected by unrest political situation during March to May 2010 in Bangkok business areas and the traffic routes around MBK Shopping Center were closed down for 9 days. To assist the tenants, the Company reduced the rental and service fees amounting to Baht 62.6 million. Golf business revenue increased by 83.7 million. Such increased amount included the revenue of Baht 69.5 million generated from a new golf course Riverdale Golf and Country Club in Pathumthani which officially opened since June The office building, that the Group acquired in June 2010 to expand the property for lease and service business, generated service and rental income increased by Baht 51.1 million. (c) Revenue from hotel operations Revenue from hotel operations for year ended 30 June 2011 increased by Baht million or 13.4%. Such increase amount included the revenue of Baht 19.2 million generated from the new hotel acquired on 1 April 2011 named, Layana Resort and Spa located in Koh Lanta, Krabi. Furthermore, in the current year, the recovery stage of tourism industry from the global economic slowdown, and in the last year, the impact from the major room renovation of Pathumwan Princess Hotel and the local political unrest situation, were the main factors that caused the increase in occupancy rate and hotel revenue in current year. (d) Revenue from hire-purchase Revenue from hire-purchase for the year ended 30 June 2011 increased by Baht million due to the acquisition of the new subsidiary who engages in the hire purchase of motorcycle business since 1 May Cost of sales and gross margin

7 The major cost of sales and gross margin of the Group are divided into 3 categories based on revenue types which are cost of sales, cost of service and rental, and direct hotel operating expenses. The details of significant movements were as follows: (a) Cost of sales and gross margin Cost of sales for the year ended 30 June 2011 increased significantly by Baht million or 48.4%. In overall, cost of sales varied according to the growth of sales. The average gross margin went up from 11.0% to 12.4% or increased by 1.4% when compared to the same period of last year. The average gross margin of rice business declined due to the reduction in selling price according to the market condition. Conversely, the increase in new businesses in the current year, that engages in the retail business in Paradise Park Shopping Center and, that engages in sales of goods and food in the Riverdale Golf and Country Club, generated higher gross margin which resulted in a better overall gross margin. (b) Cost of service and rental, and gross margin Cost of service and rental for the year ended 30 June 2011 increased by Baht million or 34.2% which was in line with the increase in revenue. The average gross margin went down from 57.4% to 56.4% or decreased by 1.0% when compared to the same period of last year. There were two factors affected to the gross margin as follows: Due to the opening of the new golf course in Pathumtani in June 2010, there were sales promotion and discount offered to the golfers to promote the new golf course, whereas the major operating costs, particularly depreciation charge, were mainly fixed costs and thus, lower the gross profit rate. On the other hand, the opening of Paradise Park Shopping Center in August 2010 generated higher revenue while the major costs were mainly fixed which resulted in a better gross margin when compared to last year. (c) Direct hotel operating expenses and gross margin Direct hotel operating expenses for the year ended 30 June 2011 increased by Baht million or 23.2% which was in line with the increase in revenue. The average gross margin reduced from 31.4% to 25.5% or decreased by 5.9% when compared to the same period of last year due to the higher depreciation charge, which was fixed cost, from the costs of major room renovation of Pathumwan Princess Hotel.

8 2.4 Selling and administrative expenses Selling and administrative expenses for the year ended 30 June 2011 increased significantly by Baht million or 56.4%. The major factors were that the consolidated financial statements of the new subsidiary, who engages in the hire purchase of motorcycle business, affected the increase of Baht million in selling and administrative expenses for the year. Furthermore, the expenses related to the grand opening of Paradise Park Shopping Center (such as marketing and promotion, staff costs and other related expenses) for the year increased by Baht million. The changes in other selling and administrative expenses were in line with the growth of revenue and normal economic conditions. 3 Analysis of financial position The significant movements in assets, liabilities and shareholders equity of the Group as at 30 June 2011 when compared with the balance as at 30 June 2010 were as follows: (Unit: Million Baht) 30 June June 2010 Increase/(decrease) Total assets 28, , , % Total liabilities 15, , , % Equity attributable to Company's shareholders 11, , % Minority interests - equity attributable to minority shareholders of subsidiaries (30.8) (3.3%) 3.1 Assets Current investments Current investments represented investments in debt securities and equity securities which are classified as available-for-sale marketable securities, decreased by Baht million or 7.6% because, during the year ended 30 June 2011, the Group purchased investment in equity securities of Baht 71.7 million and sold investments in subordinated debentures of Baht million. In addition, the changes in fair values of the securities on hand at 30 June 2011 increased by Baht 65.3 million.

9 3.1.2 Trade accounts receivable Trade accounts receivable increased by Baht million or 51.9% which was in line with the increase in revenue Inventories Inventories decreased by Baht million or 11.3%. The main factors were that the rice business postponed its raw material purchase due to the relocation of the operations from Pathumthani to a new factory located at Sikhio District in Nakhon Ratchasima, resulted in the decrease of inventory in the amount of Baht million. In addition, the cost of real-estate development for sales for projects in Phuket decreased by Baht 40.7 million due to the economic downturn. On the other hand, the construction progress of land development for residential projects in Patumthani increased by Baht 29.7 million Secured long-term loans to other persons and companies Secured long-term loans to other persons and companies (including current portion) increased sharply by Baht million or 77.7% due to the growth of the finance business Property, plant and equipment - net Property, plant and equipment - net, increased by Baht million or 7.8%. The significant movements for the year ended 30 June 2011 were as follows: Description Million Baht 1 The construction progress of office building and Community Mall under the new project The Nine Neighborhood Center 2 Property, plant and equipment net, from the acquisition of the new subsidiary who operates hotel business in Krabi 3 The costs of major renovation of Paradise Park Shopping Center 258.8

10 4 The construction costs and equipment for The Riverdale Golf and Country Club in Patumthani 5 The costs of renovation of MBK Shopping Center, expansion in office 76.8 space and the new ERP (Enterprise Resource Planning) project 6 The construction costs for a hotel building Tinidee@Phuket, landscape 71.1 decoration, and equipment for the two golf courses in Phuket, i.e., The Loch Palm Golf Course and The Red Mountain Golf Course 7 The construction costs for building, machinery and equipment for the new 34.5 factory at Sikhio District in Nakhon Ratchasima for the rice business 8 The renovation of hotel rooms of Pathumwan Princess Hotel The depreciation charge for the year (833.7) 10 The transfer of plant and equipment for discontinued operations, such as (121.8) bran oil plant and electric power plant, to non-current assets held for sale 11 Others Total net movements Liabilities Bank overdrafts and short-term loans from financial institutions Bank overdrafts and short-term loans from financial institutions decreased by Baht million or 53.3%. For the year ended 30 June 2011, the rice business repaid its partial short-term loans amounting to Baht million by using cash inflow from sales of investment and from its operations. In addition, Paradise Park Shopping Center repaid its partial short-term loans amounting to Baht million by using cash inflow from intercompany borrowing and from the Group operations Long-term loans from financial institutions Long-term loans from financial institutions (including current portion) increased by Baht 73.0 million or 5.6%. The increase (net of repayment) of Baht million was a subsidiary borrowing to be spent in renovation of shopping center. A decrease of Baht 27.0 million was the loan repayment of a subsidiary under regular repayment schedule.

11 3.2.3 Long-term debentures Long-term debentures (including current-portion) net of issuance of debenture expense went up by Baht 1,997.2 million or 39.9%. During the year ended 30 June 2011, the Company issued the long-term unsubordinated and unsecured debentures amounting to Baht 5,000.0 million. The purposes of issuing the debentures were for the payment of the previous debentures of Baht 3,000.0 million which were due for repayment in the same period, and the remaining balance was reserved for the Group business expansion Corporate income tax payable Corporate income tax payable went down significantly by Baht million or 70.8% mainly due to the recognition of significant gain on sales of marketable securities available for sales in the same period of last year Advance rental and service deposits Advance rental and service deposits (including current portion due within one year) decreased by Baht million or 6.5%. mainly represented the advance rental income received from the tenants under short-term contracts of MBK Shopping Center who had partially changed to long term lease agreements and the tenants were requested to pay the advance rental for long-term contract per schedule determined in the lease agreements. For the year ended 30 June 2011, the Company received money from the tenants amounting to Baht million and amortised as revenue based on a straightline basis over the long-term lease periods amounting to Baht million. 3.3 Equity attributable to Company s shareholders Equity attributable to Company s shareholders increased by Baht million or 5.2%. The significant movements for the year ended 30 June 2011 were as follows: a) The net income from operation attributable to equity holder of the parent of Baht 1,293.5 million.

12 b) The increase of Baht 49.6 million in the unrealised gain on available-for-sale marketable securities, net of the related deferred tax impact, was due to the higher stock market price. c) The decrease of Baht million derived from dividend payment for the operation of the second half of the year ended 30 June 2010 and the first half year of the year ended 30 June Analysis of the liquidity 4.1 Statement of cash flows Cash flows of the Group for the years ended 30 June 2011 and 2010 are summarised in table below: (Unit: Million Baht) For the years ended 30 June Cash flows increase/(decrease) Net income from operating activities before changes (54.0) (6.5%) in operating assets and liabilities Net movements in operating assets and liabilities (11.8) (38.3) % Net cash flows from operating activities (27.5) (3.4%) Net cash flow used in investing activities (1,554.0) (172.9) (1,381.1) (798.8%) Net cash flows received from financing activities ,744.5 (915.8) (52.5%) Net increase/(decrease) in cash and cash equivalents Cash flows from operating activities ,370.4 (2,324.4) (98.1%) The significant movements in cash flows from operating activities and operating assets and liabilities are as mentioned in the analysis of operating results and financial status above.

13 4.1.2 Cash flows from investing activities Net cash flows used in investing activities increased by Baht 1,381.1 million or 798.8% due to the following major reasons:- Factors in cash increases: a) In the fourth quarter of last year, there was cash paid for the purchase of vacant land plots for future development, and leasehold right of land and building amounting to Baht million. b) Cash paid for acquisition of new subsidiaries decreased by Baht million. c) In the first quarter of last year, there was cash paid for the registration fee of leasehold rights of land and building amounting to Baht million. d) Cash outflow in the purchases of property, plant and equipment decreased by Baht million due to the significant projects incurred since last year such as the major renovation projects of Paradise Park Shopping Center and Pathumwan Princess Hotel. Factors in cash decreases: e) Cash proceeds from sales of investments in marketable securities (net of cash paid for purchase investments) decreased by Baht 2,367.3 million. f) Cash outflow for lending of secured long-term loans (net of cash receipts) increased by Baht million from the expansion of the finance business Cash flows from financing activities Net cash flows received from financing activities declined by Baht million or 52.5% mainly due to the following major reasons:- Factors in cash increases: a) Cash receipts of long-term debentures (net of repayment) increased by Baht 1,994.4 million due to the issuance of debentures during the current year as mentioned in No Long-term debentures.

14 b) Cash receipts of short-term loans from related parties (net of repayment) increased by Baht million was mainly due to the fact that a subsidiary increased its borrowing in order to repay the short-term loans from a financial institution. Factors in cash decreases: c) Cash received from advance rental deposit for the long-term lease went down by Baht 2,344.3 million due to the changes of short-term lease to long-term lease for the certain tenants in MBK Shopping Center during the same period of last year. The tenants were requested to pay the advance rental for long-term contracts per schedule determined in the lease agreements. d) Cash receipts of long-term loans (net of repayment) decreased by Baht million was mainly due to the fact that a subsidiary increased its borrowing during last year in order to be spent in renovation of Paradise Park Shopping Center. e) Cash receipts of short-term loans from financial institutions (net of repayment) decreased by Baht million due to the partial repayment as mentioned in No Bank overdrafts and short-term loans from financial institutions.

MBK Public Company Limited and its subsidiaries

MBK Public Company Limited and its subsidiaries Management discussion and analysis of the financial statements For the third quarter period ended 31 March 2010 1 Analysis of operating results 1.1 Overall