Courts Asia cutting costs to prop up bottom line

As Singapore sales plunge 15% in 1H15.

Core markets are expected to remain weak due to poor consumer sentiment.

A report by Maybank Kim Eng says that 1HFY15 sales in Singapore plunged 15% YoY. Malaysia’s failed to pick up despite Hari Raya celebrations. In fact, revenue fell 10% YoY in 2Q, as the effects of its earlier credit campaign faded. With Malaysian GST introduction still ahead and Singapore property prices slipping further, demand in both markets is expected to remain lacklustre.

Here’s more from Maybank Kim Eng:

Courts has taken extreme measures to prop up its bottom line. It has cut its workforce by 10%, closed loss-making branches, rationalised its tradeshow schedule and outsourced lower-value operations. Early results are encouraging. Gross margins rose from 29.5% in 1HFY14 to 32.7% in 1HFY15.

Courts is struggling to increase its revenue amid poor consumer sentiment in its key markets. In addition, it incurred high expenses in 1HFY15 to restructure its business and break into the Indonesian market. SG&A rose from 23% of revenue in 1HFY14 to 28% in 1HFY15. As a result, net profit plunged 52% YoY to SGD6.8m, despite higher gross margin of 32.7%.