ECS first-quarter profit leaps 34.2% to $8.3m

As revenue soared to record heights.

In a release of its latest quarterly earning results, ECS Holdings Limited (ECS) announced that its net profit for the three months ended 31 March 2013 (1Q 2013) grew 34.2% to $8.3 million, outpacing the 20.9% revenue growth to $1.1 billion from a year earlier, as all three business segments contributed higher sales.

This is the highest-ever revenue recorded by the Group for any quarter.

The Singapore Exchange Mainboard-listed leading regional Info-Comm Technology (ICT) solutions provider said the increase in net profit to $8.3 million in 1Q 2013 arose mainly from the growth in revenue generated with only a moderate increase in operating costs.

Revenue growth was mainly contributed by Distribution segment, which increased by 22.6% or $151.5 million to $823.2 million from $671.7 million in 1Q 2012. It was achieved on the back of higher sales of mobility devices, consumer storage and peripheral products, partially offset by lower sales of notebooks, desktop PCs, supplies and imaging products.

Revenue for the higher-margin Enterprise Systems grew 15.5% to $257.4 million while IT Services revenue rose 39.5% to $9.8 million year-on-year, mainly due to increased sales of networking hardware, software products and enterprise storage.

On geographical basis, North Asia revenue grew 12.3% to $663.9 million in 1Q 2013 from $591.1 million in 1Q 2012, driven by stronger sales of mobility devices and software products. South East Asia revenue increased 37.3% to $426.5 million from $310.5 million, respectively, mainly from improved sales of consumer storage, desktop PCs, mobility devices and networking hardware products.

The revenue growth lifted gross profit to $39.9 million in 1Q 2013 from $36.3 million in 1Q 2012. However, gross profit margin declined to 3.7% from 4.0% due to higher sales contribution of lower-margin mobility devices, particularly in China, and consumer storage products in Singapore.

Total operating expenses were 4.0% higher in 1Q 2013 compared to 1Q 2012 due to higher marketing expenses and fair value loss on financial instruments. Despite this, total operating expenses as a percentage of revenue improved to 2.7% in 1Q 2013 from 3.2% in 1Q 2012 due to improved operational efficiencies.

Improvements in gross profit and cost and financial efficiencies lifted the Group’s net profit before interest and tax (PBIT) for 1Q 2013 by 34.3% to $13.3 million from $9.9 million in 1Q 2012. Year-on-year, the PBIT growth rates of all three business segments outpaced their respective revenue growth rates. The Enterprise Systems segment recorded the highest PBIT growth of 55.3% year-on-year, followed by IT Services and Distribution segments of 51.8% and 32.1%, respectively.

Cash and bank balances stood at $64.3 million while bank borrowings stood at $241.1 million with net gearing at 0.50 times as at 31 March 2013.

Earnings per share (EPS) rose to 2.26 cents in 1Q 2013 from 1.69 cents in 1Q 2012 while net asset value (NAV) per share increased to 96.54 cents as at 31 March 2013 from 92.83 cents as at 31 December 2012.

Mr. Ong Wei Hiam, Group Chief Executive Officer of ECS, said, “Revenue has crossed the $1.0 billion mark for the second consecutive quarter, underscoring the success of our efforts to increase the top line amidst a challenging market. We will continue to focus on expanding higher-margin Enterprise Systems to improve the gross margin as well as the bottom-line.”

Mr Tay Eng Hoe, Group Executive Chairman, said, “Although there will be a slowdown in the desktop PC and notebook sectors, we expect FY 2013 to be better than FY 2012 as global IT spending continues to be driven by double-digit growth for mobile devices, cloud services and enterprise storage. The Group will capitalise on this trend to grow our mobility devices business and expand further in emerging markets such as China and Indonesia to drive revenue and profitability growth.”

In view of the above, the Group is cautiously optimistic on the performance of 2Q 2013 and of FY 2013 that it will be better year-on-year.