Courts Asia net profit up 5.1% to S$7m

Newly relaunched stores revitalize revenues.

Mainboard-listed retailer Courts Asia Limited (Courts Asia) posted an earnings increase for the first quarter ended 30 June 2013 (Q1FYMAR2014) on steady revenue growth.

Net profit rose 5.1% to S$7.0 million for Q1FYMAR2014, compared to S$6.7 million in the last corresponding year (Q1FYMAR2013). The profit was achieved on the back of year-on-year sales growth of 1.6%, which increased to S$197.1 million in Q1FYMAR2014 from S$194.0 million in Q1FYMAR2013. In tandem with higher Group revenue, gross profit in Q1FYMAR2014 increased by 3.1% to S$60.2 million.

Gross profit margin remained at a healthy level of 30.6%. Profit before tax rose 9.7% to S$9.1 million in Q1FYMAR2014 from S$8.3 million in Q1FYMAR2013.

Revenue from Singapore, which makes up 69% of Group’s sales, was up 1.9% due to strong performances from the relaunched Megastore in Tampines and the branch in Toa Payoh. Like-for-like sales, excluding export, saw a robust growth of 7.6%.

Courts Asia’s Executive Director and Group Chief Executive Officer, Mr Terence Donald O’Connor, said: “We are pleased to have attained an improvement in net profit despite a more challenging macro environment in Malaysia and higher interest expenses of S$960,000 from our MTN issue. At the same time, we continue to focus on executing our expansion plans, which are progressing ahead of our expectation.

“We officially opened our first ‘Big-Box’ Megastore in Sri Damansara, Malaysia in July ahead of our original schedule, and secured our second ‘Big-Box’ site in Subang Jaya as well as two other sites in Sabah within a short period of time. With these recent developments, our store footprint for Malaysia is likely to reach 288,000 sq. ft.for the financial year ending March 2014, more than double the 120,000 sq. ft. increase committed during our IPO. The ‘Big-Box’ Megastore Sri Damansara and the upcoming ‘Big-Box’ Megastore Subang and two stores in Sabah will increase the store retail footprint in Malaysia by 17%. We remain on track to open six smaller format stores by March 2014.

“We are excited by our progress in Indonesia, especially with the signing of the MOU with Sinar Mas Land to develop our first two ‘Big Box’ Megastore outlets in the country with long term lease. The agreement lays the framework for building new stores in the future when suitable sites are identified. This strategic partnership with a strong property player offers us a strong leverage in our expansion plan in Indonesia, allowing us to focus on our core retail and credit operations while adopting an asset-light approach. We remain on track to open our first Indonesian store in a ‘Big Box’ format in Bekasi, eastern Jakarta, by 2014.”

Courts Asia’s sales in Malaysia in Q1FY2014 was affected by the haze situation and the general election in the country, resulting in 4.2% decline in like-for-like sales.

This has, however, been mitigated by higher service charge income due to higher credit yield, as well as contribution from new stores, resulting in 1% growth in overall turnover.

As of 30 June 2013, the Group has a strong balance sheet with cash and bank balance of S$184.2 million and a healthy gearing of 0.49x.