Courts Asia net profit nosedives 55% to S$7.2m in 2QFY14

Many factors blamed, including shorter festive season.

Retailer Mainboard-listed Courts Asia Limited (Courts Asia) posted its results for the second quarter and first half ended 30 September 2013 (Q2FY13/14 and H1FY13/14, respectively), revealing total sales for Q2FY13/14 rose 3.3% to S$222.9 million, from S$215.8 million in the corresponding quarter last year (Q2FY12/13).

Revenue from Singapore, which makes up 70% of the Group’s sales, was up 10.8% on the back of bulk sales for digital products and a focus in the air systems category which drove consumer demand.

Sales in Malaysia in Q2FY13/14 were mainly affected by poorer consumer sentiment due to the government’s newly-introduced policies to reign in household debt as well as a reduction in fuel subsidies. As a result, the Group registered an 11.0% decrease in sales for Malaysia.

Gross profit margin decreased from 34.0% in Q2FY12/13 to 28.5% in Q2FY13/14. This was mainly due to a shift in product sales mix from Furniture to IT products, which carry a lower gross profit margin and lower service charge income resulting from lower credit sales.

Moreover, the Group’s profitability was impacted by its tightened credit sanctions which led to lower credit sales, disruption to its store in JEM in Singapore, and a shorter festive season this year that resulted in fewer delivery weeks.

Factoring in operational expense and tax, the Group registered a 55.0% decline in net profit to S$7.2 million in Q2FY13/14, from S$15.9 million in Q2FY12/13.

On a half-year basis, sales for H1FY13/14 recorded a 2.5% increase from S$409.7 million in H1FY12/13 to S$420.0 million in 1HFY13/14. Net profit declined by 37.2%, from S$22.6 million for H1FY12/13 to S$14.2 million for H1FY13/14.

Courts Asia’s Executive Director and Group Chief Executive Officer, Mr. Terence Donald O’Connor, said, “This quarter has been tough for us, with a difficult retail operating environment in Malaysia brought on by macro economic factors. Nonetheless Malaysia's long term fundamentals remain favourable and the Group continues to execute its expansion plans, which are progressing well. We have taken steps and reviewed our marketing plans to ensure there is a good balance in our growth pursuit, whilst taking into consideration the broader external environment."

O'Connor added that it is opening new stores, introducing new product categories, and launching new digital products to boost sales.

As at 30 September, 2013, the Group maintains a strong balance sheet with cash and bank balance of S$135.1 million.

For H1FY13/14, the Group has declared an interim dividend of 0.76 S/cent per ordinary share. This amounts to 30% of the Group’s net profit after tax for H1FY13/14.