Review of Performance
Group's Turnover
For 1H2009, the Group recorded a turnover of S$229.1 million, a decline of 11% when compared with 1H2008. The
decline in turnover was due to reduction or delay in electronics components orders as a result of weaker demand for
electronic products especially in the United States of America and Europe amidst the global financial and economic
crisis.
On a quarter to quarter basis, turnover for first quarter and second quarter of 2009 were S$100.8 million and S$128.3
million respectively. This was an improvement of 27%. When comparing 2009 to 2008 turnover of first quarter and
second quarter of S$127.9 million and S$130.6 million respectively, quarterly turnover declined by 21% and 1.8%
respectively. The turnover improvement in second quarter of 2009 was encouraging signs that the global financial
and economic crisis is stabilising as the Group experienced improved sales in majority of the markets we operate.
Turnover in South and South East Asia registered a 37% decline in turnover when compared with 1H2008. The
decline was mainly due to lower sales volume from Singapore, Thailand and Malaysia. These countries rely heavily on
exports to United States of America and Europe, where demand of electronic products had suffered double-digit
decline.
North Asia (comprising Greater China, South Korea and Taiwan) posted an overall smaller 6% decrease in turnover when compared with 1H2008. The smaller decline was mainly due to resilient of the China market to the financial and economic crisis, and sales contribution by new customers and higher sales to certain existing customers of the Korean subsidiaries.
Turnover from North Asia accounted for 88% of the Group’s total sales for 1H2009 (1H2008: 83%).
Group's Profit After Income Tax
For 1H2009, the Group posted a net profit after tax (‘NPAT’) of about S$1.2 million as compared to a NPAT of about S$3.1 million for 1H2008.
The semiconductors/ components distribution business registered a net profit of S$1.3 million as compared to a net
profit of S$3.1 million in 1H2008. The decrease is mainly attributable to lower gross profit earned because of lower
sales. Average gross profit margin achieved in 1H2009 was 9.0% as compared to 8.9% in 1H2008, as the Group
continued to channel more efforts on the sale of higher margin products amidst continued pressures on product
margins. The lower sales commission and service income earned by the Group’s Korean subsidiaries as a result of
weak global demand for electronic products also contributed to the lower NPAT for 1H2009.
If we were to exclude allowances for trade and other receivables and currency loss, total expenses as a percentage of turnover was about 7.7% in 1H2009 as compared to 7.9% in 1H2008 as the Group remained focus on cost efficiency.
The Group’s share of losses in its associated companies was about S$0.2 million as compared to a profit of about S$0.1 million in 1H2008. The losses were mainly contributed by the Group’s 33.3% interests in Bull Will Co., Ltd, a company listed on the Over-The-Counter Securities Exchange in Taiwan due mainly to losses incurred by its subsidiary in China. Sales by this subsidiary, engaged in value-added production of electronic components, were not able to cover its operating costs.
Commentary on Current Year Prospects
While there has been encouraging signs of improved demand from our customers in second quarter of 2009, the Group remained cautious of the recovery outlook of the global economy, especially in the United States of America and Europe where consumer confidence and demand remained fragile. The Group is however optimistic that the stimulus programs introduced by various countries will have a positive effect on the global economy.
The Group expects the markets in which it operates to continue to be mired with challenges. Fluctuations in currency exchange rates and commodity prices, tight credit conditions and higher credit risks will continue to weigh on the performance of the Group’s semiconductors/ components distribution business.
The Group will continue to work closely with its suppliers and customers to expand into the North Asian market, especially China and India. Efforts will be heightened to sharpen its resource planning, tighten costs, credit and inventory controls as well as strengthen its cash flow position.
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