Half year net profit sink 31.1% to $14.1m.
EPS decline 23.5% to 1.66 cents versus 2.17 cents last year.
Overview
In line with Section 10 of the Group’s 1Q2018 Results Announcement, the Group’s transition to the new Franchise Segment in China extended into 2Q2018, resulting in lower Export Segment revenue as compared to 2Q2017. Group revenue for the reporting period ended 30 June 2018 declined 39.6% vis-à-vis the same period last year primarily due to the aforesaid transition which delays revenue recognition to 2H2018. Quarter-on-quarter, the Group’s gross profit margin improved to 76.2%, which is comparable to the margins typically achieved by the Group before the Export Segment in China, which has a lower gross profit margin, became a major revenue contributor to the Group.
Net Profit Margin also improved to 26.1% in 2Q2018, mainly due to the following factors:
Other Operating Income, which the Group charges its agent in China for market development activities, product training and IT services to support the agent’s sales in 2Q2018, increased by 58.3% vis-à-vis the same period last year.
For 1H2018, Other Operating Income increased 95.4% in line with strong market demand in China; In 2Q2018, Interest Income increased 87.2% from $0.08 million to $0.16 million due to higher income earned from higher fixed deposits placed with financial institutions; Distribution Costs which comprises freelance commissions and other sales related costs decreased by 6.7% in 2Q2018 as compared to 2Q2017 mainly due to lower annual convention expenses and commissions paid out in 2Q2018;
Administrative Expenses for 2Q2018 declined by 5.0% as compared to 2Q2017 mainly due to lower professional fees, management and staff costs as well as amortization and depreciation; In 2Q2018, Net Other Gains of $0.9 million was mainly due to reversal of slow moving stocks and Unrealised Foreign Exchange gains from the revaluation of the Group’s financial assets denominated in US dollars of certain subsidiaries, offsetting Realised Foreign Exchange losses due to weakened Indonesia Rupiah against Singapore Dollar in 2Q2018. In aggregate for 1H2018,
Net Other Gains of $0.7 million was largely attributable to reversal of unaccounted cash written off in a certain subsidiary (as previously mentioned in 1Q2018 results announcement) and reversal of slow moving stocks, offsetting Foreign Exchange losses of certain subsidiaries;
and The Group incurred Income Tax Expenses of $1.7 million due to profitability on certain subsidiaries during 2Q2018.
From TA point of view, will it breakdown of $1.23 level and continue to slide down towards 1.20 with extension to 1.15 level.
Not a call to buy or sell.
Please do your own due diligence.
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