Best World Q2 net profit up 36.9% to S$39.4m

BEST World International reported net profits of S$39.4 million for the second fiscal quarter ended June, some 36.9 per cent higher than the S$28.8 million earned in the corresponding quarter last year.

This pushed the group's earnings for the first six months of the year to S$77.3 million, up 83.8 per cent from S$42 million in the year-ago period, the company said in a filing to the Singapore Exchange after market close on Friday.

Earnings per share for the quarter came in at 7.24 cents from 5.29 cents last year.

The higher earnings for Q2 was due in part to an 8.3 per cent year-on-year increase in revenue from S$138.5 million to S$150 million. The group attributed this to an increase in contributions from its direct-selling and franchise segments.

The company also lowered its costs of sales in Q2 by 17.8 per cent - from S$36 million in the year-ago quarter to S$29.6 million - on the back of lower freight and handling charges of goods as well as lower custom duties incurred by its China subsidiary.

Share of losses for Best World's associate company Celligenics also narrowed to S$49,000 in Q2 from S$67,000 in the year-ago period.

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However, Best World booked a few higher expenses on a year-on-year basis for Q2. Administrative expenses rose to S$24.8 million from S$18.3 million, and distribution costs rose 11.3 per cent to $40.8 million, on the back of higher marketing expenses from the franchise segment and higher freelance commissions for the direct-selling segment.

Best World's board of directors said no dividend has been declared or recommended for the quarter under review; the board has opted to conserve cash in the face of the group's current circumstances and uncertain business climate.

In its outlook statement, the company said that all markets in which it operates have not yet shown signs of return to normalcy from the Covid-19 pandemic, despite the rollout of vaccines. Countries that were seemingly well controlled previously have also been affected, it said.

Best World added that orders from its contract manufacturers and vendors have been delayed indefinitely, in some cases due to factory closures. IT said: "All these present strong headwinds to the group's plan to maintain business growth in the next reporting period and beyond.

"Barring unforeseen circumstances, the management maintains a very cautious outlook in terms of its performance moving forward."

The group warned that other factors such as US-China tensions, the global supply-chain disarray and fluctuations of currencies in its key markets could affect its performance for the next 12 months, as well as the group's next reporting period.

Separately on Wednesday this week, Best World's independent auditor Ernst & Young (EY) issued a disclaimer of opinion relating to the group's financial statements for the fiscal year ended Dec 31, 2020.

EY said it was unable to obtain sufficient audit evidence to provide a basis for an audit opinion on the group's business model in China, its relationship with its import agents and marketing agent, and the classification of payments made to promotional companies.

These reasons were similar to those in its previous disclaimer of the company's financial statements in the previous financial year, said EY.

Trading in Best World shares has been suspended since May 2019.

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