Courts Asia Q3 profit falls 28% on flat revenue

ACROSS a grim retail environment, Courts Asia reported a drop of 28.7 per cent in net profit to S$3.51 million for its third quarter ended Dec 31, from a restated profit of S$4.92 million a year ago.

The drop in profit was mainly due to lower credit sales in Malaysia as a result of the country introducing the Consumer Protection (Credit Sale) regulations which came into force Jan 1, 2018.

Courts Asia's group chief executive Terence O'Connor said capping interest rates at 15 per cent per annum, coupled with a challenging retail environment, will impact sales in the short term.

"The operations and sales team had to be trained to meet the new regulations and this also had an impact on credit sales," he said, adding that the company will need to take some "difficult decisions" which include reviewing the closure of underperforming stores.

"The focus will be on driving productivity with an optimal store footprint for Malaysia," Dr O'Connor said.

Courts also said the credit collections environment continues to be "challenging" in Malaysia.

The electrical, IT and furniture retailer said its Q3 FY16/17 comparative figures have been restated from previously announced figures in the Q3 FY16/17 announcement to take into account retrospective adjustments arising from the adoption of FRS 115, and reclassification of expense line items.

For the three months ended Dec 31, revenue was mostly flat, edging up 0.6 per cent to S$186.8 million from the year-ago period, the retailer said in an earnings statement on Tuesday night.

Revenue from Singapore, which contributes to some 72 per cent of group revenue, increased 8 per cent to S$134.5 million in the third quarter, helped by higher sales of goods from the relaunch of its online platform and the reopening of the Courts Megastore at Tampines in November 2017.

Malaysian revenue - which contributes to 24.3 per cent of turnover and is counted in Malaysian ringgit - slid 15.9 per cent on a year-on-year basis in Q3 FY17/18, mainly due to lower sales and earned service charge income, the group said.

Earnings per share fell to 0.68 Singapore cent from 0.96 Singapore cent in the previous year. Net asset value per share crept up to 44.5 Singapore cents as at Dec 31, from 42.5 Singapore cents nine months ago.

In the earnings statement, Dr O'Connor said despite the overall "muted" retail environment across its key markets, the group was optimistic on the long-term outlook.

"(We) will continue to focus on our profitability by managing costs and productivity and investing in growth areas," he said.

The group also announced the appointment of Stan Kim as group chief operating officer, who will also be responsible for helming the Malaysian business until a new country CEO is found. The former Malaysia country CEO, Dolf Posthumus, will take on the role of Malaysia COO.

Courts Asia shares finished at S$0.29 apiece, up S$0.01 or 3.6 per cent on Tuesday.