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OSIM Q3 profit down 28% partly on TWG Tea's legal, start-up costs
AFTER 22 consecutive quarters of record profits, the fine run of lifestyle products company OSIM International came to an end in its third quarter ended Sept 30, 2014.
Net profit fell 28 per cent to S$16.4 million, compared to S$22.7 million a year ago. Revenue edged up slightly to S$158.2 million, up 3 per cent compared to S$153 million the same period last year. A one Singapore cent interim dividend was declared, unchanged from a year ago.
OSIM chief financial officer Peter Lee told a group of analysts and investors on Tuesday evening that the profit fall of about S$6 million can be attributed to "several millions" of legal costs as well as investment costs to open new TWG Tea outlets in China and Taiwan.
OSIM subsidiary TWG Tea, a luxury tea company, is embroiled in two lawsuits: one involving its trademark logo in Hong Kong, and another involving TWG Tea's co-founder Manoj Murjani, who has since left.
On the first, Mr Lee said that the case was heard in October and the company expects a judgement out in the next few months. "We expect quite a good outcome from that," he said.
On the second case, OSIM founder and chief executive Ron Sim said that a court hearing has not been fixed yet.
Sales were also affected because new owners of OSIM's former Brookstone outlets in the US decided not to buy as many OSIM products as the quarter a year ago. A Chinese consortium bought Brookstone a few months ago after the retailer went bust earlier in the year. Brookstone was 55 per cent owned by OSIM, and was written off in 2009.
But Mr Sim said that margins for the group's core massage chair business have remained the same. However, sales are somewhat softer due to weaker consumer sentiment. OSIM shares, which have been under pressure, fell seven Singapore cents or 3 per cent to S$2.25 on Tuesday trading.