Half Year Financial Statement For The 6 Months Ended 31 October 2004
Profit & Loss
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Balance Sheet
Review of Performance
Group turnover for the half year ended 31 October 2004 (“1HFY2005”), remained flat at $90.5 million, compared to $91.8 million in 1HFY2004. The flat turnover was contributed by the tightness in allocation of tyres from our major suppliers as they re-aligned the distribution of their products into other markets, such as North America and Europe. However, the Group continued to witness robust demand for our major international brands and proprietary brands in both existing and new markets.
During the period under review, the Group made continuous efforts to improve the product mix of our major international and proprietary brands, optimise business opportunities through our wide network of distribution centres, and focus on sales of higher value added products and services from the retail and fleet management units. As a result, we achieved a gross profit margin of 26.5 percent, which is comparable to 26.9 percent in 1HFY2004.
Overheads increased from 18.2 percent to 19.8 percent of revenue. This was mainly due to start-up costs relating to the new wheel plant in Thailand that could not be capitalized, as well as the restructuring costs associated with the realignment of our distribution structure.
Share of losses of associated company were mainly due to the continuing costs of establishing the Dunlop dealers retail network in China.
The increased operating expenses and the share of losses of the associated company contributed to the decline in Group profit before tax from $7.1 million in 1HFY2004 to $4.6 million in 1HFY2005.
The Group’s effective tax rate increased by 4 percentage points in 1HFY2005 as any tax benefit arising from the losses of overseas subsidiaries are not available for group relief.
Group profit after tax and minority interest decreased by 49.0 percent to $3.0 million in 1HFY2005, from $5.9 million in 1HFY2004.
The results for 1HFY2005 reflect the Group’s efforts on strengthening the infrastructure and building new capabilities to prepare for our next stage of growth.
During the period under review, the change in the Group’s distribution structure resulted in higher inventory holding by the overseas subsidiaries to allow them to take the lead in regional distribution from Singapore. Capital investment in the new wheel plant in Thailand and the increase in the number of retail outlets amounted to approximately $4.4 million. These were mainly funded through internally generated funds.
During the period under review, the Group made continuous efforts to improve the product mix of our major international and proprietary brands, optimise business opportunities through our wide network of distribution centres, and focus on sales of higher value added products and services from the retail and fleet management units. As a result, we achieved a gross profit margin of 26.5 percent, which is comparable to 26.9 percent in 1HFY2004.
Overheads increased from 18.2 percent to 19.8 percent of revenue. This was mainly due to start-up costs relating to the new wheel plant in Thailand that could not be capitalized, as well as the restructuring costs associated with the realignment of our distribution structure.
Share of losses of associated company were mainly due to the continuing costs of establishing the Dunlop dealers retail network in China.
The increased operating expenses and the share of losses of the associated company contributed to the decline in Group profit before tax from $7.1 million in 1HFY2004 to $4.6 million in 1HFY2005.
The Group’s effective tax rate increased by 4 percentage points in 1HFY2005 as any tax benefit arising from the losses of overseas subsidiaries are not available for group relief.
Group profit after tax and minority interest decreased by 49.0 percent to $3.0 million in 1HFY2005, from $5.9 million in 1HFY2004.
The results for 1HFY2005 reflect the Group’s efforts on strengthening the infrastructure and building new capabilities to prepare for our next stage of growth.
During the period under review, the change in the Group’s distribution structure resulted in higher inventory holding by the overseas subsidiaries to allow them to take the lead in regional distribution from Singapore. Capital investment in the new wheel plant in Thailand and the increase in the number of retail outlets amounted to approximately $4.4 million. These were mainly funded through internally generated funds.
Commentary
As highlighted in the Group’s FY2004 results announcement, global demand for tyres remains robust. This translates to the continuing tight supply situation from our major suppliers.
To address this, the Group has been continually exploring opportunities to expand our supply and has recently secured the following:
The Group will continue to focus on the distribution of its major international brands in South East Asia and China. We will also be looking to expand the number of retail outlets in Singapore, Malaysia, Thailand and Indonesia as well as continue investing in additional distribution points in China. We also intend to expand our fleet management and related value added services.
Our new alloy wheel plant in Thailand, which did a successful test run of 3,000 units in September 2004, is expected to ramp up to a commercial production volume of approximately 13,000 units per month by December 2004. The second production line will be installed at the plant in January 2005. By May 2005, we expect both production lines to have a total production volume of not less than approximately 35,000 wheels per month. The wheels are to be marketed in Thailand, Singapore, Malaysia, Australia and Indonesia, and target at new markets in the US, Europe and the Middle East. The new wheel plant is expected to contribute positively to the Group’s revenue in the financial year ending April 2006.
The Directors believe the outlook for the Group is healthy for 2HFY2005 as we would benefit from having a better product range, with less geographical restrictions and a wider market coverage. Baring any unforeseeable circumstances, the Group expects its net profit for 2HFY2005 to be higher than 1HFY2005.
To address this, the Group has been continually exploring opportunities to expand our supply and has recently secured the following:
- Offtake arrangement for the supply of Truck Bus Radial tyres, for which production is expected to commence in January 2005.
- Volume increases for Truck Bus Bias tyres, through the Sumo offtake arrangements from manufacturers in China, Thailand and Vietnam;
- Additional brands for Passenger Car and Light Truck Radial Tyres for distribution in selected territories - Maxxis from Taiwan and Thailand and Amtel from Russia;
The Group will continue to focus on the distribution of its major international brands in South East Asia and China. We will also be looking to expand the number of retail outlets in Singapore, Malaysia, Thailand and Indonesia as well as continue investing in additional distribution points in China. We also intend to expand our fleet management and related value added services.
Our new alloy wheel plant in Thailand, which did a successful test run of 3,000 units in September 2004, is expected to ramp up to a commercial production volume of approximately 13,000 units per month by December 2004. The second production line will be installed at the plant in January 2005. By May 2005, we expect both production lines to have a total production volume of not less than approximately 35,000 wheels per month. The wheels are to be marketed in Thailand, Singapore, Malaysia, Australia and Indonesia, and target at new markets in the US, Europe and the Middle East. The new wheel plant is expected to contribute positively to the Group’s revenue in the financial year ending April 2006.
The Directors believe the outlook for the Group is healthy for 2HFY2005 as we would benefit from having a better product range, with less geographical restrictions and a wider market coverage. Baring any unforeseeable circumstances, the Group expects its net profit for 2HFY2005 to be higher than 1HFY2005.