Half Year Financial Statement For The 6 Months Ended 31 October 2005

Profit & Loss



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Review of Performance

For the half year ended 31 October 2005 (1HFY2006), the Group achieved a 114.2 percent growth in net profit after tax to S$6.5 million on the back of a 32.2 percent growth in revenue.

Revenue

The double-digit growth in revenue to S$119.7 million was mainly contributed by:-

1. the organic growth in major brands – Falken, Continental, Dunlop and Toyo OTR;
   
   
2. incremental sales contribution from the optimisation of two production lines in SSW wheel plant;
   
   
3. sales contribution from proprietary brands – Sumo and Sumo Firenza tyre lines.

The Group registered revenue growth in all key geographical regions. The growth in Southeast Asia was mainly attributed to the stronger demand from the recovery of economies in the area. Continued sales and marketing efforts for proprietary brands in the international markets boost the growth in all the other regions.

Gross Profit
The Group maintained gross profit margin at 26.4 percent in 1HFY2006 (1HFY2005: 26.5 percent) and recorded an increase of S$7.6 million in gross profit. This was mainly due to:-

1. focus on sales of high performance tyres and wheels;
   
   
2. continuous efforts to improve service income through retail chain and commercial fleet/mining and tyre management services;
   
   
3. improvement on the product mix of its major brands; and
   
   
4. incremental sales from proprietary brands, Sumo Firenza and SSW rims, to the international markets.

Operating Expenses
The operating expenses increased in line with the growth of the business.

The increases in salaries and staff benefits (S$1.6m) and marketing and promotion expenses (S$2.0m) represented the Group’s investment in human resources and the development of its proprietary brands as well as enhancement of its integrated concept of value added services. obsolescence resulting from successful marketing efforts undertaken by the Group.

Finance Cost
The increase in finance costs of S$1 million was mainly due to the increase in term loans, higher utilization of trade lines and general rise in interest rates.

Financial Position
During the period, the change in the Group’s business model resulted in higher inventory holding by the overseas subsidiaries to allow them to take the lead in regional distribution from Singapore. The Group’s manufacturing activities for Sumo and Sumo Firenza tyres programmes and SSW rims also resulted in a higher inventory of raw material and finish products.

In line with the Group’s revenue growth, accounts receivable increased by S$18.2 million.

The Group accounts receivable and inventory was financed by the utilization of the trust receipt. The net proceed from trust receipt amounted to $22.7 million.

Commentary