Courts Asia Analyst briefing Q2 FY1617 Final...Results Briefing Results for the second quarter ended...

1

Results BriefingResults for the second quarter ended

30 September 2016

9 November 2016

2

� Executive summary

� Financial highlights

�Operational updates

3

To navigate well in a challenging environment, the Group will

differentiate through value-added and end-to-end services and creating

an enhanced online shopping experience for customers

This year’s Hari Raya shifted forward a few weeks into early July, pulling festive buying into Q1 FY16/17; more representative to review financial numbers based on H1 FY16/17 vs. H1 FY15/16

11

Malaysia expands to 66 stores, on track to hit 70 by end FY16/17; Indonesia opens two new stores, on track to hit nine by end FY16/17

Executive summary

55

33 Singapore continues to drive performance through cost efficiency and productivity measures

44

22

33.6% growth in net profit to S$16.1 million on steady revenue of S$376.9 million for H1 FY16/17

4


� Financial highlights

� Operational updates

5

Financial summary and key financial ratios

Notes:Q2, FY: Refers to the second(2nd) quarter from 1 July to 30 September and financial year from 1 April to 31 March respectivelyH1: Refers to the first (1st) half from 1 April to 30 September1: Basic earnings per share is calculated by dividing the Group's profit after tax attributable to shareholders by the weighted average ordinary shares during the three months ended 30 September 2016 and the same period last year of 516,936,029 and 533,231,611 respectively. 2: Diluted earnings per share is calculated by dividing the Group's profit after tax attributable to shareholders by the weighted average ordinary shares during the three months ended 30 September 2016 and the same period last year of 521,502,029 and 533,724,011 respectively. 3: Net asset value (for the issuer and group) per ordinary share based on the total number of issued shares excluding treasury shares of the issuer at the end of the current financial year reported on and immediately preceding financial year of 516,650,654 and 522,692,346 respectively.4: Comparative figures for statement of cash flows have been reclassified to be consistent with the presentation of the Group for the period ended Q2 FY16/17.

(S$m unless otherwise stated)

Income statement Q2 FY1617 Q2 FY1516 H1 FY1617 H1 FY1516

Revenue 180.5 186.1 376.9 384.3

Gross profit 61.2 65.7 132.1 134.0

Net profit 6.7 6.0 16.1 12.1

Basic EPS (cents)1 1.30 1.13 3.10 2.25

Fully diluted EPS (cents)2 1.28 1.13 3.08 2.25

Balance sheet As at 30 Sep 2016 As at 31 Mar 2016

Cash and bank balances 76.6 147.5

Trade and other receivables 556.2 539.5

Borrowings 322.6 371.2

NAV per ordinary share (cents)3 56.4 55.8

Statement of cash flows4 Q2 FY1617 Q2 FY1516 H1 FY1617 H1 FY1516

Net cash generated from / (used in) operating activities 16.4 13.7 (4.1) 5.6

Net cash used in investing activities (1.1) (2.4) (3.8) (5.0)

Net cash used in financing activities (0.1) (22.4) (61.6) (6.0)

6

505 505

118 118 243 244

248 249

65 57

134 122

16

3 6

7 11

FY2015 FY2016 Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617

Singapore Malaysia Indonesia

770

186

759

6

181

384 377

Notes:Q2: Refers to the second(2nd) quarter from 1 July to 30 SeptemberH1: Refers to the first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March

Sales by geography

Revenue

Revenue and EBIT margin

Revenue (S$m)

S$m

Sale of goods – cash/credit mix

Group

EBIT margin - % 6.1% 7.2% 8.6% 7.8%

759 770

186 181

384 377


64.5% 64.9% 66.9% 66.0% 64.0% 63.2%

35.5% 35.1% 33.1% 34.0% 36.0% 36.8%

FY 2015 FY 2016 Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617

Sale of goods - credit and earned service charge income %

Sale of goods - cash %

8.2% 8.6%

7

Product range focused on 4 key segments – Q2 FY1617

• Major White Goods• Vision • Small appliances • Audio

• Mattresses• Bedroom furniture • Dining room furniture • Living room furniture • Home office products

• Computers • Accessories • Photography • Mobile

• Warranty sales • Other services

− Product replacement services

• Connect – telecommunications

subscription plans

Electrical Products FurnitureIT Products Services & Others

% of Q2 FY1617

sale of goods

Revenue – cash/credit mix – Q2 FY1617

Singapore Malaysia

Notes:Q2, H1: Refers to the second(2nd) quarter from 1 July to 30 September and first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March* Sales for Indonesia commenced in Q3 FY14/15.

Indonesia*

46.6% 30.7% 16.7% 6.0%

82.6% 83.1% 81.2% 82.1%

17.4% 16.9% 18.8% 17.9%

FY 2015 FY 2016 Q2 FY1516 Q2 FY1617



89.5% 72.2% 75.6% 68.3%

10.5%27.8% 24.4% 31.7%

FY 2015 FY 2016 Q2 FY1516 Q2 FY1617



27.3%27.6% 40.6% 32.1%

72.7% 72.4%59.4%

67.9%

FY 2015 FY 2016 Q2 FY1516 Q2 FY1617



Singapore Malaysia Indonesia*

8

Product range focused on 4 key segments – H1 FY1617

• Major White Goods• Vision • Small appliances • Audio

• Mattresses• Bedroom furniture • Dining room furniture • Living room furniture • Home office products

• Computers • Accessories • Photography • Mobile

• Warranty sales • Other services

− Product replacement services

• Connect – telecommunications

subscription plans

Electrical Products FurnitureIT Products Services & Others

% of H1 FY1617

sale of goods

Revenue – cash/credit mix – H1 FY1617

Singapore Malaysia

Notes:Q2, H1: Refers to the second(2nd) quarter from 1 July to 30 September and first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March* Sales for Indonesia commenced in Q3 FY14/15.

Indonesia*

47.2% 29.2% 17.3% 6.3%

81.2% 82.1% 81.4% 79.9%

18.8% 17.9% 18.6% 20.1%

Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617



40.6% 32.1%31.7%

29.2%

59.4%67.9% 68.3% 70.8%

Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617



75.6%68.3% 77.9% 68.2%

24.4% 31.7%22.1%

31.8%

Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617



Singapore Malaysia Indonesia*

9

1,004 932

219 198

450 421


373

437

109 102

211 221


Notes:Q2: Refers to the second(2nd) quarter from 1 July to 30 SeptemberH1: Refers to the first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March1: Based on weighted average retail square footage and sale of goods from stores for each period, excluding sales from events held outside stores2: Like-for-like sales (net merchandise sales and current quarter/year service charge income generated) growth for a financial quarter/year is calculated based on stores which had been operating for the entire

quarter/year over that particular quarter/year and the entire same period over the preceding yearIndonesia – not significant

Operating metrics

Sales per sq. ft.1 Like-for-like sales growth2

SingaporeS$

MalaysiaMYR

Malaysia

Singapore

-3.5% -3.1%-4.0% -4.4%

-3.7%

-0.8%

-10.2%

-0.2%

-4.2%

2.3%

-6.0%

2.5%


Exclude Corporate Sales Include Corporate Sales

-11.7%

7.8%

20.6%

-14.5%

20.8%

-4.6%

-11.7%

17.6%

25.4%

-13.0%

28.0%

-2.7%


Exclude Corporate Sales Include Corporate Sales

Singapore

Malaysia

Singapore

Malaysia

10

249 253

66 61

134 132

32.8% 32.9%

35.3%33.9%

34.9% 35.1%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%


Operating metrics

Gross profit and margin

Note:Q2: Refers to the second(2nd) quarter from 1 July to 30 SeptemberH1: Refers to the first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March

S$m

11

138 144

37 35

79 77

18.1% 18.7%20.0% 19.5%

20.5% 20.5%

0

50

100

150

200

250

300

FY2015 FY2016 Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617% of net sales

97 100

26 24

56 51

39.3% 40.4% 40.1% 42.2% 41.7% 41.5%

FY2015 FY2016 Q2FY1516

Q2FY1617

H1FY1516

H1FY1617

% of net sales

138 144

37 35

79 77

18.1% 18.7%20.0% 19.5%

20.5% 20.5%

0

50

100

150

200

250

300

FY2015 FY2016 Q2

FY1516

Q2

FY1617

H1

FY1516

H1

FY1617

% of net sales

Earned service charge income

Group

Notes:Q2: Refers to the second(2nd) quarter from 1 July to 30 SeptemberH1: Refers to the first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March^ Excludes Net Sales from Home Lifestyle as there is no earned service charge income yet for Home LifestyleIndonesia – not significant

S$m

S$mS$m

Group

Singapore^ Malaysia

12

Notes:Q2, H1: Refers to the second(2nd) quarter from 1 July to 30 September and first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March1: “Others” include head office costs and other expenses2: EBITDA calculated as profit before tax add finance expense and depreciation and amortisation expense

Breakdown of expenses and EBITDA

S$m

Breakdown of expenses

EBITDA2 Segment result by geographical location3

3: Segment results are profit before other income, income tax and finance expense.

S$mS$m

19 17

37 38

10.0%9.2%

9.6% 10.0%

Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617

0

10

20

30

40

Adjusted EBITDA EBITDA Margin

5 9 11.1

18.8 11 7

22.8

16.8

(2) (3) (4.2) (5.5)

14 13

29.7 30.1

Q2 FY1516 Q2 FY1617 H1 FY1516 H1 FY1617

Singapore Malaysia Indonesia

14 13

12 11

9 9

5 5

5 5 1 1 2 2 2 4

8 3

58 54

Q2 FY1516 Q2 FY1617Others Depreciation & amortisation Bank charges and professional feesTracing and referencing Interest on loan Impairment loss on trade receivablesSalaries and wages Rental on operating leases Distribution and marketing

30 28

23 24

18 18

11 11

10 10 1 1 5 5 3 7 18 10

118 113

H1 FY1516 H1 FY1617

13

7.1

6.5

7.3

6.2

3.4%3.1%

3.4%

2.8%

Mar-15 Mar-16 Sep-15 Sep-16

Allowances for impairment loss on trade receivables

(S$m)

Delinquency rates and allowance for impairment loss on trade receivables

180+ days delinquency rates

Allowance for impairment loss on trade receivables

Singapore Malaysia

Credit book assets - Gross

S$m

Notes:Month-Year: Refers to the financial position of each balance sheet item as at each period endIndonesia – not significant

�Note: PTCRI – not significant

� As the global outlook and

development continues to

be volatile, we will continue

to strengthen our focus and

step up our efforts on credit

and risk management of

delinquent accounts to

mitigate any impact to our

portfolio impairment

562.1

590.8

552.3

612.0


16.4

17.6

16.7

18.3


Allowances for impairment loss on trade receivables

(S$m)

Jul 07

Dec 07

May 08

Oct 08

Mar 09

Aug 09

Jan 10

Jun 10

Nov 10

Apr 11

Sep 11

Feb 12

Jul 12

Dec 12

May 13

Oct 13

Mar 14

Aug 14

Jan 15

Jun 15

Nov 15

Apr 16

Sep 16

Malaysia Singapore

�Sep’16

7.7%

�Jul’07

16.2%

�Sep’16

3.5%

�Jul’07

4.8%

14

16.5

12.1

2.7 3.3

7.1 7.7

4.8%

3.4%

0.8% 0.9%

2.1% 2.0%

FY 2015FY 2016 Q2

FY1516

Q2

FY1617

H1

FY1516

H1

FY1617

Impairment loss charged to Income

Statement (S$m)

8.2 7.2

1.9 1.8 3.7 3.0

4.0%

3.4%

0.9% 0.8%

1.7%1.4%

FY 2015 FY 2016 Q2

FY1516

Q2

FY1617

H1

FY1516

H1

FY1617

Impairment loss charged to Income

Statement (S$m)

Impairment loss on trade receivables charged to Income Statement

Notes:Q2: Refers to the second(2nd) quarter from 1 July to 30 SeptemberH1: Refers to the first (1st) half from 1 April to 30 SeptemberFY: Refers to the financial year from 1 April to 31 MarchIndonesia – not significant.Indonesia – not significant

MalaysiaSingapore

15

Working capital management

Trade payable days Inventory days

Days Days

Notes:H1: Refers to the first (1st) half period from 1 April to 30 SeptemberQ2: Refers to the second(2nd) quarter from 1 July to 30 SeptemberFY: Refers to the financial year from 1 April to 31 March

68

73

60

62

64

66

68

70

72

74

H1 FY1516 H1 FY1617

65

67

60

62

64

66

68

70

72

H1 FY1516 H1 FY1617

16

Borrowings

1 CSPL Asset Securitisation : 1-mth SOR is hedged with Interest Rate Cap (strike rate of 2.5%) for notional amount of SGD70M

2 CMSB Syndicated Senior Loan: RM 267.5M is fixed at 6.35% p.a.

Facility Facility amountAmount drawn down

as at 30-Sep 16

Amount drawn down as at

30-Sep 15Available headroom

Multicurrency Medium Term Note (CAL)

S$ 500 mil

S$ 75 mil @ 5.75%p.a.Expiry 15th Mar 2019

(Previous bond of S$125 mil fully redeemed on 3rd May

2016)

S$ 125 milRedeemed in May 2016 S$ 425 mil

Asset Securitisation Programme (CSPL)Revolving Period expiring: Jan 2019 (with possibility of 1 year extension at lenders’ option)

S$ 150 mil S$ 71.2 mil S$ 57.9 mil S$78.8 mil

Syndicated Senior Loan (CMSB) Revolving Period expiring: Feb 2018 (with possibility of 1 year extension at lenders’ option)

RM 535 mil RM 460 mil RM 415 mil RM 75 mil

Various Term Loans (PTCRI)Various expiry dates ranging from 2017 to 2019

IDR 263.2 bil IDR263.2 bil IDR138.9 bil _

17


�Financial highlights

�Operational updates

18

Singapore Operations Update

� Expanded digital & mobile services offering to five stores islandwide (Sep 2016)� Refurbished Courts Toa Payoh (Sep 2016)

19

iPhone 7 Launch (16 Sep 2016)

� Leading retailer in the non-telco space to be able to offer iPhone 7 and 7 Plus on an islandwide scale

� Competitive cover services package bundle offer

As covered in:

Courts Online Relaunch (Coming soon!)

21

Updates to Malaysia Store Portfolio

� Refurbished

� Closures

• Plentong, Johor• Aug 2016

• Bukit Gambir, Johor (Aug 2016)• Bundusan, Kota Kinabalu (Aug 2016)

� New

• Jitra, Kedah• Sep 2016

• Riyal, Sarawak• Sep 2016

• Kuala Kangsar, Perak• Sep 2016

• Pasir Tumboh, Kelantan • Oct 2016

� New

65

stores

as of Q2

FY16/17

ended

30 Sep

2016

66

stores

to date

(10 Nov

2016)

22

Store Launches – Ciledug, Tangerang City, and Ciputat, South Tangerang

� 20,000 square feet of retail space added� Courts Indonesia on track to have nine stores by end FY16/17

23

�Appendix

24

Total comprehensive income for Q2 FY16/17 was an income of $4.1 million as compared to loss of $9.4 million in Q2

FY15/16. The improvement was mainly due to higher profit and lower translation loss mainly arising from translating

Malaysia’s results and financial position into Singapore dollar (presentation currency) as at 30 September 2016.

�Income tax expense of of $2.0 million for Q2 FY16/17 was based on taxable profit from Singapore and Malaysia

operations (Q2 FY15/16: $2.8 million). The decrease in tax expense of $0.8 million mainly as a result of income tax credits

from Indonesia’s loss and lower taxable profit from Malaysia, and it was partially offset by higher taxable profit from

Singapore operations. The effective tax rate for Q2 FY16/17 was higher than the Singapore statutory tax rate of 17.0%

mainly due to higher tax rate in Malaysia and non-tax deductible expenses.

Distribution and marketing expenses decreased by $0.9 million to $12.8 million in Q2 FY16/17 from $13.7 million in Q2 FY15/16. As a percentage of revenue, distribution and marketing expenses decreased to 7.1% in Q2 FY16/17 from 7.4% in Q2 FY15/16. This decrease was primarily attributable to lower advertising cost and the continuous efforts in improving the management of warehouse and distribution cost in Malaysia.

Administrative expenses decreased by $1.5 million to $35.4 million in Q2 FY16/17 from $36.9 million in Q2 FY15/16. The decrease was mainly due to a reversal of overpayment on GST for previous years, but offset by higher impairment allowance of trade receivables in Malaysia and higher occupancy costs for new stores in Indonesia, Malaysia and Singapore.

Finance expenses decreased by $1.9 million to $5.3 million in Q2 FY16/17 from $7.2 million in Q2 FY15/16 mainly due to lower exchange loss captured in Malaysia’s books with the settlement of its Singapore dollar denominated inter-company loan and lower borrowings in Singapore, but offset by higher interest expenses in Indonesia due to increase in bank borrowings.

Unaudited Results for the quarter ended 30 September 2016

Group’s revenue of $180.5 million for Q2 FY16/17 were 3.0% or $5.6 million lower than Q2 FY15/16.

�Singapore revenue which contributed to 65.5% of the Group’s revenue in Q2 FY16/17 reported a marginal increase of 0.5% compared to Q2 FY15/16.

�Malaysia revenue, which contributed to 31.5% of the Group’s revenue, reported 12.9% (in presentation currency) and 9.0% (in RM currency) decrease in Q2 FY16/17 as compared to Q2 FY15/16 mainly due to lower sales across all categories.

�Indonesia revenue, which contributed to 3.0% of the Group’s revenue, registered a 70.2% (in presentation currency) and 35.8% (in Rupiah currency) increase in Q2 FY16/17 compared to Q2 FY15/16 mainly due to contributions from newly opened stores.

Gross profit for Q2 FY16/17 decreased by 6.8% or $4.5 million resulting from lower revenue and gross profit

margin compared to Q2 FY15/16. Gross profit margin decreased from 35.3% in Q2 FY15/16 to 33.9% in Q2

FY16/17 mainly a result of lower earned service charge income in Malaysia, lower merchandise margin for the

Group and due to the shifting of Hari Raya festival into Q1 FY16/17. The lower merchandise margin for the

Group was mainly due to higher corporate sales and lower furniture sales mix.

Q2 Q2 %FY16/17 FY15/16 ChangeS$'000 S$'000

Revenue 180,547 186,139 (3.0) Cost of sales (119,301) (120,427) 0.9 Gross profit 61,246 65,712 (6.8)

Other income and other gains/(losses) - net 1,020 911 12.0

Expenses

- Distribution and marketing (12,794) (13,712) 6.7 - Administrative (35,425) (36,936) 4.1 - Finance (5,328) (7,162) 25.6

Profit before income tax 8,719 8,813 (1.1)

Income tax expense (2,020) (2,795) 27.7

Net profit 6,699 6,018 11.3

Group

25

�The decrease in net deferred income tax liabilities as at 30 September 2016 was mainly due to increase in deferred

tax assets arising from tax losses from Indonesia subsidiary.

�The total borrowings of $322.6million (31 March 2016: $371.2 million) consist of S$75 million 3-year unsecured fixed

rate notes and term loan in Courts Asia Ltd (“CAL”), the Asset Securitisation Programme 2016 in Singapore, Syndicated

Senior Loan in Malaysia, and term loans in Indonesia. The decrease was mainly due to the repayment of the S$125

million 3-year unsecured fixed rate notes in May 2016 and offset by additional drawdown in bank borrowings.

�The Group’s inventories increased to $85.6 million as at 30 September 2016 from $77.8 million as at 31 March 2016

due to stocking up for upcoming tradeshows in Singapore.

Unaudited Balance Sheet as at 30 September 2016

� The Group’s trade and other receivables (current and non-current) increased by $16.7 million to $556.2 million

as at 30 September 2016 from $539.5 million as at 31 March 2016 due to higher credit sales.

� Allowance for impairment of trade receivables as at 30 September 2016 was $25.2 million as compared to $24.2 million

as at 31 March 2016 representing 4.1% of trade receivables at both period ends.

� Cash and bank balances decreased by $70.9 million to $76.6 million as at 30 September 2016 from $147.5 million as

at 31 March 2016 mainly as a result of repayment of the S$125 million 3-year unsecured fixed rate note in May 2016 and

payment of dividends in August 2016, offset by additional drawdown in bank borrowings.

�Derivative financial instruments represent the carrying amount of interest rate and currency swaps that the Group

has entered into to hedge its exposure to floating interest rate and exchange rate fluctuations on its bank borrowings.

The Group has adopted hedge accounting in respect of the derivative financial instruments it has entered into in FY14/15.

�Derivative instrument is in a net liability position with the fair value loss in Q2 FY16/17 mainly attributed to the

strengthening of Indonesia rupiah against Singapore dollar at the end of the financial reporting period.

26

For the purposes of the consolidated statement of cash flows, the cash and cash equivalents comprise the following:-

Unaudited Statement of Cash Flows for the quarter ended 30 September 2016

27

�Q&A

To access the results presentation and briefing, please visit http://ir.courts.com.sg which will be available by 11 November 2016.

Courts Asia Analyst briefing Q2 FY1617 Final...Results Briefing Results for the second quarter ended...

Documents

Transcript of Courts Asia Analyst briefing Q2 FY1617 Final...Results Briefing Results for the second quarter ended...