COURTS Asia has reported a 6.4% year-on-year (y-o-y) dip in revenue to SG$165.1 million for the second quarter ended 30 September 2018. Revenue was SG$165.1 million in Q2 FY18/19, a decrease of 6.4% from GS$176.4 million in Q2 FY17/18. Compared to Q1 FY18/19, revenue was down by 8.2% in Q2 FY18/19.
This is mainly attributable to the decline in Singapore as well as Malaysia’s top line performance. Singapore’s revenue decline is due to lower earned service charge income and corporate sales, whilst Malaysia revenue came under pressure after the introduction of the Consumer Protection (Credit Sale) Regulations 2017. Revenue from Singapore, which contributed to 72.4% of the Group’s revenue, decreased by 4.8% y-o-y mainly due to lower earned service charge income and corporate sales. Revenue from Malaysia, which made up 23.7% of the Group’s revenue, reported a 16.0% decrease in RM currency as compared to Q2 FY17/18. The y-o-y revenue dip in Malaysia was mainly due to lower earned service charge income.
Nonetheless, according to COURTS ongoing transformation work with a persistent focus on cost and productivity efficiencies in Malaysia reaped results, with Malaysia’s Profit Before Tax (“PBT”) crossing into positive terrain after two consecutive quarters of loss. COURTS Asia’s executive director and group chief executive officer, Terence Donald O’Connor said the company is “encouraged by the early signs of stabilisation” in the Malaysia business.
“We have closed 10 underperforming stores since the start of our financial year in April and continue to review our store network performance […] We recognise it is critical to maintain the momentum and have invested towards increasing management strength to ensure all parts of our strategic focus across the Group are not compromised even as we turn around Malaysia,” he said. In the coming months, the transformation work in Malaysia will focus on enhancing backend support systems.
Distribution and marketing expenses decreased by SG$1.9 million in Q2 FY18/19 to SG$11.5 million from SG$13.4 million in Q2 FY17/18, mainly due to lower distribution and marketing expenses in Malaysia. As a percentage of revenue, distribution and marketing expenses decreased to 7.0% in Q2 FY18/19 from 7.6% in Q2 FY17/18.
The Group recently announced the appointment of Dominic Wong as group chief operating officer (COO) with effect from 15 October 2018. In the immediate term, Wong will be prioritising his time to lead the strategic and operational transformation of the Malaysia business. He brings over 20 years of retail experience to COURTS, having previously helmed A.S. Watson Group as managing director as well as Watsons Singapore as country head and GM. His predecessor, Stan Kim, will focus on the regional chief innovation officer (CIO) portfolio and work across COURTS’ markets of operation to accelerate the Group’s digitalisation efforts and e-commerce capabilities regionally, whilst continuing to oversee critical workstreams of the Group’s transformation.
O’Connor added, “The transformation remains a large-scale effort that will require time to manifest, particularly in Malaysia where we expect to see results in the medium to long term. That said, we are encouraged by early indicators of turnaround and continue to invest for the long term, building on the strong omni-channel and solutions leadership base in Singapore and translating that into value across the business. The Singapore business delivered a strong performance […]”
During the quarter, the Indonesia business was impacted by an increase of SG$2.2 million in impairment allowance on trade receivables. The Group is keeping a close watch and has already taken mitigating actions to reduce bad debt costs and strengthen its risk management framework.Revenue in Indonesia increased by 5.3% in Rupiah currency y-o-y, mainly due to higher merchandise sales offset with lower earned service charge income.
O’Connor said, “We have put measures in place to tighten the credit sanctioning process. These include imposing advance instalment deposits and centralising credit sanctioning for greater oversight. Work is ongoing with a fintech vendor to develop a digitalised scorecard which will include facial recognition capabilities.”