Thailand operating results for the First Quarter 2009

H.T. SET.025/2009 Date : May 13th, 2009 To : Managing Director The Stock Exchange of Thailand Re : Singer Thailand operating results for the First Quarter of Y 2009 The Company has generated for the quarter a profit of Baht 16.7 Million compared to a profit of Baht 10.5 Million for Q.1 2008. As a result, the Company's Earning Per Share (EPS) was Baht 0.06 compared to Baht 0.04 per Share for Q.1 2008. It is a matter of commitment of the management to deliver profits under the business and economic conditions in Thailand affected not only by global recession but also by the unstable political situation, and while encouraging it is also a clear indication that the Company's strategies have been working. During the first quarter of Y2009, the major highlights were:- -The Company has generated a positive operating cash flow of Baht 47.9 Million. -From the positive operating cash flow, the Company had been able to pay outstanding loans amounting Baht 147.3 Million. -At the end of December 2008, long-term loans have been reduced from Baht 426.6 -Million to Baht 276.6 Million, whereas short-term loans have been increased from Baht 742.0 Million to Baht 744.7 Million. -The balance of hire-purchase motorcycle accounts has been reduced from 20,093 accounts to 15,906 accounts.A significant improvement of the gross margin resulting from lower purchase prices from the Suppliers, better conditions and additional volume rebate combined with lower Trade-in business. The Trade-in value is basically a discount and tends to put pressure on gross margin, in addition effective 1st January 2009, the Company had reduced its trade-in values. -At the end of March 2009, the inventory of used motorcycles was reduced to 1,670 units. -At the end of March 2009, the percentage of paying accounts which is measuring how many accounts are paying from the total portfolio has been improving by 1.6% compared with the end of December 2008. -The Company benefited from some gain amounting Baht 6.3 Million from exercising the purchase option for the vehicles on lease agreements, which were due in February and March 2009. The future strategy of Singer Thailand is to continue to dominate the appliance hire purchase business in the rural areas of Thailand. The Company has been in this market for over 100 years. The Company keeps on a multi brands, multi products trade-in strategy however with lower trade-in values and the Company expects the momentum to continue and gaining in strength providing the opportunity of a huge replacement business for the Company. To prevent, detect and hasten recovery of defalcations under the global recession situation, the Company has implemented the following measures :- -Whistleblower Policy, which provides all personnel, especially those in the field,specific contact information for reporting defalcations as well as protection from harassment. -Early Warning Report, which summarizes relevant indicators of defalcations and ranks the shops according to the level of exposure. -Establishment of Anti-corruption Committee to handle large cases of defalcations,assign responsibility for smaller cases, monitor progress of investigation or recovery and impose appropriate disciplinary actions. -Training and strengthening the Roles of Region Managers -Closer coordination and involvement of the Legal Department and field supervision in the recovery process. The Company has successfully made a U-Turn by converting a core business based on motorcycles into a core business based on electrical home appliances as shown in total gross sales for the first quarter of Y2009, in which the motorcycle business represented only 2.4% of total sales. Comments to Key Financial Numbers: Income Statement The operating performance for Q.1 2009 is indicating that the Company has generated net profit of Baht 16.7 Million compared to the net profit of Baht 10.5 Million for Q.1 2008. Total revenue decreased from Baht 599.4 Million for Q.1 2008 down to Baht 492.6 Million or a decline of 17.8% mainly due to net product sales decreased by 27.4%, which was caused by the combination of two factors : The economic downturn as the Company is not isolated from the overall economy and the strengthening of Credit Evaluation and Control, interest from installment sales decreased by 5.7% or equal to Baht 7.2 Million due to a decrease of installment accounts number from 189,031 accounts at the end of December 2008 to 182,693 accounts at the end of March 2009, which was caused by more accounts being closed and reverted than new accounts being opened, and other income increased by Baht 29.0 Million mainly due to gain from selling both non performance shops in January 2009 and exercising the purchase option of the vehicles on lease agreements after the contracts ended. Inventory reserve as of March 2009 equaling Baht 69.0 Million was lower than the reserve at end of December 2008 at Baht 103.0 Million due to on going plan to clear slow-moving stock of home appliances and motorcycles. In summary, the Net Profit for this quarter was Baht 16.7 million compared to a Net Profit of Baht 10.5 million at the first quarter of last year. The favorable difference of Baht 6.2 million can be analyzed as follows: Million Baht i. A decrease of products sale -128 ii. A decrease of interest from Installment -7 iii. An increase of other income 29 iv. A decrease of cost of goods sold 118 v. A decrease of variable expenses 19 vi. An increase of semi-variable expenses -17 vii. An increase of period expenses -9 viii. A decrease of interest expense 1 Total difference 6 Balance Sheet Net installment and other receivables decreased to Baht 1,322 million at end of March 2009 from Baht 1,395 million at the end of December 2008 or a reduction of 5%, which was caused by more accounts being closed by revert and discount. At 31 March 2009, the number of installment receivable accounts was 182,693 compared to 189,031 at the end of December 2008 or a reduction of 6,338 accounts. Net inventories at the end of March 2009 reduced to Baht 217 million from Baht 222 million at the end of December 2008. This was mainly due to a plan to clear slow-moving stock of home appliances to convert it into cash. Trade account payable at the end of March 2009 reduced to Baht 132 million from Baht 179 million was caused by a reduction of stock orders to match lower sales level. Interest bearing debt decreased by Baht 147 million over the quarter due to continued positive operating cash flows resulting from ongoing collections of receivable accounts. Kindly be informed, Yours truly, Daniel Philiponet Managing Director