Thailand operating results for year 2009

H.T. SET.003/2010 Date : February 26th, 2010 To : Managing Director The Stock Exchange of Thailand Bangkok Re : Singer Thailand operating results for year 2009 For the quarter, the Company has generated a net profit of Baht 1.2 Million compared to a net loss of Baht 66.4 Million for Q.4 2008. For the year, the Company had a profit of Baht 36.5 Million compared to a loss of Baht 81.6 Million for Y2008. As a result, the Company's EBITDA improved from the positive figure of Baht 29.2 Million in Y2008 to the positive figure of Baht 130.5 Million in Y2009. During the year 2009, the major highlights were:- - The Company has generated a positive operating cash flow for the year equal to Baht 345.8 Million and a positive cash flow for Q1.-Q.3 equal to 210.3 Million. - 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. - From the positive operating cash flow, the Company had been able to pay outstanding loans and interest for the year 2009 amounting Baht 365.8 Million. - In November 2009, the Company succeeded to enter the Debt Rescheduling Agreement with the Financial Institutions for shifting total loans amounting Baht 1,026.2 million to 6 years long-term loans with last payment on 30 March 2015. - At the end of December, the Company's current ratio was improved to 4.9 times from 1.1 times at the end of Y2008 with the balance of short term loans and long term loans amounting Baht 54.0 million and Baht 820.2 million respectively. - At the end of Y2009, D/E ratio was improved from 3.4 to 2.6 time, which caused by the improvement of net profit amounting Baht 36.5 million and the reduction of loans amounting Baht 294.4 million. - At the end of December 2009, the Company had a total of 162,169 installment accounts out of which 5,761 motorcycle accounts represented 3.6 % of total portfolio, and the inventory of used motorcycles was reduced to 715 units. - At the end of December 2009, the percentage of paying accounts which is measuring how many accounts are paying from the total portfolio has been improving by 6.3% compared with the end of December 2008. - The Company managed to significantly reduce its absolute arrears value by Baht 124.2 Million since December 2008. 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 120 years. The Company keeps on 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. In December 2009, after having launched the TV advertising with a new campaign of air conditioners that " Paying only Baht 30 per day, you can own a "Singer" air conditioner ", sale of air conditioners have been booted up significantly even not the season for the Company to sell. Thus the Company will keep to repeat this campaign for the first half of Y2010. Recognizing the importance of protecting the Company, its customers, its employees and sale agents, and its assets against financial risks, operational breaches and unethical activities, the company has adopted a zero tolerance policy regarding fraud or defalcations to communicate to both internal and external customers, vendors, employees and sales agents. 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 Y2009, in which the motorcycle business represented only 1.5% of total gross sales. Comments to Key Financial Numbers: Income Statement The operating performance for Y2009 is indicating that the Company has generated net profit of Baht 36.5 Million compared to net losses of Baht 81.6 Million for Y2008. The revenue decreased from Baht 2,355.4 Million for Y2008 to Baht 1,874.9 Million or a decrease by 20.4% mainly due to net product sales decreased by 22.1%, which was caused by the combination of two factors : there remain substantial slack in the economy and political issues would continue to discount whatever prospects there are for the recovery of domestic demand and the strengthening of Credit Evaluation and Control, interest from installment sales decreased by 10.0% or equal to Baht 49.7 Million due to a decrease of installment accounts number from 189,031 accounts at the end of December 2008 to 162,169 accounts at the end of December 2009, which was caused by the impact of a change from Sum of the Digit Method to Effective Rate and more accounts being closed and reverted than new accounts being opened, and other income decreased by Baht 41.6 Million mainly due to less gain from selling non performance shops Inventory reserve as of December 2009 equaling Baht 33.0 Million was lower than the reserve at end of December 2008 at Baht 103.0 Million due to on going plan to clear by selling the slow-moving stock of home appliances. In summary, the net profit for Y2009 was Baht 36.5 million compared to a net loss of Baht 81.6 million for Y2008. The favorable difference of Baht 118.1 million can be analyzed as follows: Million Baht i. A decrease of net products sale -389 ii. A decrease of interest from Installment -50 iii. A decrease of other income -42 iv. A decrease of cost of goods sold 435 v. A decrease of variable expenses 100 vi. A increase of semi-variable expenses -9 vii. A decrease of loss on products reprocess 16 viii. A decrease of period expenses 51 ix. A decrease of interest expense 6 Total difference 118 Balance Sheet Net installment and other receivables decreased to Baht 1,132 Million at the end of December 2009 from Baht 1,395 Million at the end of December 2008 or a reduction of 18.9%, which was caused by more accounts being closed by normal closing, revert and discount especially motorcycle installment accounts. At 31 December 2009 the number of installment receivable accounts was 162,169 compared to 189,031 at the end of December 2008 or a reduction of 26,862 ccounts. Net inventories at the end of December 2009 decreased to Baht 200.8 Million from Baht 222.2 Million at the end of December 2008. This was mainly due to a plan to turn all obsolete stock to be cash. Trade account payable at the end of December 2009 decreased to Baht 153.2 Million from Baht 179.2 million at the end of December 2008, which was caused by decreasing inventory orders for decreasing sales and early payments to major suppliers to get cash discount. Interest bearing debt was decreased by Baht 294.4 Million compared with Y2008 due to continued positive operating cash flows resulting from ongoing collections of receivable accounts, and the related reduction of borrowings. Kindly be informed, Yours truly, Boonyong Tansakul Managing Director