operating results for the Second Quarter of Y 2010

H.T. SET 018/2010 Date : August 11th, 2010 To : Managing Director The Stock Exchange of Thailand Re : Singer Thailand operating results for the Second Quarter of Y 2010 The Company has generated for the quarter a profit of Baht 25.8 Million compared to a profit of Baht 12.6 Million for Q.2 2009. As a result, the Company's Earning per Share (EPS) was Baht 0.10 compared to Baht 0.05 per Share for Q.2 2009. It is a matter of commitment of the management to deliver profits under the business and economic conditions in Thailand affected by the political unrests during April-June period, and while encouraging it is also a clear indication that the Company's strategies have been working During the second quarter of Y2010, the major highlights were:- A significant increase of product sales for Q.2 2010 by 28.6% or Baht 99.8 Million above the same period of the prior year with strong sales of air conditioners. An increase of gross installments receivables from the end of December 2009 by Baht 134.1 Million was due to a significant increase of product sales. In order to increase the installment receivables as the above, the Company's operation cash flow was shown as the negative figures of Baht 62.5 million. With the operating cash flow, the Company also had been able to pay outstanding loans with its interest amounting Baht 54.8 Million. At the end of June 2010, long-term loans have been reduced from Baht 820.3 Million to Baht 774.7 Million, whereas short-term loans plus bank overdrafts have been increased from Baht 54.0 Million to Baht 72.8 Million. The % gross margin for Q.2 2010 was reduced from 61.3% to 54.0% mainly due to % gross margin of air conditioners lower than other main products caused by the installation fee of air conditioners given to customers without any charge during the launching of air conditioners; however, strong sale of air conditioners pushed the fabulous result of the gross margin amount increased by Baht 18.4 million. At the end of June 2010, the percentage of paying accounts which is measuring how many accounts are paying from the total portfolio has been improving by 2.87% compared with the end of December 2009. The Company keeps having significant reduction of the absolute arrears value by Baht 36.8 Million since December 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 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. The Company's customer base has been shifted slowly from Group C&D to Group B&C with the strong sales of air conditioners and the Company's efforts to sell freezers and air time vending machines to Grocery Owners in the villages. To ensure that the new accounts came from the growth in revenue which is attributed to air conditioners, air time vending machines and freezers remain healthy and fictitious accounts, if any, are detected promptly, strict credit controls and monitoring of red delinquents accounts in each product categories have been put in place To prevent, detect and hasten recovery of defalcations under the uncertainty situation, the Company keeps on 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 Sub Anti-Corruption Committee to assist Ant-Corruption Committee to handle all the cases of defalcations strictly complied with a zero tolerance policy to 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 second quarter of Y2010, in which the motorcycle business represented only 0.14% of total gross sales and the number of motorcycle installment accounts left only 2,323 accounts as of June 2010. Comments to Key Financial Numbers: Income Statement The operating performance for Q.2 2010 is indicating that the Company has generated net profit of Baht 25.8 Million compared to the net profit of Baht 12.6 Million for Q.2 2009. Total revenue increased from Baht 476.2 Million for Q.2 2009 to Baht 567.8 Million or an increase by 19.3% mainly due to strong sale of air conditioners (over 9,000 units), interest from installment sales decreased by 3.0% or equal to Baht 3.5 Million due to a decrease of installment accounts number from 162,169 accounts at the end of December 2009 to 155,521 accounts at the end of June 2010, which was caused by more accounts being closed and reverted than new accounts being opened, and other income decreased by Baht 4.6 Million mainly due to no any gain from both selling non performance shops and exercising the purchase option of the vehicles on lease agreements after the contracts ended like Q.2 2009. Inventory reserve as of June 2010 equaling Baht 30.0 Million was in the line of the reserve at end of December 2009 along the on-going plan to clear slow-moving stock of home appliances and motorcycles. In summary, the Net Profit for this quarter was Baht 25.8 million compared to a Net Profit of Baht 12.6 million at the second quarter of last year. The slight difference of Baht 13.2 million can be analyzed as follows: Million Baht i. An increase of products sale 100 ii. A decrease of interest from Installment -3 iii. A decrease of other income -5 iv. An increase of cost of goods sold -78 v. An increase of variable expenses -21 vi. A decrease of semi-variable expenses 14 vii. A decrease of period expenses 2 viii. A decrease of interest expense 4 Total difference 13 Balance Sheet Net installment and other receivables at end of June 2010 have been increased to Baht 1,208 million from Baht 1,132 million at the end of December 2009 or an increase of 6.7%, which was caused by an increase of new air conditioner installment accounts with higher value than the old accounts being closed by revert and discount. At 30 June 2010, the number of installment receivable accounts was 155,521 compared to 162,169 at the end of December 2009 or a reduction of 6,648 accounts. Net inventories at the end of June 2010 equaling to Baht 234 million were higher than net inventories at the end of December 2009 equaling to Baht 201 million. This was mainly due to an increase of new inventories of air conditioners, freezers and refrigerators for sale in the summer seasons. Trade account payable at the end of June 2010 reduced to Baht 118 million from Baht 153 million was caused by early repayment for cash discounts from a few major suppliers. Interest bearing debt decreased by Baht 12.3 million over the quarter due to loan repayment as the schedule with the company's operating cash flows resulting from ongoing collections of receivable accounts. Kindly be informed, Yours truly, Boonyong Tansakul Managing Director