Thailand Operating Results for the Third Quarter 2007

H.T. SET.039/2007 Date : November 13th , 2007 To : Managing Director The Stock Exchange of Thailand Bangkok Re : Singer Thailand Operating Results for the Third Quarter 2007 During the Third Quarter of 2007, the major highlights were : - Positive Operating Cash Flow of Baht 217.5 million for Jul.-Sep.2007, total positive operating cash flow for Jan.-Sep. 2007 was Baht 773.1 million - The Company has also sold certain non strategic shops which have generated cash of Baht 23.1 million for Jul.- Sep.2007, and Baht 38.8 million for Jan.- Sep.2007 - From the positive operating cash flow, the Company had been able to pay outstanding loans for Jul.-Sep.2007 amounting Baht 208.1 million (or total loan repayment for Jan.-Sep.2007 equal to Baht 772.5 million) In order to eliminate the risk related to selling on hire-purchase in the three Southern Provinces of Thailand, the Company do not allow the shops in these provinces to sell on credit terms and focus on collection of accounts. The Company continued with its programme to reduce the number of used motorcycles in stock and from a peak of almost 37,000 units in August 2006, the stock was brought down to 5,712 units in September 2007. The motorcycle inventory will be reduced to normal level by year end 2007. The Company has entered into an Agreement with SVOA, the Manufacturer of personal computer, to directly sell P.C. under the SVOA brand, on a back to back system with higher down payment and pre-approval from credit central. The test conducted since August 2007 in a limited number of areas and shops has been positive and it is the Company's intention to develop this business, which tie very well with the Government Plan to promote E-Learning to develop people's education in rural area. During the Quarter, the Company has intensified its strategy to re-focus on the sales of electrical home appliances which the Company considers as being basically a replacement market by developing a multi brands, multi products trade-in approach. This is providing the opportunity of a huge replacement business for the Company. In order to quickly move out the expected in-flow of trade-in products, the Company plans to set up a network of shops which will specialize in selling 2nd hand-products, multi brands on a cash and carry concept. During the Quarter, the Company has significantly strengthened its credit granting and control process by establishing a new corps of Credit Control Officers, they were recruited and trained to properly evaluate the credit risk taken by the Company when selling on hire purchase. The rejection rate experiences is in the range of 22%, which has impacted the sales but represent too high-risks customers who would have jeopardized the Company's quality of receivables. Comments to Key Financial Numbers Income Statement Though the operating performance for the Third Quarter 2007 continuously show improvement in relation to two last Quarter 2007 as well as in comparison to the net loss amounting Baht 713.1 million of Third Quarter 2006, the Company is still reporting a loss of Baht 105.0 million caused by a sale drop, and the impact of the actions taken to repossess motorcycles from poor hire-purchase loans granted during the years 2004 and 2005 and large write-downs in the value of the motorcycle inventory. Inventory provision as of September 2007 equaling Baht 151.4 million was significantly lower than the provision at end June 2007 at Baht 235.0 million due to a decreasing number of used motorcycles in inventory as well as a plan to clear slow-moving stock put in place. The revenues decreased from Baht 585.1 million for the Third Quarter 2006 down to Baht 397.1 million or a decline of 32.1% mainly due to sales of both motorcycles and home appliances reduced by Baht 78.4 million and Baht 109.6 million respectively. A decrease of motorcycle sales is resulting from the Company's strategy to re-focus on home appliances, but due to an increase of down payment with the implement of pre-approval credit checking process under the economic downturn, and the Company's Policy not to allow the Shops in three Southern provinces of Thailand to have new hire purchase accounts, sale of home appliances was also decreased. Interest from installment sales decreased by Baht 117 million compared with the Third Quarter 2006 due to a decrease of installment accounts number from 322,883 accounts to 247,725 accounts caused by more accounts closed and reverted. Following the Thai Accounting Standard No. 44 (TAS No.44) about "The Consolidated Financial Statements and Accounting for investments in Subsidiaries" be revised on 11th October, 2006, the Company has changed the method of booking consolidated accounts from the equity method to the cost method since the first quarter 2007. This change has no significant impact on the Income Statement in Q3/2007 due to the very small profits from the Company's Subsidiaries. In summary the net loss for the Third Quarter 2007 was Baht 105.0 million compared to a net loss of Baht 713.1 million for the same period prior year. The positive difference of Baht 608.1 million can be analyzed as follows : - The percentage of cost of goods sold increased by 6.5% due to realized loss from sale of a lot of motorcycles and home appliances returned from the Customers. - After solving the problem of motorcycles returned, there was no need to book other expenses in one time adjustment for devaluation and reserve of used motorcycles amounting Baht 377.2 million, an addition bad debt provision for motorcycles amounting Baht 113.3 million, and an extra loss on re-possession amounting Baht 173.7 million. - Selling and Administrative Expenses decreased by Baht 101.8 million mainly due to a decrease of provision for benefit payment after Watson Wyatt had their review on the number of employee staff decreased in Y2006 by Baht 38.6 million, a decrease of bad debt provision by Baht 73 million after cleaning the problem of motorcycles. - Interest Expenses decreased by about Baht 15 million due to a huge decrease of loan from Baht 2,602.3 million at the end of September 2006 to Baht 1,562.6 million at the end of September 2007, somewhat offset by an increase in interest rate Balance Sheet Net installment and other receivables decreased to Baht 1,866 million at the end of September 2007 from Baht 2,770 million at the end of December 2006 due to a large number of motorcycles accounts being repossessed and reverted as well as a decrease of new motorcycles accounts by 39.4% compared with the same period of last year. At the end of September 2007, the number of installment receivable accounts was 247,725 accounts compared to 296,063 accounts at the end of December 2006. Net inventories decreased from Baht 547 million at the end of December 2006 to Baht 259 million at the end of September 2007 mainly due to major clearance of new & used motorcycles (reduced by 22,404 units) and home appliances via auction, bulky and canvassing sale. Kindly be informed. Yours truly, Daniel Philiponet Managing Director