inger Thailand operating results for year 2007

H.T. SET.003/2008 Date : February 28th, 2008 To : Managing Director The Stock Exchange of Thailand Bangkok Re : Singer Thailand operating results for year 2007 The Company's results in the fourth quarter of Y2007 improved as the losses narrowed to Baht 82 Million bringing the total losses for the year to Baht 500 Million which compared to the losses of Y2006 at Baht 1,233 Million is showing a significant improvement. This is clearly signaling a trend towards better results. During the Year of 2007, the major highlights were:- - The Company has generated a positive operating cash flow of Baht 959 Million for Y2007 continuing on a solid performance in 2006, when the Company generated Baht 1,100 million of positive cash flow. - The Company has also sold certain non strategic shops which have generated cash of Baht 65.6 Million for Y2007. - From the positive operating cash flow, the Company had been able to pay outstanding loans for Y2007 amounting Baht 998.6 Million. - The inventory of second hand products were significantly reduced as shown below :- End of Y2006 End of Y2007 Unit Baht ('000) Unit Baht ('000) Motorcycles 25,976 450,391 5,774 108,953 Electrical Home Appliances 34,307 106,026 23,825 65,913 - With the Company's decisive restructuring program in the Fourth Quarter of Y2006,the period cost forY2007 compared to Y2006 was reduced by Baht 120 Million especially total salaries and employee benefits. - The % of paying accounts which is measuring how many accounts are paying from the total portfolio has been improving by 10% at end of December 2007. 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. For Y2008, the Company will continue 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. For Y2008 and beyond the Company should take advantage of being the sole company in Thailand to sell hire purchase direct selling to develop and expand its business by adding more commissioned agents and more sale-units aiming at market domination. After establishing a new corps of Credit Control Officers and not allowing the Shops in the three Southern Provinces of Thailand to sell on credit terms in order to eliminate the risk related to selling on hire-purchase, the Company continues to enhance its risk management processes and control environment. The stricter credit granting procedures will continue to improve the quality of receivables and the profitability of the new business. Comments to Key Financial Numbers: Income Statement The operating performance for 2007 is indicating that the Company has been narrowing its losses since Q.3rd2006, not only comparing quarter to quarter but also in absolute amount quarter after quarter in the current year. The revenue decreased from Baht 3,813.1 Million for Y2006 down to Baht 2,514.1 Million or a decline of 34.1% mainly due to a decrease of both product sales by 56.1% for motorcycles and by 16.5% for home appliances, and interest from installment sales decreased by 44.4% or equal to Baht 474 Million due to a decrease of installment accounts number from 296,063 accounts to 230,957 accounts caused by more accounts closed and reverted. A decrease of motorcycle sales is resulting from the Company's strategy to re-focus on electrical home appliances, but due to an increase of down payment with the implementation 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. Inventory provision as of December 2007 equaling Baht 162.0 Million was lower than the provision at end of December 2006 at Baht 380.0 Million due to the program to reduce the number of used motorcycles and a plan to clear slow-moving stock of home appliances put in place via Smart Select Shop. Following the Thai Accounting Standard No.44 (TAS No.44) about "The Consolidated Financial Statements and Accounting for investments in Subsidiaries." 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 year 2007 due to the very small profits from the Company's Subsidiaries. In summary, the Net Loss for the year was Baht 500 million compared to a Net Loss of Baht 1,233 million at the end of last year. The favorable difference of Baht 733 million can be analyzed as follows: i. A decrease of product sales -832 million ii. A decrease of interest from installment -474 million iii.A decrease of cost of sales 550 million iv. A decrease of devaluation & reserve for used motorcycles 420 million v. A decrease of loss on repossession 475 million vi. A decrease of variable and semi-variable expenses 424 million vii. A decrease of period cost 120 million viii.Lower interest paid 50 million Balance Sheet Net installment and other receivables decreased to Baht 1,675 million at end of December 2007 from Baht 2,770 million the prior year. This resulted due to the large number of accounts being repossessed, as well as lower sales. At 31 December 2007 the number of installment receivable accounts was 230,957 compared to 296,063 at the end of the prior year,a decrease of 65,106 accounts. Net inventories decreased from Baht 547 million to Baht 231 million. This was mainly due to the program to decrease the number of used motorcycles and used home appliances. Interest bearing debt decreased by Baht 999 million over the year due to strong positive operating cash flows resulting from ongoing collections of receivable accounts and lower purchase of new inventory. Kindly be informed, Yours truly, Daniel Philiponet Managing Director