Courts Asia reports fiscal 1Q18/19 net loss as Malaysia revenue hit by credit regulations

Malaysia ringgit notesMalaysia ringgit notes

Courts Asia reported on Monday a fiscal first quarter net loss of S$2.21 million, swinging from a year-earlier profit of S$6.05 million, amid a decline in revenue from Malaysia as new credit regulations bit into earnings.

Revenue for the quarter ended 30 June fell 3.6 percent on-year to S$179.82 million, the consumer electronics retailer said in a filing to SGX after the market close on Monday.

At the beginning of the year, Malaysia’s Consumer Protection (Credit Sale) Regulations 2017 took effect, which coupled with a “more prudent approach” to credit sales, a challenging collections environment in Malaysia, higher impairment levels in Indonesia and the adoption of new Singapore accounting regulations, affected performance, Courts Asia said.

Malaysian revenue, which contributed 25.6 percent of group revenue, fell 20.6 percent on-year in the quarter in Singapore-dollar terms and 24.4 percent on-year in Malaysian ringgit terms, mainly on lower earning service charge income, Courts Asia said. The CPAA regulations cap interest rates at 15 percent per annum, it noted.

Additionally, Malaysian operations were also affected by a hit to merchandise margins from the absorption of GST there from 18 May to 1 June, when GST was zero rated as the company tried to maintain festive sales momentum, it said.

“Our group’s business performance continues to be impacted by the interest rate cap imposed by CPAA in Malaysia. However, there are early indicators to suggest that the business transformation work in Malaysia is delivering green shoots,” Terence Donald O’Connor, Courts Asia’s executive director and CEO, said in the statement, pointing to a 16.8 percent on-quarter revenue rise in Malaysia.

“Our Malaysia business will continue to face pressure in the short term and we expect to reap the results of the transformation work only in the medium to long term,” he said.

Singapore revenue, which contributed 70.1 percent of group revenue for the quarter, rose 3.9 percent on-year, mainly on higher goods sales from the relaunch of its online platform and the relaunch of its megastore in Tampines in November, it said.

“Singapore continued on its growth trajectory and delivered a strong set of results, following the transformation of its flagship Tampines Megastore into an experiential retail hub and the online store relaunch which both saw a double-digit year-on-year growth,” the CEO added.

Indonesian revenue, which contributed 4.3 percent of group revenue for the quarter, rose 6.4 percent on-year in Singapore dollar terms and 15.8 percent on-year in Indonesian rupiah terms, mainly on higher earnings service charge income, it said.

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