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Revenue decreased by S$8.0 million or 26.5% from S$30.0 million in HY2015 to S$22.0 million in HY2016 with Builders Shop Pte Ltd (BSPL) contributing $2.3 million to the overall revenue. Our key retail business segment registered a decrease of 23.8% from S$24.0 million in HY2015 to S$18.3 million in HY2016. Our export markets remained weak and competitive; this resulted in the decline by 52.0% from S$1.7 million in HY2015 to S$0.8 million in HY2016. The revenue from LRS stores decreased by 58.3% from S$1.6 million in HY2015 to S$0.6 million in HY2016.
Revenue by Business Segment:
Number of Stores:
Cost of Goods Sold and Gross Profit
As a result of decline in sales, our cost of sales decreased by 24.4% from S$17.5 million in HY2015 to S$13.2 million in HY2016. Gross profit decrease by 29.5% from S$12.5 million in HY2015 to S$8.8 million in HY2016. Gross profit margin also decreased from 41.6% in HY2015 to 39.9% in HY2016 due to inefficiency.
Profit before and after Taxation
Overall poor performance resulted in higher loss before taxation of S$4.1 million in HY2016 from a loss of S$3.6 million in HY2015.
Other Operating Income
Other operating income arises mainly from transportation revenue, sundry income, and foreign exchange gains arising from timing differences. The Group does not undertake any hedging or derivative trading activities.
Other operating income decreased from S$1.3 million in HY2015 to S$1.0 million in HY2016, mainly due higher foreign exchange gain recorded in HY2015.
Administrative expenses comprise mainly salaries and related expenses, rental expenses, directors' remuneration, retail store maintenance, office equipment maintenance and general office expenses.
The administrative expenses decreased by 22.7% or $2.7 million from S$12.0 million in HY2015 to S$9.3 million in HY2016 mainly due to decrease in salaries and related expenses of S$1.2 million.
Distribution and Marketing Costs
The distribution and marketing costs decreased by 38.3% or S$1.5 million to S$2.4 million in HY2016 as compared to HY2015 mainly due to decrease in advertisement expenses of S$0.8 million in HY2016.
Other Operating Expenses
Other operating expenses increased by S$0.6 million or by 52.6% from S$1.1 million in HY2015 to S$1.7 million in HY2016 mainly due to foreign exchanges loss.
Finance costs increased marginally by 3.4% from S$0.47 million in HY2015 to $0.48 million in HY2016 mainly due to increase in interest expenses for overdraft and utilization of trade financing.
The Group's income tax expenses decreased from S$0.3 million in HY2015 to S$0.1 million in HY2016 as a result of the loss generated from the business segments.
Net profit after Tax
As a result of the above, the Group reported a net loss after tax of S$4.1 million for HY2016 as compared to a net loss after tax of S$3.9 million for HY2015.
The Group's non-current assets decreased by S$1.8 million from S$22.8 million as at 31 December 2015 to S$21.0 million as at HY2016 due to depreciation of property, plant and equipment.
Inventories decreased by approximately by 7.7% or S$1.3 million from S$16.4 million as at 31 December 2015 to S$15.2 million as at HY2016. Decreased in inventories was mainly due to seasonal demand. The inventory turnover increased to 209 days as compared to FY2015's 186 days.
Current Liabilities: Borrowings
Current portion of the bank borrowings decreased from S$18.9 million as at 31 December 2015 to S$16.7 million as at HY2016 primarily due to repayment of the bank loans and bills payables.
The Group's current ratio dropped from 0.81 times to 0.77 times for the period under review. The negative current assets of the Group also increased from $6.6 million as at 31 December 2015 to S$7.8 million as at HY2016.
As at 30 June 2016, the Group's net gearing ratio (defined as the borrowings to shareholder's equity) stood at 1.42 times as compared to 31 December 2015's 1.23 times.
Shareholders' equity of the Group decreased by S$3.5 million from S$15.6 million as at 31 December 2015 to S$12.1 million as at HY2016 as a result of S$4.1 million loss offset by the issuing of new ordinary shares.
Net cash generated from the operating activities was S$0.2 million for HY2015 and S$0.1 for HY2016.
Net cash used in investing activities was S$0.1 million in HY2015 as compared to S$0.2 million in HY2016.
Net cash outflow used in the financing activities was S$7.1 million in HY2015 as compared to S$0.4 million used in HY2016 mainly due to repayment of bills payable of S$9.5 million in HY2015, there was a net proceeds from issue of ordinary shares of S$3.6 million in HY2015 and S$1.16 million in HY2016.
Hence, the cash and cash equivalents decreased by S$0.4 million in HY2016.
Revenue from retail business segment remained as the main contributor, contributing 83.0% or S$18.3 million of total revenue in HY2016. Export market contributed 3.6% or S$0.8 million, LRS contributed 2.9% or $0.6 million and BSPL contributed 10.4% or S$2.3 million.
Revenue from retail segment which enjoyed the highest gross margin compared to other business segments decreased by 23.8% in HY2016 as compared to HY2015.
The revenue from Malaysia remained as the main contributor, contributing 35.6% of total revenue in HY2016 and followed by revenue from Taiwan which contributed 25.7% of total revenue. Other countries consist of overseas corporate customers for trading of sofa and other furniture.
Revenue by geographical segments:
The Board of Directors is cautious about the Company's forthcoming second half prospects due to market challenges such as the continued weakness in the Europe, foreign exchange movements and weakening Chinese GDP growth, dampen demand and negative consumer sentiment and the ongoing slump in global crude oil prices which is affecting the economy.
In our core Malaysian market, demand for furniture is likely to remain weak due to the challenging environment such as the negative consumer sentiment. In Singapore, the demand for residential property remain weak which drives the furniture demand in the industry we operate.
As a result, the Group will continue to explore new opportunities to improve its future income stream.