SINGAPORE (Aug 27): UG Healthcare reported higher revenues in FY19 from a year ago but higher marketing, administrative and distribution costs caused the bottomline to drop by more than 40%.

Nevertheless, the glovemaker expects to hold its bottomline steady in FY20 as it ekes out better efficiency from its production lines and ramps up on sales and marketing efforts.

For the FY19 ended June, UG Healthcare posted revenues of $91.7 million, up 17.5% compared to last year. Earnings, on the other hand, fell 42.2% to $2.5 million.

In 4Q19, gross margin came in at 19.9%, slightly down from 20.1% in 3Q19.

Despite lower earnings, UG Healthcare has declared a first and final dividend of 0.259 cent per share for FY19, 10.4% higher than the 0.235 cent per share declared for FY18.

Geographically, UG Healthcare’s largest market is Europe -- specifically in the UK and Germany -- contributed to 47% of total revenue.

South America contributed 18% of total revenue for FY19, up from 16% a year ago. However, the group has invested in boosting its branding and distribution networks in large developing markets like Brazil as well.

“We have to solidify our dental, and medical customer base, and then move to industrial, and then food industries,” says UG Healthcare executive director Lee Jun Yih in a results briefing.

According to Lee, the Netherlands leads the world in glove consumption per capita, with 333 pairs used per person per year. On the other spectrum, each person in India uses two pairs per year. In between, Brazil sees 33 pairs used per person per year.

Meanwhile, UG Healthcare is focusing its attention on selling its own branded gloves, which earn better margins, but requires near-term investment in marketing and distribution. For now, the group still derives around 20% of its revenue as an original equipment manufacturer (OEM) for other brands.

“We believe our strategy to manage both upstream manufacturing and downstream distribution through our proprietary branded products will enable us to have a sustainable business that is capable of generating higher value for the group in the long run,” adds Lee.

Year to date, shares in UG Healthcare are down 16.3% to trade at 18 cents on Aug 16. RHB’s Leng Seng Choon, in his May 7 report, rates the company “buy” and has a target price of 32 cents.

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