CFA Society Singapore
SINGAPORE (Aug 13): Serial System, the distributor of electronic components and consumer products, reported a 39% fall in 2Q earnings to US$2.0 million ($2.7 million) from a year ago.
The group’s bottom line was impacted by higher currency translation losses, impairment loss on investment in an associated company, fair-value loss on financial assets, higher allowance for impairment losses on trade and other receivables and impairment losses on goodwill arising from acquisition of subsidiaries.
Professional fees for the proposed spin-off of the company’s subsidiary on the Stock Exchange of Hong Kong also affected the group’s profitability.
Total revenue for 2Q18 rose 9% to US$408.7 million, exceeding the previous record high of US$405.2 million achieved in the 1Q18. Sales from electronic components distribution grew 9% to US$394.4 million as increased demand in Taiwan, South Korea, Hong Kong and China offset lower contributions from South Asia.
The consumer products distribution business generated sales of US$13.0 million, up 24% from 2Q17, with Malaysia driving the increase. Print-IQ Singapore, in which Serial System acquired a 70% stake in May 2017, also accounted for the higher revenue for the consumer products distribution business in 2Q18.
With the group’s continued focus on more profitable electronic components and consumer products, overall gross profit margins for 2Q18 rose from 7.0% a year earlier to 8.2%, the highest since the first quarter of 2015.
For the 1H18 ended June, Serial System’s earnings rose to US$7.2 million, up 19% from the same period last year with the higher gross profit from increased sales and stronger margins, coupled with a writeback of inventory obsolescence. Total revenue for 1H18 increased 15% to US$813.9 million.
As at 30 June 2018, it had cash and cash equivalents of US$68.0 million and net debt as a percentage of equity of 101.4%, compared with US$73.1 million and 114.8% respectively as at 31 December 2017.
Dr Derek Goh, the Group’s Executive Chairman and CEO, says: “We have made notable progress in growing our revenue and bottom line but are very mindful of the competitive operating environment and the growing risk of a trade war between the US and its key trading partners, including China. The proposed spin-off of our Hong Kong subsidiary is one way to position ourselves to seize growth opportunities, as this will free up resources for us to redeploy to other projects and help strengthen our balance sheet.”
The group has proposed an interim dividend of 0.40 cent a share for 1H18, up from 0.29 cent a share for 1H17.
Shares in Serial System closed 1.9 cents lower at 13 cents on Monday.