Main Points:
The Group opened eight new outlets in various urban and suburban mega malls in FYE2009. The Company has a total of 95 retail outlets nationwide.
Poh Kong’s higher revenue was attributed to additional revenue from new stores together with like-for-like growth in existing stores, as well as higher sales of diamonds and gem-based jewellery from existing stores.
Poh Kong’s inventory comprising of gold and gems, notwithstanding the outlets expansion, have decreased from RM391.3 million in FYE2008 to RM356.7 million in FYE2009 due to efficiencies in stock control.
As at 31 July 2009, the Group’s net assets recorded an increase of RM22.6 million at RM283.7 million over the previous year of RM261.1 million.
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95 outlets
2009 Revenue: RM 541.636 m
Average Revenue per outlet: RM 5.701 m per year or RM 475,000 m per month
2009 PBT: RM 38.558 m
Average PBT per outlet: MR 405,874 per year or MR 33,823 per month
2009 PAT: RM 28.420 m
Average PAT per outlet: MR 299,158 per year or MR 24,930 per month
2009 Inventories: RM 356.7 m
Average Inventories per outlet: MR 3.755 m
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Chairman’s STATEMENT
Dear Valued Shareholders,
On behalf of the Board of Directors (“Board”) of Poh Kong Holdings Berhad (“the Company” or “PKHB”), I am pleased to present the Annual Report and Audited Financial Statements of the Company and its subsidiaries (“the Group”) for the financial year ended 31 July 2009 (“FYE 2009”).
Economic and Business Overview
The Malaysia’s economy registered a lower growth of 4.6% in 2008 compared to 6.3% in the previous year. GDP growth was close to negative territory in the fourth quarter of 2008 at 0.1%. In 2009, the global economy was largely affected by the financial crisis and economic recession which emanated in the US and Europe on a scale that was unprecedented. As asset prices fell and global demand plunged, developing economies were impacted by the fallout.
In the first quarter of 2009, the Malaysian economy contracted by 6.2% due largely to a drop in external demand and exports as advanced countries had to contend with a deepening recession. The country’s economy contracted to a slower 3.9% in the second quarter of 2009 and in the third quarter, the economy contracted to a smaller 1.2% mainly due to a decline in the manufacturing sector but it was reported that the worst was over for the economy.*
Notwitstanding the various uncertainties, the global and domestic economies are expected to register modest growth in 2010. In Malaysia, this is mainly due to the Government’s earlier stimulus spending packages totalling RM67 billion, unveiled in November 2008 (RM7 billion) and March 2009 (RM60 billion), which are having positive impact on the economy.
Supported by the domestic demand, stabilization and the fiscal stimulus packages designed to lessen the impact of a global recession, the Government is confident of achieving a 5% GDP growth in 2010. In announcing this on November 18, 2009, YB Tan Sri Nor Mohamed Yakcop, Minister in the Prime Minister’s Department, said the Government had no plans to introduce additional stimulus package to boost the economy as it was in the process of formulating the 10th Malaysian Plan and a new economic model.**
According to Retail Group Malaysia (RGM) which tabulates retail data, spending in the retail industry in Malaysia was expected to grow marginally between 1% and 3% by the end of 2009 in view of the sluggish economic conditions.***
This posed challenging times for malls and retailers of luxury goods which have gone through one of the toughest ever operating environment.
However, RGM is more optimistic next year and projects annual retail sales growth at about 5% in 2010.
In this context, Poh Kong remains committed to the luxury retail sector and has put in more focus on promotions of its products to further enhance sales of its jewellery.
Shopping malls and retailers have geared up for the Malaysia Year End Sale (MYES) campaign, a much anticipated celebration of shopping, dining and entertainment from Nov 21 to Jan 3, 2010. This campaign aimed at promoting domestic and tourist shopping regionally, would benefit the Group in jewellery retail sales.
Sources:
* Reported in The Edge online “Malaysia Q3 GDP shrinks less than expected”, 20 Nov 2009
** Reported in StarBiz, “No plan for additional stimulus package”, 19 Nov 2009, Page 5
*** Reported in StarBiz, “Retail industry still growing despite slowdown” 19 October 2009, Page 6
Review of Financial Performance
The Poh Kong Group achieved an increase of 6.34% in revenue of RM541.6 million in its financial year ended 31 July 2009 (FYE2009) compared with RM509.3 million for its previous financial year (FYE2008). This is an increment of RM32.3 million in sales revenue.
Poh Kong’s higher revenue was attributed to additional revenue from new stores together with like-for-like growth in existing stores, as well as higher sales of diamonds and gem-based jewellery from existing stores.
The Group opened eight new outlets in various urban and suburban mega malls in FYE2009. Poh Kong’s inventory comprising of gold and gems, notwithstanding the outlets expansion, have decreased from RM391.3 million in FYE2008 to RM356.7 million in FYE2009 due to efficiencies in stock control. Profit before taxation stood at RM38.6 million for the FYE 2009 or a marginal decrease of RM1.4 million or a 3.5% decline against RM40 million for its FYE2008. The decrease in profit before tax was mainly due to thinner profit margins from having purchased gold at higher prices and increased initial operating costs associated with the opening of new outlets.
Based in terms of the number of outlets, the Group is the largest jewellery retail chain store in Malaysia, and the market leader nationwide (RAM Ratings Report, November 2009). Gold jewellery remains Poh Kong’s main revenue contributor although the Group has stepped up the sales of diamonds and gems in its advertising and promotions campaigns. The branding strategy of these stores have been adopted so that the Company
becomes less dependant on its traditional yellow gold jewellery. As at 31 July 2009, the Group’s net assets recorded an increase of RM22.6 million at RM283.7 million over the previous year of RM261.1 million.
Retailing and Marketing Support
Besides Poh Kong stores as the top line contributor to total sales revenue, the Group has broaden its range of non-yellow gold jewellery via alternate brands, namely Tranz and Walt Disney Collections. The Company currently operates specialty brands and retail concept stores, such as Diamond Boutique, Diamond & Gold, Jade Gallery, Poh Kong Gallery, Oro Bianco white gold jewellery, and Schoeffel boutique, as well as the Schoeffel Time Collection, a range of fine watches from Germany. At Poh Kong, we are committed to brand building and will continue to invest in branding as a long-term investment in our luxury fashion retailing business.
The Group also represents exclusive designer jewellery brands from international houses, such as Alessandro Fanfani, Angel Diamonds, Lapplesite Collection, Luca Carati, Rodney Rayner, SunDay and Verdi Gioielli. These brands are mainly from European countries, such as the United Kingdom, Germany and Italy. From exquisite pieces to simple elegant designs, from irresistible collections to dazzling custom-made orders, Poh Kong has just the right jewellery for every occasion. The Group’s marketing mix continues to place strong emphasis and commitment on design, craftsmanship, reputation, premium quality and competitive pricing.
For marketing support, intensified efforts in advertising, merchandising and implementing various product launches, sponsorships, road shows and promotions over the year will help to maintain the Group’s leading position.
These effort included the Miss Poh Kong Glamour/ Miss Tourism International Pageant World Final 2008 beauty parade held at the Sunway Pyramid Shopping Mall in December. We plan to continue the Miss Poh Kong Glamour 2009 sponsorship in conjunction with the opening of an upcoming outlet in Malacca in December.
In June, we launched one of Italy’s oldest and most prestigious jewellery brand Luca Carati and commemorated Poh Kong as the sole distributor in Malaysia. Poh Kong’s co-sponsored the Mary Search for Celebrities, a popular cable TV programme to unearth talents in Malaysia to star in the Jia Yu family entertainment channel on Astro 304 in September. Road shows for this talent search were organized during preliminary rounds in Penang, Ipoh, Klang Valley and Johore Bahru with the grand finals held in Kuala Lumpur. Several jewellery road shows were organized to coincide with the Hari Raya Puasa and UMNO General Assembly in Kuala Lumpur from August to October. In October, Poh Kong featured two of its labels, Schoeffel pearls from Germany and Luca Carati diamonds from Italy, and held a jewellery show at the “Fashion on the Turf” Ladies Day event in the Selangor Turf Club. Poh Kong and Schoeffel also presented the new line of ready-to-wear Schoeffel pieces for the Autumn-Winter Collection 2009/2010 to a group of patrons and guests at the Hilton Kuala Lumpur in November.
Branding & The Customer Experience
Poh Kong has been spending considerable time and capital in brand building which has paid off over the years. The Group has promoted its brands to become one of the most recognised jewellery brands nationwide. Our specialty brands and retail concept stores not only stands out distinctly for our renowned
yellow gold but also for the finest quality in jewellery, be it pearls, jade, gold, diamonds or gem stones.
The customer’s experience and brand’s advertising are the two most critical elements that go into the building of our successful brands. The advertising of our specialty brands and retail concept stores are often remembered, being the first point of contact with our customers, and that sets the stage for the brand’s promise. It is the customer experience that ultimately delivers the promise in our branding.
Poh Kong continues to deliver the customer’s experience through our brands and products at our stores that’s high-end, accessible and affordable. At the end of the day, we believe our customers will look for chic products at the right price points and mix to complement their individual lifestyle.
Corporate Social Responsibility
The initiatives of Corporate Social Responsibility (CSR) have been an integral part of the Group’s social objectives. This means integrating CSR activities into our workplace, our market place, our community and our environment. The Group’s CSR activities are highlighted on a separate page in this Annual Report.
Future Prospects
The Board expects FYE 2010 to pose stiffer competitive challenges than before and remains cautious of the current economic conditions and weakness in consumer demand.
In response to this general trading environment, the Group has taken a more prudent approach in major capital expenditures and implemented cost control initiatives. It will continue to place emphasis on achieving higher productivity and improve operational efficiency for the Group’s divisions. Poh Kong’s management plans to continue its drive to build market share by enhancing and differentiating its product offerings to its targeted market segments. The Company is actively evaluating various initiatives and opportunities to attract new customers through the introduction of new product lines, designs andenhanced customer service.
The Company has a total of 95 retail outlets nationwide and will identify strategic locations for outlets across the country which have the potential for higher revenue growth and consumer demand. Moving forward, the Group will continue to expand outlets at a more moderate pace in view of the softer economic conditions and will invest on the refurbishment of existing stores.
With the current economic environment, Poh Kong does not expect to record any significant momentum in sales growth in the fourth quarter 2009 and first quarter 2010. However, the Group is optimistic on its retail sales due mainly to the festive seasons and its loyal customers who buy gold-based jewellery as a long-term investment and as an alternative to term deposits or as a hedge against inflation.
Barring unforeseen circumstances, the Board remains positive on the performance of the Group for the FYE 2010.
Earnings Per Share
The basic earnings per share for the financial year ended 31 July 2009 stands at 6.93 sen (2008: 6.99 sen).
Dividend
The Board is pleased to recommend a first and final single tier tax exempt dividend of 1.40 sen per ordinary share of RM0.50 each in respect of the financial year ended 31 July 2009 (2008 : 1.40 sen single tier tax exempt per ordinary share of RM0.50 each). The proposed dividend is subject to shareholders’ approval at the 7th Annual General Meeting to be held on 20 January 2010.
Acknowledgements
On behalf of the Board of Directors, I would like to record our appreciation to Mr Choon Yee Fook who has resigned as an Executive Director of the Board during the course of the year. We are also pleased to welcome Datin Shirley Yue Shou How as our new Independent Non-Executive Director of the Board.
I would like to express my utmost and sincere appreciation to all my fellow Board Directors for their counsel and support during the course of the year. To the Management and Staff, thank you for your conscientious efforts, commitment, dedication and contributions towards the Group.
We are also grateful to our shareholders for their confidence, valued customers, business partners, Government authorities, financiers and suppliers for their continued support and cooperation in the
Group.
DATO’ CHOON YEE SEIONG
Executive Chairman & Group Managing Director
16 December 2009
Source:
Annual Report of Poh Kong:
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/ad831d76bbe08151482576950032bfe5/$FILE/POHKONG-Cover%20to%20Page%2014%20(2.5MB).pdf
http://announcements.bursamalaysia.com/EDMS/subweb.nsf/7f04516f8098680348256c6f0017a6bf/ad831d76bbe08151482576950032bfe5/$FILE/POHKONG-Page%2015%20to%20ProxyForm%20(2.6MB).pdf
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