Signature International sees lower FY19 revenue

TheEdge Tue, Dec 04, 2018 10:14am - 5 years View Original


PETALING JAYA: With a thinner order book of RM116 million as at September, Signature International Bhd is poised to deliver weaker results for its current financial year ending June 30, 2019 (FY19).

Group managing director Tan Kee Choong said the kitchen furniture maker has been negatively impacted by lower orders amid a subdued property market, and it does not see sentiment improving anytime soon.

“Based on the order book, FY19 revenue would be lower than in FY18 and Signature International Bhd is poised to deliver weaker results for its current financial year ending June 30, 2019 (FY19),” Tan told reporters after the company’s annual general meeting yesterday.

The group already saw a decline in profitability in the first quarter ended Sept 30, 2018 (1QFY19), with net profit down 28.96% to RM1.3 million from RM1.83 million a year earlier, on lower contribution from projects in its kitchen and wardrobe segments. Revenue declined by 22% to RM40.75 million from RM52.26 million.

The margins have been on the decline, with profit margins eroding by 3% to 5% year-on-year in FY18. Tan said that this was largely the result of having to lower their selling prices.

He said the company has done what it can to protect its bottom line, including cost engineering, or cutting out the middle men.

This has managed to lower the group’s cost of goods sold, he said.

“The project margins are not fixed (but) moving forward we are quite optimistic that we can get higher margin products,” he said.

One of the group’s strategies to boost net profit is to focus on expanding its retail business through dealerships. Signature International is targeting to launch four new showrooms in FY19, on top of its existing branches of over 20, Tan said.

The group’s planned retail expansion is not expected to incur significant capital expenditure as costs for retail outlets would be borne by the dealers, he said. As such, the group is able to expand its outlets quickly and at relatively low cost.

Meanwhile, Signature International also plans to diversify its product range, namely into the living room furniture segment. Its living room products, which began development since last year, are currently being finalised and should be launched within the first quarter of 2019, Tan said.

Signature International’s current order book provides earnings visibility for just over a year, and the group is bidding for over 100 projects in Malaysia. The order book figure excludes its retail segment, which Tan hopes to grow to 30% of revenue again in FY19. FY18 saw a larger contribution from the kitchen and wardrobe project segments at about 80%.

“The replenishment of our order book is ongoing,” Tan said, adding that new orders are expected to be awarded throughout FY19.

The group is also putting in efforts to expand across Asean, with established partnerships in Cambodia and Vietnam as well as retail partners in Indonesia and Thailand.

“We are also in discussions with a potential partner in the Philippines,” Tan said.

Shares in Signature International closed unchanged at 40.5 sen yesterday, leaving the group with a market capitalisation of RM97.32 million. The group’s share price has fallen by 40.58% or 28 sen year to-date.

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