KUALA LUMPUR: ELK-Desa Resources Bhd's revenue for the second quarter (Q2) ended 30 September 2021 (FY21) revenue declined by 38 per cent to RM23.36 million compared to RM37.39 million a year ago.

Profit before tax for the non-bank lender focused in the used-car segment in Q2 also decreased by 53 per cent to RM6.33 million against RM13.38 last year due to lower contribution from both hire purchase and furniture segments.

The decline in performance was predominantly due to business disruptions during the full lockdown imposed between June and September 2021.

As of 30 September 2021, ELK-Desa's hire purchase receivables stood at RM469.87 million, which is 13 per cent lower than the previous year.

Bank borrowings decreased by 14 per cent mainly due to repayment of block discounting facilities and term loans, and the company's gearing remains at a low level of only 0.34 times.

For the hire purchase segment, revenue decreased by 20 per cent to RM18.62 million due to a smaller hire purchase portfolio.

There was also no hire purchase disbursement during the quarter under review due to the Full Movement Control Order (MCO).

Both impairment allowance and credit loss charge increased by 95 per cent to RM5.36 million and from 0.47 per cent to 1.01per cent, respectively.

The higher impairment allowance and credit loss charge were mainly due to increase in the non-performing accounts during the quarter.

Executive director and chief financial officer Teoh Seng Hee said the company's performance in the first half of the financial year was within expectations as the Full MCO introduced from June 2021 onwards disrupted business and operations.

"Given the lower hire purchase portfolio achieved to date, ELK-Desa expects its performance for the financial year ending 31 March 2022 to be lower than the previous financial year due to disruptions in generating new hire purchase loans during the full lockdown," he said in a statement yesterday.

From a six-month (6M) period, revenue decreased by 19 per cent to RM54.73 while profit before tax decreased by 18 per cent to RM13.24 million.

ELK-Desa has declared a single-tier interim dividend of 2.0 sen per share regarding the current financial year ending 31 March 2022, which will be paid on 16 December 2021.

"In the immediate term, we still have to maintain a cautious stance as the disruptions caused by the MCO may impact our customers' capability of fulfilling their loan obligations.

"We will concentrate our efforts to ensure our hire purchase receivables would not decline further while being focused on credit risk management to protect the quality of our assets," Teoh said.

Teoh also said that ELK-Desa is confident that the operating landscape will improve in the medium to long term.

"The fast-paced national vaccination programme, economic stimulus packages and recovery initiatives announced in Budget 2022, as well as the resumption of business activities, locally are expected to positively impact our economy as a whole.

"While demand for hire purchase solutions has always been resilient, a stronger economy in the near future would allow us to mitigate credit risks better as we shift towards expanding our hire purchase portfolio," Teoh said.

For the company's furniture segment, revenue decreased by 67 per cent to RM4.74 million with a loss before tax of RM0.27 million for the quarter, mainly due to lower furniture sales caused by logistic problems due to the pandemic and its inability to operate for most of the quarter.

"As we move forward from these short term disruptions, we expect demand for value for money and quality furniture products to trend upwards as more and more Malaysians seek to re-style their homes to fit better a work or study from home lifestyle in the new normal," Teoh said.

Despite the challenging operating landscape in the current financial year, ELK-Desa remains committed to delivering its dividend policy of distributing not less than 60 per cent of its annual net profits after tax to shareholders.