Boustead released their 1H FY 2010 results on November 12, 2009. Suffice to say that I was pleasantly surprised that even though revenue had fallen by 12.7% for 2Q 2010, net profit attributable to shareholders actually increased 12% to S$10.8 million, and was up 33.4% to S$20.2 million for 1H 2010. The table below offers a quick glance at the results of Boustead for 2Q 2010 and 1H 2010, and a comparison against the corresponding period last year.
Profit and Loss Analysis
One would immediately notice that gross margin has weakened considerably for 1H 2010, as the 10.8% rise in revenues was more than offset by the 17.2% rise in COGS, resulting in a decrease in gross profit of 3.3% from S$66.2 million to S$64.0 million. This can be attributed to margin erosion as costs are now higher and margins are also depressed as contracts are harder to come by, and customers have had to bargain for lower prices in order to accept jobs as financing is also tight. Gross margin contracted from 31.4% to 27.5%, and a closer look at each division will be done in Part 2 of this analysis, as well as offering a peek into PBT margins and I will provide possible explanations for the margin erosion, and whether I think it will persist in the medium-term.
Other income had also dipped by 40% from S$3.3 million to S$1.9 million as result of lower interest income and rental income. Fortunately, Boustead’s focus on cost controls managed to reduce selling and distribution expenses by 7.8% from S$12.8 million to S$11.8 million, and administrative expenses by 16.7% from S$22.9 million to S$19.1 million. Financing costs also fell by 52% as the Group had repaid some long-term bank loans during the 6-month period ending Sep 30, 2009. All these measures helped profit before tax to rise by 10%. Read more...