Action Asia suffers $5.7m net loss for 9MFY2013

Lower revenue and higher costs blamed.

SGX-Mainboard-listed Action Asia Limited (Action Asia) has reported revenue of S$83.1 million for the nine months ended September 30, 2013 (9MFY2013). The revenue was about 36% lower compared to the nine months ended September 30, 2012 (9MFY2012).

Action Asia said the revenue decline was mainly due to lower selling price and orders for the Group’s consumer lifestyle entertainment products. "The reduced revenue coupled with higher costs of certain key raw materials led to a $5.7 million net loss in 9MFY2013 against a net profit of S$2.6 million in 9MFY2012," it added.

Despite the loss, the Group continued to generate positive cashflow of S$26.3 million in 9MFY2013 from its operating activities. This is higher than the S$9.4 million cash inflow in 9MFY2012. Group’s cash and cash equivalent rose about 17% to S$47.1 million, up from S$40.1 million at the end of FY2012. Cash per ordinary share stands at 11.8 cents, being 81% of the current share price of 14.5 cents as at 8 Nov 2013.

"In line with lower sales and coupled with the Group’s stringent cost control measures, overall costs for the Group including employee compensation, finance expenses and other operating expenses have been reduced in 9MFY2013," said Action Asia.

Employees’ compensation for 9MFY2013 was down by 8% to S$10.8 million against S$11.7 million in 9MFY2012, which the company said was due to less overtime claims as a result of lower sales volume.

Depreciation expense for 9MFY2013 decreased by 16.6% to S$3.1 million as certain property, plant and equipment have been fully depreciated in the current financial period.

Finance expenses in 9MFY2013 dropped by 31% to S$361,000 from S$522,000 in 9MFY2012. This was mainly due to lower interest expense for trade financing to buy raw materials.

The other operating expenses which include warranty expenses and other distribution expenses amounted to S$8.6 million in 9MFY2013, down by 37% from S$13.8 million in 9MFY2012.

Group borrowings fell from S$36.32 million as at December 31, 2012 to S$27.05 million as at September 30, 2013 mainly due to lower purchases of raw materials through trade financing.

Group Loss Per Share was 1.33 cents in 9MFY2013, against Earnings Per Share of 0.40 cent in 9MFY2012. The Net Asset Value (NAV) slipped to 22.06 cents at September 30, 2013, from 23.30 cents at December 31, 2013.

On the Group’s results, Chairman Mr Jack Li Yuan Chen said: “Global volatility in the past months reflected the global market gyrations due to economic uncertainties as well as the digital transformation sweeping across the world - which saw a consolidation of tech players and the waning demand for consumer electronics products such as PCs, TVs, digital cameras and other electronic gadgets as consumers move towards smartphones, tablets, phablets and other all-in smart mobile devices.

“In the light of these trends, the Group’s consumer digital products suffered a decline in sales as our key customers adjust to the new paradigms. We have been taking steps to meet new demand for portable and mobile smart devices such as smartphones and tablets and phablets. Our production of these devices remain small for now but we expect to increase our output of these products in the coming months.

“China had shown some progress in rebalancing its economy, with consumption contributing more and services accounting for a larger share of GDP. But the economy has yet to make the decisive turn toward consumer-based growth.

“The Group will therefore continue to monitor market trends closely and to manage the operational risks prudently, and exercise cost control to lower operational costs.

“As market visibility in the next few months still lacks certainty, we remain cautious of the Group’s outlook for the rest of the year.”