It plans to open 300 sales outlets, launch new products and bring production in-house
By LYNETTE KHOO 7 March 2009
Unfazed by the closure of some 50 points-of-sale (POS) last year and losses in the fourth quarter, Beauty China is still going big on expansion. It is looking to add over 300 POS this year, launch hair colour products and bring all production of its cosmetic products in-house by the end of this year.
Some HK$70-80 million (S$14-16 million) of capital expenditure is set aside for this year, with the costs of bringing its production in-house substantially paid off.
While this seems an aggressive plan, it pales in comparison with the growth of the group’s retail network last year, which saw a net increase of 455 POS to 2,249 as at end-2008. This comprised 1,805 Colour Zone and 444 CharmingLady POS throughout China.
Speaking to analysts and reporters via teleconference yesterday, group financial controller Joe Wong said that the group wants to open another 200-250 Colour Zone POS and 100-120 CharmingLady POS this year.
But he reiterated that it would be a challenging year for the group, which had sunk into the red for the fourth quarter and posted lower earnings for the full year ended Dec 31, 2008. Net profit for the year slumped 28.9 per cent to HK$115.04 million as allowance for impairment of trade receivables and impairment loss on land use rights offset the growth in sales.
The allowance for impairment of trade receivables prompted a query from SGX and also drew pointed queries from analysts yesterday.
Beauty China explained that the allowance of HK$42.4 million was made for the full balances owed by 19 small and medium customers, who accounted for 13.15 per cent of revenue from the group’s brand business (Colour Zone and CharmingLady) for the full year. But no additional allowance is expected to be made for them.
The group had ceased trading with 11 of these customers. This led to the closure of close to 40 Colour Zone POS and about 10 CharmingLady POS, Mr. Wong disclosed yesterday.
The group has allowed the remaining eight customers to continue distributing the group’s products but has ceased to supply them new products except on a cash on delivery basis.
‘We have put a lot of effort to improve our working capital including controlling costs, inventory management and on collecting debts from distributors,’ Mr. Wong said.
The group has cut credit terms to new distributors by 30 days and the existing ones to no more than 60 days. But it is now faced with the need to raise cash before its short-term loan of HK$80.8 million matures this year. This was secured with corporate guarantees and certain assets of the company.
‘We may raise funds through debt or equity but our focus is to use internally generated funds to finance our operations and other short-term obligations,’ Mr. Wong said. He noted that though the group’s bank borrowing is higher than the cash equivalents of HK$64.58 million as at end-2008, most of the loan is due in the second half of this year.
‘So, we still have time to increase our working capital to settle this outstanding debt in the second half,’ he said.
Giving a glimpse of how this year has panned out so far, Mr. Wong said that Beauty China enjoyed double-digit growth in sales in January, thanks to pre-Chinese New Year shopping but sales in February fell after the festive season.
Commenting on the ongoing talk of a potential stake sale by group chairman Wong Hon Wai and the forced-selling of some of his pledged shares under his personal loan, the group yesterday reiterated that this would have no direct impact on its business.
‘Our business is mature and has been established for quite a while,’ said executive director Stephen Tsim. ‘It is not dependent on one person.’
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Beauty China’s big expansion plans
It plans to open 300 sales outlets, launch new products and bring production in-house
By LYNETTE KHOO
7 March 2009
Unfazed by the closure of some 50 points-of-sale (POS) last year and losses in the fourth quarter, Beauty China is still going big on expansion. It is looking to add over 300 POS this year, launch hair colour products and bring all production of its cosmetic products in-house by the end of this year.
Some HK$70-80 million (S$14-16 million) of capital expenditure is set aside for this year, with the costs of bringing its production in-house substantially paid off.
While this seems an aggressive plan, it pales in comparison with the growth of the group’s retail network last year, which saw a net increase of 455 POS to 2,249 as at end-2008. This comprised 1,805 Colour Zone and 444 CharmingLady POS throughout China.
Speaking to analysts and reporters via teleconference yesterday, group financial controller Joe Wong said that the group wants to open another 200-250 Colour Zone POS and 100-120 CharmingLady POS this year.
But he reiterated that it would be a challenging year for the group, which had sunk into the red for the fourth quarter and posted lower earnings for the full year ended Dec 31, 2008. Net profit for the year slumped 28.9 per cent to HK$115.04 million as allowance for impairment of trade receivables and impairment loss on land use rights offset the growth in sales.
The allowance for impairment of trade receivables prompted a query from SGX and also drew pointed queries from analysts yesterday.
Beauty China explained that the allowance of HK$42.4 million was made for the full balances owed by 19 small and medium customers, who accounted for 13.15 per cent of revenue from the group’s brand business (Colour Zone and CharmingLady) for the full year. But no additional allowance is expected to be made for them.
The group had ceased trading with 11 of these customers. This led to the closure of close to 40 Colour Zone POS and about 10 CharmingLady POS, Mr. Wong disclosed yesterday.
The group has allowed the remaining eight customers to continue distributing the group’s products but has ceased to supply them new products except on a cash on delivery basis.
‘We have put a lot of effort to improve our working capital including controlling costs, inventory management and on collecting debts from distributors,’ Mr. Wong said.
The group has cut credit terms to new distributors by 30 days and the existing ones to no more than 60 days. But it is now faced with the need to raise cash before its short-term loan of HK$80.8 million matures this year. This was secured with corporate guarantees and certain assets of the company.
‘We may raise funds through debt or equity but our focus is to use internally generated funds to finance our operations and other short-term obligations,’ Mr. Wong said. He noted that though the group’s bank borrowing is higher than the cash equivalents of HK$64.58 million as at end-2008, most of the loan is due in the second half of this year.
‘So, we still have time to increase our working capital to settle this outstanding debt in the second half,’ he said.
Giving a glimpse of how this year has panned out so far, Mr. Wong said that Beauty China enjoyed double-digit growth in sales in January, thanks to pre-Chinese New Year shopping but sales in February fell after the festive season.
Commenting on the ongoing talk of a potential stake sale by group chairman Wong Hon Wai and the forced-selling of some of his pledged shares under his personal loan, the group yesterday reiterated that this would have no direct impact on its business.
‘Our business is mature and has been established for quite a while,’ said executive director Stephen Tsim. ‘It is not dependent on one person.’
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