Archive : Management's Discussion and Analysis.
Overall Thai Economy
The overall economy in 2016 continued to expand with public spending as a main driver of economic growth. Exports of goods showed a more robust sign of recovery in terms of both price and quantity. However, the tourism sector slowed down as the number of foreign tourists contracted, especially those from China after the government’s new regulation on illegal tour operators. Despite the temporarily deceleration of private consumption, the situation improved at the end of the year, thanks to the government’s tax break.
Key highlight for year 2016
Comparison performance of the Company for 3 months ended 31 December 2016 and 31 December 2015
|(Unit: Baht Million)|
|Consolidated financial statement||
|Revenue from sale of goods||7,353||7,258||95||1.3%|
|Cost of sale of goods||5,506||5,469||37||0.7%|
|Share of profit of associates||208||151||57||37.9%|
|Profit before income tax expense||1,219||907||312||34.4%|
|Income tax expense||(162)||(151)||(11)||(7.0%)|
Core profit is net profit excludes share of profit of associates
Comparison performance of the Company for year ended 31 December 2016 and 31 December 2015
|(Unit: Baht Million)|
|Consolidated financial statement||
|Revenue from sale of goods||26,078||25,185||892||3.5%|
|Cost of sale of goods||19,574||19,022||552||2.9%|
|Share of profit of associates||580||451||129||28.6%|
|Profit before income tax expense||3,552||2,882||670||23.3%|
|Income tax expense||(556)||(534)||(22)||(4.1%)|
Core profit is net profit excludes share of profit of associates.
In 4Q16, the Company had a total income of Baht 8,595 million, an increase of Baht 310 million or 3.7% from 4Q15. This increase was an increase of the rental income from new lifestyle malls that opened in 2015 and 2016 and also other income from the reversal of allowance for doubtful accounts.
In 2016, the Company had a total income of Baht 30,187 million, an increase of Baht 1,424 million or 5.0% from 2015. This can be summarized as follows:
Cost of sales of goods
In 4Q16, cost of sales of goods amounted to Baht 5,506 million, an increase of Baht 37 million from the previous year. The cost of sales of goods accounted for 74.9% of net sales, which decreased by 0.5% from 4Q15 due to higher product mix and control of trade promotion.
In 2016, cost of sales of goods amounted to Baht 19,574 million, an increase of Baht 522 million. The cost of sales of goods accounted for 75.1% of net sales, which decreased by 0.4% from 2015. This was mainly due to the Company’s implementation of product mix strategies since 2015 and our focus on signature categories such as health and beauty, unisex products, jeans, kids products, home products, and lingerie. In addition the Company increased its revenue contribution from international brands and private brands which commanded higher margins. The Company also controlled trade promotion and focused more on signature promotions such as the Pay Day promotion or the Wednesday promotions. These helped increase gross margin to 24.9% in 2016, an increase of 0.4% compared to the margins achieved in 2015.
Selling and Administrative Expenses (SG&A)
In 4Q16, selling and administrative expenses amounted to Baht 2,057 million, an increase of Baht 19 million or 1.0% from 4Q15.
In 2016, selling and administrative expenses amounted to Baht 7,557 million, an increase of Baht 326 million or 4.5% from 2015. This can be attributed to expenses of new stores in 2015 and 2016 such as depreciation, personnel, utility. However the Company was able to efficiently control expenses of existing stores.
In 4Q16, Finance cost amounted to Baht 21 million, a decrease of Baht 1 million or 4.4% from 4Q15.
In 2016, finance costs amounted to Baht 84 million, an increase of Baht 5 million or 6.2% from 2015.
Shares of Profit of Associates
In 4Q16, the shares of profit of associates was Baht 208 million, an increase of Baht 57 million or 37.9% from 4Q15 (which derived from shares of profit of Power Buy Company Limited with amount of Baht 121 million-apart from normal operation, Power buy received flood compensation in 2011 and shares of profit of CRC Sports Company Limited with amount of Baht 87 million).
In 2016, the shares of profit of associates was Baht 580 million, an increase of Baht 129 million or 28.6% from 2015 (which derived from shares of profit of Power Buy Company Limited with amount of Baht 260 million and shares of profit of CRC Sports Company Limited with amount of Baht 320 million). These are in line with their business growth.
In 4Q16, the net profit amounted to Baht 1,010 million, an increase of Baht 309 million or 44.0% while core profit excluding shares of profit of associates amounted to Baht 802 million, an increase of Baht 251 million or 45.7%. Higher net profit was attributable to the efficiency of overall operations, shares profits of associated income, as well as the reversal of allowance for doubtful accounts.
In 2016, the net profit amounted to Baht 2,815 million, an increase of Baht 662 million or 30.7%. Meanwhile, core profit excluding shares of profit of associates amounted to Baht 2,235 million, an increase of Baht 533 million or 31.3%. The key drivers are:
Comparison statement of financial position for the year ended 31 December 2016 and 31 December 2015
|Unit : Million Baht|
|Cash and Cash equivalents||2,219||2,082||137||6.6%|
|Other current assets||3,470||3,200||270||8.4%|
|Other non-current assets||21,277||20,743||534||2.6%|
|Total current liabilites||7,367||9,864||(2,497)||(25.3%)|
|Total non-current liabilites||3,437||1,744||1,693||97.0%|
|Total liabilites and equities||27,001||26,059||941||3.6%|
Total assets amounted to Baht 27,001 million, an increase of Baht 941 million or 3.6% compared to the end of 2015. Total liabilities amounted to Baht 10,804 million, a decrease of Baht 805 million or 6.9% compared to the end of 2015. This decrease is due to lower account payable and other payable. Shareholders' equity totaled Baht 16,197 million, an increase of Baht 1,746 million or 12.1%, attributable to an improved financial performance.
As of 31 December 2016, the Company's capital structure comprised of total liabilities of Baht 10,804 million while the interest bearing debt was Baht 3,267 million, and total shareholders' equity of Baht 16,197 million. The Company had a liability to equity ratio of 0.7, while a net debt to equity ratio was 0.1.
|Key financial ratio||
|Gross profit margin (%)||24.9%||24.5%|
|Net profit margin (%)||9.3%||7.5%|
|Core profit margin (%)||7.4%||5.9%|
|Return on equity (%)||19.7%||16.7%|
|Return on asset (%)||13.7%||12.0%|
|Current ratio (Time)||0.6%||0.5%|
|Liability to Equity ratio (Time)||0.7%||0.8%|
Future outlook and Prospects for the future malls in 2017
The Company plans to open three new stores in Thailand (one lifestyle center in Petchaburi in the first half and one lifestyle in Kampeangphet and one department store in Mahachai in the second half). By the end of 2017, the Company will have a total forty seven stores Thailand and two stores in Vietnam.