MD & A

Archive : Management's Discussion and Analysis.

Management’s Discussion and Analysis (MD&A) and operating result for 3 months and 9 months ended 30 September 2016

Overall Thai Economy

The Thai economy continued to recover with public spending, steady growth in private consumption, as its major drivers. The tourism sector continued to robustly grow despite bombing incidents and government regulations on the zero-dollar tour operators. Consumer confidence improved from the previous quarter due to domestic factors, farm income gradually recovered after the drought had subsided, and exports began to recover. Nonetheless private investment was similar to last year.

Key highlight for the third quarter of 2016

  • In the third quarter, the Company still continued to expand our business as planned by opening a new lifestyle department store in Nakornsrithamarat province, with new lifestyle concept specifically catered to the lives of southern customers. Currently, the Company operates 43 branches in Thailand and 2 branches in Vietnam.
  • Same store sale growth is flat in 3Q15 due to heavy rainfall and explosion in the southern provinces in August.
  • The Company had a total income of Baht 7,198 million, which increased by 4.4% compared to 3Q15 due to a net sale from both existing stores and new store opened in 2015 and 2016 which increased by 3.4% while investment income increased by 16.0% from higher rental incomes in our lifestyle centers. The Company also arranged event activities in the malls and renovated stores in order to attract more customers.
  • Gross margin continued to expand steadily to 40 basis points to 24.3% in 3Q16. Mainly from continued strength in our product mix and controlled trade discount.
  • In 3Q16, net profit amounted to Baht 510 million, increasing by 28.3% from 3Q15 due to an improved business strategy, a continued implementation of product mixing, controlled trade discounts during non-promotional periods, and efficient operating costs and administrative expense management.

Comparison performance of the Company for 3 months ended 30 September 2016

(Unit: Baht Million)
30 Sep 2016
30 Sep 2015
Increase (Decrease)
% Change
Revenue from Sale of good 6,237 6,031 206 3.4%
Investment income 742 639 102 16.0%
Other income 219 221 (2) (1.0%)
Total income 7,198 6,891 306 4.4%
Cost of Sale of Goods 4,720 4,588 132 2.9%
Selling expenses 1,576 1,534 42 2.8%
Administrative expenses 327 311 16 5.1%
Financial costs 23 20 3 14.5%
Total expenses 6,645 6,452 193 3.0%
Share of point of associates 103 90 14 15.1%
Profit before income tax expense 656 529 127 24.0%
Income tax expense (111) (90) (21) 28.3%
Net Profit 510 397 112 28.3%
Core profit 406 308 99 32.1%

Core profit is net profit excludes share of profit of associates

Comparison performance of the Company for 9 months ended 30 September 2016

(Unit: Baht Million)
30 Sep 2016
30 Sep 2015
Increase (Decrease)
% Change
Revenue from Sale of good 18,725 17,927 798 4.5%
Investment income 2,187 1,884 323 16.1%
Other income 680 667 14 2.0%
Total income 21,592 20,478 1,114 5.4%
Cost of Sale of Goods 14,068 13,552 515 3.8%
Selling expenses 4,559 4,306 253 5.9%
Administrative expenses 942 888 54 6.0%
Financial costs 63 57 6 10.4%
Total expenses 19,631 18,803 828 4.4%
Share of point of associates 372 300 72 23.9%
Profit before income tax expense 2,334 1,976 358 18.1%
Income tax expense (394) (383) (11) 3.0%
Net Profit 1,805 1,452 353 24.3%
Core profit 1,433 1,151 282 24.5%

Core profit is net profit excludes share of profit of associates.

Total Income

In 3Q16, the Company had a total income of Baht 7,198 million - an increase of Baht 306 million or 4.4% from 3Q15. This can be summarized as follows:

  • The total revenue from sales was Baht 6,237 million, which increased by Baht 206 million or 3.4% from 3Q15. This is mainly due to efficient management of net sales from both existing stores and new stores opened in 2015 and 2016. Furthermore, our marketing strategies and promotions successfully attracted targeted customers who are regularly visitors to specific stores at our shopping malls.
  • The total investment income was Baht 742 million, which increased by Baht 102 million or 16.0% from 3Q15. This increase is mainly from an increase in rental income from a new lifestyle center opened in 2015.
  • Other incomes totaled Baht 219 million, decreasing by Baht 2 million or 1.0% from 3Q15.

In 9M16, the Company had a total income of Baht 21,592 million, an increase of Baht 1,114 million or 5.4% from 9M15. Total revenue from sales was Baht 18,725 million, an increase of Baht 798 million or 4.5% from 9M15. The investment income was Baht 2,187 million, an increase of Baht 303 million or 16.1% from 9M15 while other income totaled Baht 680 million, an increase of Baht 14 million or 2.0% from 9M15.

Cost of sales of goods

In 3Q16, the cost of sales of goods amounted to Baht 4,720 million, an increase of Baht 132 million. The cost of sales of goods accounted for 75.7% of net sales, which decreased by 0.4% from 3Q15.This was mainly due to the Company’s implementation of product mixing strategies since 2015 and a focus on signature categories such as health and beauty, unisex/Jean, kids products, home products, and lingerie. In addition the Company increased its revenue contribution from international brands and private brands. The Company also controlled trade promotion and focused more on signature promotions, for example, pay day promotion or Wednesday promotions. These would increase gross margin to 24.3% in 3Q16, an increase of 0.4% compare to 3Q15.

In 9M16, the cost of sales of goods amounted to Baht 14,068 million, an increase of Baht 515 million. The cost of sales of goods accounted for 75.1% of net sales, a decrease of 0.5% from 9M15. Gross margin was 24.9%, an increase of 0.5% compared to 9M15.

Selling and Administrative Expenses (SG&A)

In 3Q16, selling and administrative expenses amounted to Baht 1,902 million, an increase of Baht 58 million or 3.2% from 3Q15. This was mainly due to expenses of new stores that opened in 2015 and 2016. Depreciation, personnel expenses, and utilities expenses contributed to these expenses. The Company was able to efficiently control expenses of existing stores.

In 9M16, selling and administrative expenses amounted to Baht 5,500 million, an increase of Baht 307 million or 5.9% from 9M15.

Finance cost

In 3Q16, finance costs amounted to Baht 23 million, an increase of Baht 3 million or 14.5% from 3Q15.

In 9M16, finance costs amounted to Baht 63 million, an increase of Baht 6 million or 10.4% from 9M15.

Share of Profit of Associates

In 3Q16, the share of profit of associates was Baht 103 million, an increase of Baht 14 million (divided into Power Buy Company Limited with amount of Baht 29 million and CRC Sports Company Limited with amount of Baht 74 million) or 15.1% from 3Q15.

In 9M16, the share of profit of associates was Baht 372 million, an increase of Baht 72 million (divided into Power Buy Company Limited with amount of Baht 139 million and CRC Sports Company Limited with amount of Baht 233 million) or 23.9% from 9M15.

Net Profit

In 3Q16, the net profit amounted to Baht 510 million, an increase of Baht 112 million or 28.3%. This was mainly due to a continual growth of net sales, rental income, and efficient expense management. However, the core net profit (net profit excluding share of profit of associates) totaled Baht 406 million, an increase of Baht 99 million or 32.1% from 3Q15.

In 9M16, the net profit amounted to Baht 1,805 million, an increase of Baht 353 million or 24.3%. The core net profit (net profit excluding share of profit of associates) totaled Baht 1,433 million, an increase of Baht 282 million or 24.5% from 9M15

Comparison statement of financial position as of 30 September 2016 and 31 December 2015

Unit : Million Baht
30 Sep 2016
31 Dec 2015
Increase (Decrease)
% Change
Cash and Cash equivalents 1,093 1,082 (989) (47.5% )
Current investment 35 35 0.3 0.9%
Other current assets 3,361 3,200 161 5.0%
Other non-current assets 20,602 20,743 (141) (0.7%)
Total assets 25,091 26,059 (969) (3.7%)
Total current liabilites 6,578 9,864 (3,259) (33.33%)
Total non-current liabilites 3,372 1,744 1,628 93.4%
Total liabilites 9,951 11,608 (1,658) (14.3%)
Total equity 15,140 14,451 689 4.8%
Total liabilites and equity 25,091 25,059 (969) (3.7%)

The total assets amounted to Baht 25,091 million, a decrease of Baht 969 million or 3.7% compared to the end of 2015. Total liabilities totaled Baht 9,951 million, a decrease of Baht 1,658 million or 14.3% compared to the end of 2015 due to lower account payable and other payable. Shareholders' equity totaled Baht 15,140 million, an increase of Baht 689 million or 4.8% attributable to an improved financial performance.

Capital Structure

As of 30 September 2016, the Company's capital structure comprised of total liabilities of Baht 9,951 million and total shareholders' equity of Baht 15,140 million. The Company had a liability to equity ratio of 0.7, while a net debt to equity ratio was 0.14.

Financial ratio

30 Sep 2016
30 Sep 2015
Gross profit margin (%) 24.9% 24.4%
Net profit margin (%) 9.6% 8.1%
Core profit margin (%) 7.7% 6.4%
Return on Equity (%) 18.7% 16.8%
Return on Asset (%) 13.5% 12.7%
Current ratio (Time) 0.5% 0.4%
Liability to Equity ratio (Time) 0.7% 0.7%