Chairman's Message
(Extracted from Annual Report 2011)
Group Performance
Financial year ended 31 March 2011 was an eventful year for the TT International Group of Companies. The Group had to grapple with several adverse developments which had an impact on our businesses as follows:
- Although the Scheme of Arrangement (the "Scheme") approved by the requisite majority of the company's creditors was approved by the High Court and sanctioned effective 19 April 2010, some creditors filed an appeal to the Singapore Court of Appeal seeking to overturn the decision of the High Court.
- There was an immediate impact on our business as a result of the loss of confidence of various suppliers who then tightened, reduced or stopped making available trade credit terms; and many of our wholesale customers who either returned goods already shipped to them or refused to make payment for past shipments as they were not confident that n will be able to honour our future product warranties obligations.
- The Group's businesses suffered another serious setback when, the Court of Appeal made a decision on 26 August 2010 to overturn the decision by the High Court for the sanction of the Scheme and ordered a Re-Vote of all creditors, with substantial variations as to eligibility and amounts allowed for re-voting. This Re-Vote was carried out in September 2010 and based on the results of the Re-Vote, the Court of Appeal then again approved and sanctioned the Scheme of Arrangement and made it effective 19 April 2010 as before.
- Throughout this difficult period, the Group continued Its efforts to stabilize the businesses and reassure business partners of our resolve to continue operetions. Hence, despite the Group having little or no access to additional working capital financing due to the standstill pending the financial restructuring, and stringent suppliers' terms and other various setbacks faced during the year under review, we were stili able to sustain a tumover of S$426.4 million compared to S$539.9 million in the corresponding previous year.
- The decline in Group Revenues was also the result of our efforts to conserve working capital by re-strategizing and repositioning our various businesses to focus on the ASEAN and Oceania markets where we have some competitive advantage. Due to working capital constraints, many of our trading and supply chain businesses in East and Western Europe, Africa and Middle East were either under hibernation and/or scaled down substantially.
The Directors do not propose any dividend In respect of the financial year ended 31 March 2011 given the need to conserve working capital for the business.
Review
As most of the uncertainties with respect to our Scheme of Arrangement was only finally resolved by January 2011 (after several clarifications were sought and obtained from the Court of Appeal), management's time and focus was distracted away from building up the business for most of the financial year ended 31 March 2011.
During the year, after scaling down our trading, distribution and supply chain business in Western Europe, Middle East, Africa and Poland, the Group revenue declined by S$113.5 million to S$426.4 million from S$539.9 million the previous financial year. Contribution from our retail and distribution, and trading business segments remained stable, which contributed S$424.5 million or 98.4% of the total revenue as compared with S$533.5 million or 97.0% of the previous corresponding financial year. Sales from our core consumer electronics product amounted to S$385.0 million as compared with S$484.7 million of the previous corresponding financial year. Of this, our AKIRA and private label business contributed S$172.3 million as compared with S$206.6 million in the previous corresponding financial year.
The Group suffered a loss of S$37.1 million for the full year ended 31 March 2011, as compared with a loss of S$0.7 million (restated) achieved in the previous financial year (The financial statements for the year ended 31 March 2010 was restated as explained under Note 29 to the financial statements). The higher losses were mainly attributable to exchange difference between current financial year under review (recorded an exchange loss of S$4.4 million) as compared to the corresponding previous financial year (recorded an exchange gain of S$36.1 million). If the exchange differences were excluded, loss for the financial year ended 31 March 2011 would be S$32.7 million, improving by S$4.1 million over the previous corresponding financial year's loss of S$36.8 million. This improvement was mainly attributed to reduction in operating expenses and a one-off gain arising from the Scheme Adjustments.
Outlook
With the Scheme of Arrangement completed and also the scaling down of many of our less profitable and working capital intensive businesses globally, management is now focused on growing the ASEAN and Oceania markets mainly for retail businesses and some trading/distribution activities for our AKIRA and private label business. The dark clouds looming from the Europe debt crisis and also now the USA budget debacle may lead to a possible recession in these developed countries. Asean and Oceania markets remain relatively stable for the moment but is susceptible to an economic slowdown if the global economy deteriorates further.
The Group intends to pursue sustainable growth in our distribution business in Australia, our retail Consumer Electronics business in Indonesia and to maintain our Furniture and Furnishings business in Singapore, which is a mature market. At the same time we have beefed up our product/brand management of AKIRA and private label for which results are starting to show.
Barring any unforeseen circumstances, the Group is expected to show stabilization of our business for the financial year ending 2012.
In addition, we are in active and constant discussions/negotiations with potential investors and other stakeholders for the Warehouse Retail Scheme ("WRS") project in Jurong East. We will provide updates as soon as we are able to make progress in this matter.
In the meantime, the Board would advise the investing public to trade in the Company's shares with the requisite caution.
Appreciation
On behalf of the Board, I wish to thank all our loyal shareholders during this difficult time. I would also like to thank our valued customers, business partners, suppliers, bankers for your continuing support and confidence in the Group. I would also like to highlight the dedication, patience and hard work put in by all our staff members and management during this very difficult last 3 years. In closing, I would like to express my sincere appreciation to my fellow Board members and all other members of TT International, who have enabled us to survive this very challenging year.
I am confident that with all your support, the Group will be able to overcome all challenges ahead.