Management Discussion and Analysis

Operating Results for the year ending December 31, 2020

During 2020, the Company had total revenues of Baht 1,326 million which consisted of;

  • Baht 1,294 million on Sales which decreased by Baht 193 million or 12.98% from the previous year. The comprises of Baht 167 million on body care products, Baht 263 million on facial skin care products, Baht 764 million on cosmetics, Baht 30 million on accessories, Baht 49 million on furniture, marketing tools and other, Baht 21 million on food and beverage section.
  • Income from warehouse rental and warehouse services amounted to Baht 21 million equal to last year.
  • Gain on fair value adjustment of investment properties amounted to Baht 0.10 million decreased from the previous year by Baht 0.36 million.
  • Other incomes totaled of Baht 11 million, decreased from the previous year by Baht 5 million or 31.25% which comprises of gain on currency exchange Baht 4 million, gain on disperse of assets Baht 1 million and others of Baht 6 million.

During the year 2020, The Total Expenses was Baht 1,147 million which comprises of;

  • Cost of sales amounted to Baht 638 million which decreased from the previous year by Baht 56 million or 8.07%. The cost of sales is directly proportional to the Sales Revenue. The gross profit margin was 50.70% which was similar to the previous year.
  • Cost of warehouse rentals and warehouse services were Baht 0.04 million.
  • Selling and Administrative expenses totaled of Baht 509 million which increased from the previous year by Baht 15 million or 3.04% which consisted of the selling expenses decreased by Baht 38 million in response to the market conitions. The administration expenses increased by Baht 53 million out of which Baht 22.11 million is Microsoft licensing fee incurred along with interests payable as ordered by the Civil Court of Thailand, write-off building Baht 16.51 million, deposit and delivery inventory Baht 5.78 million, expenses under the contract Baht 6.49 million.
  • Share of gain (loss) from investments in joint venture and associate Baht (1.25) million decreased from the last year Baht 2.52 million because associate loss performance
  • Finance income amounted to Baht 1 million decreased from the previous year by Baht 0.5 million.
  • Finance cost of the Company on the interest expenses totaled of Baht 10 million equal to last year.
  • Income tax expenses of Baht 34 million decreased from the previous year by Baht 31 million or 47.69%.

During the year 2020, the Company had 10.26% net profit of sales which decreased from the previous year 40.07%. In 2020; there was an epidemic of coronavirus 2019 the company has sale decreased by Baht 193 million but administrative expenses increased from the previous year by Baht 53 million out of which Baht 22.11 million is Microsoft licensing fee incurred along with interests payable as ordered by the Civil Court of Thailand, write-off building Baht 16.51 million, deposit and delivery inventory Baht 5.78 million, expenses under the contract Baht 6.49 million.

The business operation profit during the year 2020 resulted in the rate of return on equity at 13.19% in the previous year 26.16% during the year 2020, the Company had decreased profit from operating activities.

Financial Status as at December 31, 2020.

1.1 Composition of Assets

The total assets at the year end 2020 was Baht 1,521 million which decreased from the previous year by Baht 66 million or 4.16%.

1.1.1 Current Assets amounted to Baht 703 million, decreased by Baht 63 million or 8.22% from the previous year. The details are as follows;
  • Cash and cash equivalents of Baht 9 million which decreased from the previous year by Baht 7 million because Net cash from operating activities Baht 251 million, net cash used in investing activities Baht 39 million and net cash used in financing activities Baht 219 million.
  • Trade accounts receivable and other account receivable at Baht 323 million, decreased from the previous year by Baht 71 million or 18.02% due to the Company had decreased the sales due to the coronavirus epidemic situation.
  • Current portion of finance lease receivables and finance lease receivables – net of current protion Baht 10 million increased from the previous year Baht 6 million 100%.
  • Current portion of long – term loans to related party Baht 1 million, equal to last year from Company Limited which carried interests at a rate of 5.00 percent per annum.
  • Inventory of Baht 328 million which comprises on consumer products and raw material which increased from the previous year by Baht 15 million or 4.79%
  • Other Current Assets of Baht 37 million, decreased from the previous year Baht 4 million of 9.76%.

1.1.2 Non-Current Asset amounted to Baht 818 million which decreased by Baht 2.60 million or 0.32% from the previous year as follows;
  • Long-Term Loans to related party-net of current portion Baht 1 million decreased from the previous year by Baht 1 million or 100% interests at a rate 5% per annum.
  • Other non – current financial assets of Baht 8.00 million increased from the previous year by Baht 8.00 million because the list has been reclassified. The year 2019 has been other non – current assets.
  • Investment in the subsidiary of Baht 190 million, equal to last year because the Company share of gain from investments in associate in The Iconic Property Company Limited.
  • Properties Investment was at Baht 122 million, increased from the previous year by Baht 0.01 million or 0.08% because the investment properties of the Company represent land and building used for providing warehouse service. Their fair value has been determined based on the valuations performed by an accredited independent valuer, using the income approach.
  • Property, Plant and Equipment – net amounted to Baht 443 million with an decrease from the previous year by Baht 30 million or 6.34% because the Company bought machinery and equipment Baht 16 million. Assets under installation and construction in progress increased Baht 16 million decorations and merchandise shelves of the branches Baht 7 million, increased depreciation Baht 34 million, write – off building Baht 17 million, and decreased from the previous year By Baht 16 million because the list has been reclassified to right – of – use assets.
  • Land awaiting for future development Baht 8.28 million. The Company had land awaiting for future development amounting to Baht 8.28 million. The Company has placed land with net book value by Baht 3.2 million as collateral for short-term and long-term credit facilities granted by commercial banks.
  • Right – of – use assets Baht 25.28 million include land Baht 0.74 million building Baht 12.94 million motor vehicles Baht 11.60 million increased from the previous year by Baht 25.28 million because 1 January 2020 reclassification to right – of – use assets due to the adoption of TFRS16
  • Intangible Assets – net at Baht 2 million decreased from the previous year by Baht 0.50 million amortization during the year.
  • Other Non-Current Assets was Baht 11 million decreased from the previous year by Baht 7 million or 38.89% because on December 22, 2014, the Company entered into an agreement to sell all of the inventories, that are related to the project to upgrade the 470MHz Mobile Telephone Network to CDMA2000 1X to a non-related party at a price of Baht 28.1 million (including VAT). This agreement requires the buyer to make payment to the Company in monthly installments, within 10 years. As at December 31, 2020, the Company had such account receivable balance of Baht 10.66 million (December 31, 2019 : Baht 14.03 million) with the portion due in over 12 months amounting to Baht 8.00 million (December 31, 2019: Baht 10.70 million) and classified as other non-current financial assets in the statements of financial position.

2. Quality of Assets

In 2020 trade and other receivables Baht 323 million or 18.02% of total assets. Account receivable average collection period was 106 days, increase from the previous year 15 days. (91 days in 2019) due to the fact that the cash sales for consumer goods had decreased, and instead increased on modern trade channels credit sales with 30 – 90 days term of payment.

An adequate reserve was set according to the prediction of non-collectable debt. The reserve for the year 2020 non-collectible debt was budgeted at 5.31% of the outstanding account receivable at the year-end.

Inventories Baht 328 million or 21.56% of total assets. Average inventory turnover of 124 days as same as the previous year (124 days in 2019).

Investment properties Baht 122 million or 8.02% of total assets by an accredited independent valuer, using the income approach. Key assumptions used in the valuation include discount rate, yield rate and long-term growth in rental rate.

2.1 Cash flows

In 2020, the Company’s net cash flows cash and cash equivalents was Baht 9 million, compared to 2019 which was Baht 16 million, decreased by Baht 7 million net cash from operating activities Baht 251 million, net cash used in investing activities Baht 39 million as the Company purchase of land equipment and intangible assets, net cash used in financing activities Baht 220 million as the Company dividend paid short – term loans from related party and long – term loans from financial institution paid.

2.2 Liquidity Ratios

Current ratio (current asset/current liabilities) in 2020 was 1.61:1 which shows high liquidity as the Company’s current assets can be easily cashed in a short period of time such as short-term cash or cash equivalents 1%, account receivables 21.26%, inventories 21.56% of total assets.

The company average debt collection period was between 106 days. Average inventory turnover of 124 days as same as the previous year due to the fact that Karmart products had a higher turnover.

2.3 Collection and Payment Periods

Average debt collection period was 106 days while average account payment period was 171 days. This is because the Company at present has selected the payment option by issuing the letter of credit through the commercial banking and prolonging the credit term around 120 – 180 days through the bank’s granted Trust Receipt.

During the year, the Company had in capital expenditures was mainly from the land, building machine and equipment at Baht 40.3 million for supporting the business growth.

4.1 Capital Structure

In 2020, debt/equity ratio was 0.51:1 equal to last year 0.57:1. The company had total liabilities Baht 514 million decreased from the previous year Baht 51 million or 9.03% equity attributable to owners of the company Baht 999 million decreased from the previous Baht 16 million or 1.58% decrease in accordance with similar proportions.

4.2 Shareholders’ Equity

In 2020, shareholders’ equity increased by Baht 16 million to Baht 999 million from the operating profit during the year of Baht 132 million while the dividend payment was Baht 149 million and other comprehensive income for the year Baht 28 million.

4.3 Liabilities

The Company’s total liabilities was Baht 514 million, decreased by Baht 51 million or 9.03% from the previous year.

Current Liabilities was Baht 438 million, decreased by Baht 44 million or 9.13% from the previous year. The Details are as follows:

  • Bank overdrafts and Short-term loan from bank was Baht 182 million, decreased by Baht 28 million from the Company’s promissory notes decreased from the previous year Baht 16 million interest rate MLR-2.00 short – term loans from financial institutions decreased from the previous year Baht 12 million interest rate 1.86 – 3.00.
  • Trade and other payables of Baht 146 million, decreased by Baht 4 million.
  • Short-term loan from related party amounted Baht 30 million equal to last year from The Iconic property Company Limited interests at a rate 2% per annum.
  • Current portion of Liabilities under financial lease agreements due within 1 year and Liabilities under financial lease agreements – net of current portion was Baht 26 million which increased by Baht 16 million or 16.00% the Company due to the adoption of TFRS16.
  • Current portion of long-term loans from financial institution Baht 18 million equal last year a long-term of the Company under credit facilities of Baht 80 million, both principal and interest, is monthly repayable in 60 installments. The loan carries interest at a rate of 4.5% per annum.
  • Income Tax Payable at Baht 19 million, decreased from the previous year of Baht 14 million due to the Company’s decrease in net profit.
  • Other Current Liabilities was Baht 32 million decreased from the previous year of Baht 4 million or 11.11% because decreased from retention and withholding TAX.

    Non-current liabilities was Baht 76 million, decreased by Baht 7 million or 7.87% from the previous year, The Details are as follows:
  • Long-term loans from financial institution-net of current portion Baht 15 million decreased from the previous year of Baht 16 million or 51.61% a long-term loans of the Company under credit facilities of Baht 80 million, both principal and interest, is monthly repayable in 60 installments. The loan carries interest at a rate of 4.5% per annum.
  • Provision had been made for long-term employee benefits of Baht 19 million, which increased from the previous year of Baht 2 million due to the new standard of accounting for employee benefit reservation No.19 had taken effect.
  • Deferred Tax Liabilities at Baht 27 million, decreased by Baht 1 million or 3.57% from right – of – use assets and current portion of liabilities under finance lease agreements, liabilities under finance lease agreements – net current portion.

The Executive Committee set up annual business plan and strategic actions to achieve its annual goals. These ensure that the Company is able to adjust its management style in a flexible manner to cope with significant factors which may affect the Company as listed below.

Main Factors
  1. Sufficient procurement of products and changes in product trend and fashion
  2. Human Resources Development
  3. The Price of products and Wages
  4. Financial Assistant to Associated or Subsidiary companies and Contingent Liabilities in the future.
Action Plan
  1. The Company is capable of product adjustment to cope with the changing trend of product popularity and its procurement system can manage inventory level to service the changing demand and changing trend and fashion.
  2. The Company supports Human Resources Development by providing adequate both internal and external training to increase employee skills and proficiency.
  3. The Company has a special unit and system of procurement of raw material finished products from quality sources with competitive prices.
  4. In case of rendering financial assistant to the Associated or Subsidiary company, the Company completely and transparently follows the rules and regulations of SET and able to be audited. The independent directors are to review and monitor the Company’s operations closely, for the most benefit of investors and stakeholders.