Management Discussion and Analysis

Operating Results for the year ending December 31, 2018

During 2018, the Company had total revenues of Baht 1,523 million which consisted of;

  • Baht 1,479 million on Sales which decreased by Baht 14 million or 0.94% from the previous year. The comprises of Baht 222 million on body care products, Baht 327 million on facial skin care products, Baht 866 million on cosmetics, Baht 20 million on accessories, Baht 22 million on furniture, marketing tools and other, Baht 22 million on food and beverage section.
  • Income from warehouse rental and warehouse services amounted to Baht 20 million equal to last year.
  • Gain on fair value adjustment of investment properties amounted to Baht 4 million increased from the previous year by Baht 5 million.
  • Other incomes totaled of Baht 19 million, decreased from the previous year by Baht 18 million or 48.65% which comprises of interest of Baht 12 million, gain on currency exchange Baht 1 million, gain on security Baht 1 million, rent income Baht 1 million and others of Baht 4 million.

During the year 2018, The Total Expenses was Baht 1,225 million which comprises of;

  • Cost of sales amounted to Baht 687 million which increased from the previous year by Baht 14 million or 2.08%. The cost of sales is directly proportional to the Sales Revenue. The gross profit margin was 53.54% which was similar to the previous year.
  • Cost of warehouse rentals and warehouse services were Baht 1 million.
  • Selling and Administrative expenses totaled of Baht 536 million which increased from the previous year by Baht 32 million or 6.35%, directly proportionate to the Company’s business expansion. The selling expenses increased by Baht 8 million. The administration expenses increased by Baht 24 million due to the increase Baht 22 million for salary and employee benefit, increase Baht 4 million for utility and security expensed and license fee Baht 6 million.
  • Financial cost of the Company on the interest expenses totaled of Baht 12 million which increased from the previous year by Baht 2 million or 20%
  • Income tax expenses of Baht 51 million decreased from the previous year by Baht 20 million or 28.17%.

During the year 2018, the Company had 24.35% net profit of sales which increased from the previous year 5.50% as the Company had share of gain (loss) from investments in joint venture and associate amounted Baht 127 million but selling expenses and administrative expenses increased from the previous year by Baht 32 million due to the employee benefit expenses, utility and security expenses and license fee.

The business operation profit during the year 2018 resulted in the rate of return on equity at 38.95% in the previous year 33.83%

Financial Status as at December 31, 2018.

1. Composition of Assets

The total assets at the year end 2018 was Baht 1,545 million which increased from the previous year by Baht 198 million or 14.70%.

1.1 Current Assets amounted to Baht 757 million, decreased by Baht 39 million or 4.90% from the previous year. The details are as follows;
  • Cash and cash equivalents of Baht 8 million which decreased from the previous year by Baht 3 million because Net cash from operating activities increased Baht 231 million, net cash used in investing activities decreased Baht 26 million and net cash used in financing activities decreased Baht 208 million.
  • Current investments amounted to Baht 10 million increased from the previous year by Baht 10 million or 100%
  • Trade accounts receivable and other account receivable at Baht 345 million, increased from the previous year by Baht 1 million or 0.29% due to the Company had increased the sales in many channels, including added more modern trade accounts.
  • Current portion of long-term loans to related party Baht 1 million increased from the previous year Baht 1 million 100% loans to Reunrom Food and Beverage carried interests at a rate of 5% per annum.
  • Current portion of long – term loans to unrelated person and party Baht 10 million, equal to last year from Large Asia Company Limited which carried interests at a rate of 15.00 percent per annum.
  • Inventory of Baht 348 million which comprises on consumer products and raw material which increased from the previous year by Baht 43 million or 14.10%
  • Other Current Assets of Baht 36 million, equal to last year.

1.2 Non-Current Asset amounted to Baht 788 million which decreased by Baht 237 million or 43.01% from the previous year as follows;
  • Long-Term Loans to related party-net of current portion Baht 3 million increased from the previous year by Baht 3 million or 100% interests at a rate 5% per annum.
  • Long-Term Loan to related parties-net of current portion Baht 18 million decreased from the previous year by Baht 10 million which carried interests at a rate of 15% per annum. The Long-Term Loan will be due within September 2020.
  • Investment in the subsidiary of Baht 190 million, increased from the previous year because the Company share of gain from investments in associate by Baht 127 million or 201.59% in The Iconic Property Company Limited.
  • Properties Investment was at Baht 122 million, increased from the previous year by Baht 4 million or 3.39% 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 413 million with an increase from the previous year by Baht 120 million or 40.96% because the Company acquisitions land Baht 71 million, transfer in building and building improvement Baht 60 million, motor vehicles Baht 7 million, machinery and equipment Baht 20 million increased depreciation Baht 32 million. Assets under installation and construction in progress decreased Baht 6 million from transfer of the completed building.
  • 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.
  • Intangible Assets – net at Baht 3.80 million decreased from the previous year by Baht 6.20 million because acquisitions computer software under installation and amortization during the year.
  • Deferred Tax Assets was Baht 10.95 million increased from the previous year by Baht 2.50 million or 29.59% because the Company allowance for doubtful accounts Baht 0.24 million allowance for diminution in value of inventories Baht 7.06 million provision for long-term employee benefits Baht 3.65 million.
  • Other Non-Current Assets was Baht 19 million decreased from the previous year by Baht 1 million or 5% 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, 2018, the Company had such account receivable balance of Baht 16.14 million (December 31, 2017 : Baht 20.37 million) with the portion due in over 12 months amounting to Baht 13.33 million (December 21, 2017: Baht 16.70 million) and classified as other non-current assets in the statements of financial position.

2. Quality of Assets

In 2018 trade and other receivables Baht 345 million or 22.33% of total assets. Account receivable average collection period was 85 days, increase from the previous year 8 days. (77 days in 2017) 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 2018 non-collectible debt was budgeted at 0.87% of the outstanding account receivable at the year-end.

Inventories Baht 348 million or 22.52% of total assets. Average inventory turnover of 129 days as same as the previous year (121 days in 2018).

Investment properties Baht 122 million or 7.90% 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.

1. Cash flows

In 2018, the Company’s net cash flows cash and cash equivalents was Baht 8 million, compared to 2017 which was Baht 11 million, decreased by Baht 3 million net cash from operating activities Baht 231 million, net cash used in investing activities Baht 26 million as the Company purchase of current investments, long-term loans to related party and purchase of land, net cash used in financing activities Baht 208 million as the Company dividend paid.

2. Liquidity Ratios

Current ratio (current asset/current liabilities) in 2018 was 1.68:1 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 0.52%, account receivables 22.33%, inventories 22.52% of total assets.

The company average debt collection period was between 85 days. Average inventory turnover of 129 days as same as the previous year due to the fact that Karmart products had a higher turnover.

3. Collection and Payment Periods

Average debt collection period was 85 days while average account payment period was 147 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 155 million for supporting the business growth.

1. Capital Structure

In 2018, Debt/Equity Ratio was 0.57:1 against 0.55:1 in the previous year. The company had bank overdrafts and short-term loans from bank Baht 148 million decreased from the previous year Baht 27 million because the Company import finished goods reserve to support and short-term loans from related party Baht 100 million increased from the previous year Baht 100 million from The Iconic property Company Limited interests at a rate 2% per annum.

2. Shareholders’ Equity

In 2018, shareholders’ equity increased by Baht 114 million to Baht 982 million from the operating profit during the year of Baht 360 million while the dividend payment was Baht 246 million.

3. Liabilities

The Company’s total liabilities was Baht 559 million, increased by Baht 81 million or 16.95% from the previous year.

Current Liabilities was Baht 449 million, increased by Baht 97 million or 27.56% from the previous year. The Details are as follows:

  • Bank overdrafts and Short-term loan from bank was Baht 148 million, decreased by Baht 27 million from the Company’s goods payment.
  • Trade and other payables of Baht 136 million, increased by Baht 33 million.
  • Short-term loan from related party amounted Baht 100 million increased from the previous year Baht 100 million or 100% 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 12 million which increased by Baht 1 million or 9.09% the Company finance lease for sale manager.
  • 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 27 million, decreased from the previous year of Baht 11 million due to the Company’s decrease in net profit.
  • Other Current Liabilities was Baht 15 million due to the withholding tax from the dividend payment and the accrued value added tax.

    Non-current liabilities was Baht 110 million, decreased by Baht 16 million or 12.70% from the previous year, The Details are as follows:
  • Long-term loans from financial institution-net of current portion Baht 47 million decreased from the previous year of Baht 15 million or 24.19% a loan-term 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.
  • Provision had been made for long-term employee benefits of Baht 18 million, which increased by Baht 2 million or 12.50% from the previous year due to the new standard of accounting for employee benefit reservation No.19 had taken effect.
  • Deferred Tax Liabilities at Baht 37 million, decreased by Baht 4 million or 9.76% from surplus of fair value from book value of investment properties Baht 22 million surplus on revaluation of land Baht 10 million and surplus of fair value from book value of land and building transferred from investment properties Baht 5 million.

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.