Management Discussion and Analysis

Operating Results for the year ending December 31, 2019

During 2019, the Company had total revenues of Baht 1,526 million which consisted of;

  • Baht 1,487 million on Sales which increased by Baht 8 million or 0.54% from the previous year. The comprises of Baht 190 million on body care products, Baht 287 million on facial skin care products, Baht 938 million on cosmetics, Baht 20 million on accessories, Baht 32 million on furniture, marketing tools and other, Baht 20 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 0.46 million decreased from the previous year by Baht 3.54 million.
  • Other incomes totaled of Baht 18 million, decreased from the previous year by Baht 1 million or 5.26% which comprises of interest of Baht 1 million, gain on currency exchange Baht 7 million, gain on security Baht 1 million, rent income Baht 2 million and others of Baht 7 million.

During the year 2019, The Total Expenses was Baht 1,189 million which comprises of;

  • Cost of sales amounted to Baht 694 million which increased from the previous year by Baht 7 million or 1.02%. The cost of sales is directly proportional to the Sales Revenue. The gross profit margin was 53.28% 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 493 million which decreased from the previous year by Baht 43 million or 8.02% which consisted of the selling expenses decreased by Baht 86 million due to the company adjust expenses to be net with sales. The administration expenses increased by Baht 43 million due to the increase Baht 17 million for salary and employee benefit, increase Baht 23 million for expenses under the contract.
  • Financial cost of the Company on the interest expenses totaled of Baht 10 million which decreased from the previous year by Baht 2 million or 16.67%
  • Income tax expenses of Baht 65 million increased from the previous year by Baht 14 million or 27.45%.

During the year 2019, the Company had 17.12% net profit of sales which decreased from the previous year 7.23% year 2018 as the Company had share of gain (loss) from investments in joint venture and associate amounted Baht 127 million but administrative expenses increased from the previous year by Baht 43 million due to the employee benefit expenses and expenses under the contract.

The business operation profit during the year 2019 resulted in the rate of return on equity at 26.16% in the previous year 38.95% during the year 2018, the Company had share of gain from investment in joint venture and associate.

Financial Status as at December 31, 2019

1.1 Composition of Assets

The total assets at the year end 2019 was Baht 1,604 million which increased from the previous year by Baht 59 million or 3.82%.

1.1.1 Current Assets amounted to Baht 766 million, increased by Baht 9 million or 1.19% from the previous year. The details are as follows;
  • Cash and cash equivalents of Baht 16 million which increased from the previous year by Baht 8 million because Net cash from operating activities increased Baht 327 million, net cash used in investing activities decreased Baht 36 million and net cash used in financing activities decreased Baht 283 million.
  • Current investments amounted to Baht 0 million decreased from the previous year by Baht 10 million or 100%
  • Trade accounts receivable and other account receivable at Baht 394 million, increased from the previous year by Baht 49 million or 14.20% due to the Company had increased the sales in many channels, including added more modern trade accounts.
  • Current portion of finance lease receivables and finance lease receivables – net of current protion Baht 5 million increased from the previous year Baht 5 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 313 million which comprises on consumer products and raw material which decreased from the previous year by Baht 35 million or 10.06%
  • Other Current Assets of Baht 41 million, increased from the previous year Baht 5 million of 13.89%.

1.1.2 Non-Current Asset amounted to Baht 838 million which decreased by Baht 50 million or 6.35% from the previous year as follows;
  • Long-Term Loans to related party-net of current portion Baht 2 million decreased from the previous year by Baht 1 million or 33.33% interests at a rate 5% per annum.
  • Long-Term Loan to unrelated parties-net of current portion Baht – million decreased from the previous year by Baht 18 million which carried interests at a rate of 15% per annum. The Long-Term Loan will be due within September 19 2020.
  • 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 123 million, increased from the previous year by Baht 1 million or 0.82% 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 473 million with an increase from the previous year by Baht 60 million or 14.53% because the Company acquisitions land Baht 17 million, motor vehicles Baht 7 million, machinery and equipment Baht 21 million increased depreciation Baht 38 million. Assets under installation and construction in progress increased Baht 16 million from transfer of the completed building, surplus on revaluation of assets Baht 37 million.
  • 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 2.50 million decreased from the previous year by Baht 1.30 million because acquisitions computer software under installation and amortization during the year.
  • Deferred Tax Assets was Baht 17.58 million increased from the previous year by Baht 6.63 million or 60.55% because the Company allowance for doubtful accounts Baht 1 million allowance for diminution in value of inventories Baht 8.99 million allowance for right to return goods Baht 3.99 million provision for long-term employee benefits Baht 2.98 million.
  • Other Non-Current Assets was Baht 18 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, 2019, the Company had such account receivable balance of Baht 14.03 million (December 31, 2018 : Baht 16.14 million) with the portion due in over 12 months amounting to Baht 10.70 million (December 31, 2018: Baht 13.33 million) and classified as other non-current assets in the statements of financial position.

2. Quality of Assets

In 2019 trade and other receivables Baht 394 million or 24.56% of total assets. Account receivable average collection period was 91 days, increase from the previous year 6 days. (85 days in 2018) 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 2019 non-collectible debt was budgeted at 2.07% of the outstanding account receivable at the year-end.

Inventories Baht 313 million or 19.51% of total assets. Average inventory turnover of 124 days as same as the previous year (129 days in 2018).

Investment properties Baht 122 million or 7.61% 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 2019, the Company’s net cash flows cash and cash equivalents was Baht 16 million, compared to 2018 which was Baht 8 million, decreased by Baht 8 million net cash from operating activities Baht 326 million, net cash used in investing activities Baht 36 million as the Company sales of current investments, purchase of land, net cash used in financing activities Baht 282 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 2019 was 1.59:1 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 24.56%, inventories 19.51% of total assets.

The company average debt collection period was between 91 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 91 days while average account payment period was 154 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 81 million for supporting the business growth.

4.1 Capital Structure

In 2019, debt/equity ratio was 0.57:1 equal to last year 0.57:1. The company had total liabilities Baht 582 million increased from the previous year Baht 23 million or 4.11% equity attributable to owners of the company Baht 1,015 million increased from the previous Baht 34 million or 3.47% increase in accordance with similar proportions.

4.2 Shareholders’ Equity

In 2019, shareholders’ equity increased by Baht 33 million to Baht 1,015 million from the operating profit during the year of Baht 261 million while the dividend payment was Baht 246 million, right to return goods – net of income tax Baht 10 million and other comprehensive income for the year Baht 28 million.

4.3 Liabilities

The Company’s total liabilities was Baht 582 million, increased by Baht 23 million or 4.11% from the previous year.

Current Liabilities was Baht 482 million, increased by Baht 33 million or 7.35% from the previous year. The Details are as follows:

  • Bank overdrafts and Short-term loan from bank was Baht 210 million, increased by Baht 62 million from the Company’s promissory notes increased from the previous year Baht 50 million interest rate MLR-2.00 short – term loans from financial institutions increased from the previous year Baht 16 million interest rate 3.25 – 4.50.
  • Trade and other payables of Baht 150 million, increased by Baht 14 million
  • Short-term loan from related party amounted Baht 30 million decreased from the previous year Baht 70 million or 70% 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 10 million which decreased by Baht 2 million or 16.67% the Company finance lease for sale manager and pay off debt continuously.
  • 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 33 million, increased from the previous year of Baht 6 million due to the Company’s increase in net profit.
  • Other Current Liabilities was Baht 36 million increased from the previous year of Baht 20 million or 133.33% due to the right to return goods.

    Non-current liabilities was Baht 100 million, decreased by Baht 10 million or 9.09% from the previous year, The Details are as follows:
  • Long-term loans from financial institution-net of current portion Baht 31 million decreased from the previous year of Baht 16 million or 34.04% 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 18 million, which equal to last year due to the new standard of accounting for employee benefit reservation No.19 had taken effect.
  • Deferred Tax Liabilities at Baht 45 million, increased by Baht 8 million or 21.62% from surplus of fair value from book value of investment properties Baht 22 million surplus on revaluation of land Baht 18 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.