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RETAIL | Tony Chua, Hong Kong

Linmark profit down to HK$4.7mn

The company will consider M&A opportunities that lead to a more diverse range of products to offer customers in a difficult business environment.

Supply chain management and solutions provider Linmark Group Limited (“Linmark”) on Friday announced its annual results for the year ended 30 April 2011 (“FY2011”).

For the year under review, the Group continued to operate under a highly challenging business environment. Though shipment value amounted to approximately US$280.2 million (equivalent to HK$2,185.6 million) compared to approximately US$319.0 million (equivalent to HK$2,488.2 million) last year, revenue did increase by approximately 2.5% year-on-year to approximately US$95.8 million (equivalent to HK$747.2 million). The decline in shipment volume was mainly due to the departure of a key customer from North America. However, this impact was mitigated by management’s ability to develop more business with existing key customers, establish new business ties and initiate effective cost saving measures.

The Group recorded profit after tax of approximately US$0.6 million (equivalent to HK$4.7 million) for FY2011. The profit reported in the 2010 financial year was approximately US$5.9 million (equivalent to HK$46.0 million), which included non-cash items of approximately US$5.3 million (equivalent to HK$41.3 million) gained from the liquidation of Linmark Electronics Limited and approximately US$1.0 million (equivalent to HK$7.8 million) in exchange loss arising from the deregistration of overseas branches.

General and administrative expenses fell by approximately 14.2% to approximately US$22.0 million (equivalent to HK$171.6 million) when compared with last year. This is a reflection of an effective cost savings plan that included reduction of headcount to a level in line with the Group’s current business requirements, as well as employing cost control measures.

Basic earnings per share were approximately 0.1 US cent (equivalent to 0.78 HK cent). The Board of Directors does not recommend the payment of a final dividend.

During the year under review, shipment to North America decreased by approximately 24.8% to approximately US$133.7 million (equivalent to HK$1,042.9 million), contributing approximately 47.7% of the Group’s total shipment value. Shipment to Europe increased by 4.7% to approximately US$71.1 million (equivalent to HK$554.6 million). Shipment grouped under “Others”, comprising mainly shipments to the southern hemisphere, amounted to approximately US$75.4 million (equivalent to HK$588.1 million). The Group has been able to make notable progress in Australia and South Africa and the management is investigating additional markets to penetrate in order to broaden revenue streams.

The Group’s financial position remains healthy with cash and cash equivalents of approximately US$17.5 million (equivalent to HK$136.5 million) as at 30 April 2011. Its current ratio was 1.8 and gearing ratio was zero, based on no interest-bearing borrowings and total equity of approximately US$36.7 million (equivalent to HK$286.3 million) as at 30 April 2011.

The difficult business environment is set to persist as unemployment remains high in parts of North America and Europe, dragging down consumer confidence as a result. Growing concerns over the worsening debt crisis in Europe, as well as economic data suggesting that the economy of the United States is stalling triggering fears of a potential double-dip recession also puts in doubt that a full recovery from the global downturn is underway.

Developing countries will also be faced with their own unique set of challenges, the most significant of which will be rising inflation and currency appreciation, which present increasing cost pressures as well, as mentioned in a Linmark report.

In the face of these global challenges, which will lead to more conservative shopping practices and greater pressure on maintaining lower prices, the management will seek to further enhance the Group’s competitiveness. Elevating service standards, bolstering ties with existing customers and investigating unexplored markets in order to establish new alliances will be among the efforts to be made.

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