Linmark returns to profit at HK$46mln in FY2010

The company sees recovery and growing order bookings in next months despite 52.2% decrease in FY2010 revenue.

Supply chain management and solutions provider Linmark Group Limited (Linmark) has returned to profitability for the year ended 30 April 2010 (FY 2010) after two consecutive years of substantial losses.

For the year ended 30 April 2010, shipment value amounted to approximately US$319.0 million (HK$2,488.2 million), down by approximately 35.8% compared to approximately US$496.9 million (HK$3,875.8 million) last year. Revenue decreased by approximately 52.2% to approximately US$93.5 million (HK$729.3 million). The drop in both shipment volume and revenue were mainly affected by the global economic slowdown and the drastic decline of business of the Group’s UK electronics division, Linmark Electronics Limited (LEL).

LEL was put in administration on 28 July 2009 and moved to creditors’ voluntary liquidation on 25 January 2010.

The Group reported a profit after tax of approximately US$5.9 million (HK$46.0 million) for the year ended 30 April 2010, against a loss of approximately US$12.3 million (HK$95.9 million) last year. The profit for the year under review included non-cash items of approximately US$5.3 million (HK$41.3 million) gain on liquidation of LEL and approximately US$1.0 million (HK$7.8 million) exchange losses arose from deregistration of overseas branches.

Basic earnings per share were approximately 0.9 US cent (7.02 HK cents). The Board of Directors recommended the payment of a final dividend of 0.75 HK cent per share and a special dividend of 6 HK cents per share for the financial year (FY2009: 2.2 HK cents). Together with the interim dividend of 0.75 HK cent per share paid, the total dividend for FY2010 amounted to 7.5 HK cents per share.

Mr. Wang Lu-yen, Chairman of Linmark, said, “I am happy to report that the Group has returned to profitability. We have finally come to terms with our consumer electronics division in the UK, eliminating the non-profitable part of the organization. Despite order volumes dropping in FY2010, we are seeing positive signs of recovery and growing order bookings for the months to come. Our efforts in the past years have cemented our foundation for future growth and profitability.”

During the year under review, shipment to North America decreased by approximately 30.7% to approximately US$177.9 million (equivalent to HK$1,387.6 million). North America is at present the largest market of the Group, contributing approximately 55.8% of the Group’s total shipment value.

Shipment to Europe decreased by 51.3% to approximately US$67.9 million (equivalent to HK$529.6 million) which was largely due to the drop in sales of the electronics division in the UK. Shipment to Europe now accounts for approximately 21.3% of the Group’s total shipment value. Shipment grouped under “Others,” comprising mainly shipments to the southern hemisphere, amounted to approximately US$73.2 million (equivalent to HK$571.0 million).

The loss-making electronics division LEL filed a notice of appointment of administrators in the UK in July 2009. Since then, the financial results of LEL have ceased to be consolidated within those of the Group. LEL moved from administration to creditors’ voluntary liquidation in January 2010. Save for the gain on liquidation of a subsidiary as mentioned above and the dividend payment from LEL (the quantum of which, if any, is uncertain), at present, the Board does not expect the liquidation to have any other material impact on the Group.

Mr. Michel Bourlon, CEO of Linmark, said, “We have refocused our teams and activities on our core competencies, we have returned to profitability and our cash position remains solid. It is also very encouraging to note that there are several additional opportunities with new customers already at an advanced stage of negotiation. While we understand that it may take time to get the full benefits of such new alliances in the first year, it is certainly a strong factor of top and bottom line growth in the mid to long term.”

The first half of the next fiscal year will remain challenging with a cocktail of unfavorable economic indicators rocking the sourcing world: soaring cotton prices, labour shortage and labour wage increases in China, weaker European currencies and a foreseeable appreciation of the RMB.

However, Linmark’s network of offices in Asia and its renowned ability to react quickly to changing market conditions are assets that management will put at the disposal of its newly extended customer base to secure a healthy development.

“Based on the current assessment, management maintains an overall positive view on the Group’s performance for the next fiscal year and is optimistic about the Group’s long term prospects,” Mr. Bourlon concluded.