CURACAO, Netherlands Antilles, April 10 /PRNewswire-FirstCall/ --
Retail Holdings N.V. (Pink Sheets: RHDGF)
Retail Holdings N.V. ("ReHo" or the "Company") announced today its results for the year ended December 31, 2008. The Company also announced that ReHo's Board of Directors anticipates recommending for shareholder approval a distribution of $0.20 a Share for 2009.
Chairman's Comments
Commenting on the 2008 results, Stephen H. Goodman, ReHo's Chairman, President and Chief Executive Officer, remarked, "I am very pleased by the Company's strong operating performance during 2008. Consolidated revenue increased 6% to $294 million while operating earnings, excluding a non-cash charge for goodwill impairment, rose by $16 million to $22 million. The retail and financial services businesses in Bangladesh, Pakistan and Sri Lanka continued to perform well during 2008; revenue grew 8% to $222 million, while operating earnings grew to $26 million. Thailand's operation evidenced a strong recovery during 2008 with revenue increasing 4% to $57 million and operating results showing a profit of $4 million as compared to a $12 million loss for 2007. With over 980 shops, more than 1,300 distributors and dealers, and over 650,000 active installment accounts, Singer Asia enhanced its position during 2008 as the number one retailer for consumer durables for the home in Bangladesh, Pakistan, and Sri Lanka and as an important direct seller in Thailand.
"Reflecting a more uncertain economic outlook, the Company during 2008 wrote-off intangibles of $12 million representing most of the goodwill associated with the Company's Asia operations. As a consequence of this impairment charge, the equity holders of the Company experienced a loss of $11 million.
"Retail Holdings' strategy remains unchanged, to maximize and monetize the value of its assets with the medium-term objective of liquidating the Company and distributing the resulting funds and any remaining assets to its shareholders. The Company's objective is to ultimately distribute to shareholders at least the value of its tangible net assets, which stood at $11.56 per Share at December 31, 2008, although there is no assurance that this can be achieved. Consistent with the strategy and this objective, the Company initiated a dividend/distribution program, paying a special dividend of $1.00 per Share in 2007 and a distribution of $0.75 per Share in 2008. The Company's Board of Directors anticipates recommending for shareholder approval a distribution of $0.20 a Share for 2009. Reflecting the current price for Retail Holdings' Shares, the Company will also actively seek to repurchase Shares in the public market although its ability to do so is severely limited by the Share's low trading volume and by applicable trading restrictions on company share repurchase programs.
"This year's financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS'); in prior years, the Company's financial statements were prepared in accordance with U.S. GAAP. The decision to switch to IFRS from U.S. GAAP reflected three considerations: 1) the local accounting standards of the Company's operating subsidiaries conform more closely to IFRS than to U.S. GAAP; 2) IFRS is somewhat better understood and more accepted internationally than U.S. GAAP; and, 3) audit costs under IFRS are expected to be somewhat less than under U.S. GAAP.
"I encourage all shareholders to read the Company's complete Summary Annual Report and audited consolidated financial statements, which are available on the Retail Holdings website, www.retailholdings.com or by request to the Company."
2008 Year Results
A strong operating performance during 2008 was offset, in part, by a non-cash charge for impairment of goodwill, reflecting management's judgment, in the face of a more uncertain economic outlook, to write-off the goodwill associated with certain of the Company's operations in Asia.
For the year ended December 31, 2008, the Company reported consolidated revenue of $293.7 million compared to consolidated revenue of $277.4 million for the same period in 2007, an increase of $16.3 million or 5.9%. Revenue at the retail operating units in Bangladesh, Pakistan and Sri Lanka increased by $16.5 million for 2008 to $221.8 million, or by 8.0% as compared to the same period in 2007. Revenue at Singer Thailand increased by $2.3 million for 2008 to $56.6 million, or by 4.2% as compared to the same period prior year.
The Company's revenue for 2008 includes $42.2 million of finance earnings on consumer credit sales compared to $41.6 million for the same period in 2007. The increase in finance earnings is due to an increase at the retail operating units as a result of their higher sales, offset, in part, by reduced financial earnings in Thailand reflecting the shorter credit terms now offered.
Gross profit for the year ended December 31, 2008 was $111.2 million, representing a gross profit as a percentage of revenue of 37.9%, as compared to $108.3 million and a gross profit percentage of 39.0% for the year ended December 31, 2007. The decline in gross profit percentage is primarily due to the decline in Thailand's gross profit percentage from 62.3% for 2007 to 59.5% for 2008, reflecting the higher share in revenue for 2008 as compared with 2007 of used and reverted products which carry a lower gross margin, and greater discounting. Gross profit at the retail operating units in Bangladesh, Pakistan and Sri Lanka was $74.2 million for the year ended December 31, 2008, representing a gross profit as a percentage of revenue of 33.5%, as compared to $68.7 million and a gross profit percentage also of 33.5% for the year ended December 31, 2007.
Other income for the year ended December 31, 2008 was $4.9 million as compared to $2.4 million for the year ended December 31, 2007. The increase in other income, which arises primarily from the sale of excess assets, was due to the gain on the sale of the Company's stake in a former operating affiliate in Sri Lanka and the gain on the sale of a former factory site in Thailand.
Selling and administrative expenses for the year ended December 31, 2008 were $91.1 million, representing 31.0% of revenue, as compared to $101.5 million and 36.6% of revenue for the year ended December 31, 2007. The decline in selling and administrative expenses is primarily due to the reduction in Thailand's bad debt expense from $13.5 million for the year ended December 31, 2007 to a reversal of bad debt cost of $0.2 million for the year ended December 31, 2008. At the retail operating units, selling and administrative expenses for the year ended December 31, 2008 were $49.5 million, representing 22.3% of revenue, as compared to $44.6 million and 21.7% of revenue for the same period in 2007. Selling and administrative expenses at ReHo declined to $2.3 million for 2008 as compared with $2.7 million for the same period prior year.
An impairment charge for goodwill of $12.3 million was recorded for the year ended December 31, 2008; there was no impairment charge for the year ended December 31, 2007. The impairment charge, which is a non-cash charge, is based on an analysis of the market value less cost to sell and the discounted cash flows of the Company's operating subsidiaries containing goodwill. The market values and projected cash flows both reflect a more uncertain economic outlook.
Other expense, royalty, was $2.9 million and $2.8 million for the years ended December 31, 2008 and December 31, 2007, respectively. The increase in royalty expense is due to the increased revenue at Singer Asia. The royalty expense is for the use of the Singer trademark by Singer Asia and its operating companies.
Results from operating activities for the year ended December 31, 2008 was a profit of $9.8 million as compared to a $6.4 million profit for the same period in 2007, an increase of $3.4 million or 52.8%. Aside from the charge for goodwill impairment, results from operating activities increased from $6.4 million for the year ended December 31, 2007 to $22.1 million for the year ended December 31, 2008. The improvement in operating results reflects the recovery in Thailand's operations to a $4.4 million profit for the year ended December 31, 2008 as compared to a $11.9 million loss for the year ended December 31, 2007, primarily as a result of reduced bad debt expense. Results from operating activities at the retail operating units was a profit of $26.3 million for the year ended December 31, 2008 as compared with a profit of $24.5 million for the same period prior year.
Finance income, primarily interest on cash and the Seller notes at ReHo corporate, was $3.3 million and $3.6 million for the years ended December 31, 2008 and December 31, 2007, respectively; the decline reflecting a drop both in invested cash and in U.S. dollar interest rates.
Finance expense, primarily interest expense on borrowings at Singer Asia to finance working capital, was $20.3 million and $17.1 million for the years ended December 31, 2008 and December 31, 2007, respectively. The increase in finance expense is primarily the result of a shift in the mix of the Company's borrowings from countries with lower interest rates, such as Thailand, to countries with higher interest rates, such as Sri Lanka, reflecting differential growth rates in operations, as well as an increase in interest rates charged the Company's operating businesses for borrowings in local currency, particularly in Sri Lanka.
Share of profit of equity accounted investees was $1.2 million and $1.7 million for the years ended December 31, 2008 and December 31, 2007, respectively. This decline was due to the sale in Sri Lanka during the year ended December 31, 2008 of the Company's equity stake in Commercial Leasing Company, PLC, an equity accounted investee.
The Company's loss before income tax was $6.0 million for the year ended December 31, 2008 as compared to a $5.4 million loss for the same period in 2007. The larger loss for the year ended December 31, 2008 primarily reflects the charge for impairment of goodwill and higher finance expense moderated by the improvement in operating performance as compared with the same period prior year.
Income tax expense amounted to $4.8 million for the year ended December 31, 2008 as compared to $8.1 million for the year ended December 31, 2007. The decline in income tax expense includes a reduction in current tax expense by $1.0 million for the year ended December 31, 2008 as compared with prior year, reflecting the tax free income on sale of affiliate in Sri Lanka and a shift in pre-tax income from Sri Lanka, with a higher effective tax rate, to Bangladesh and Thailand. Deferred tax expense was reduced by $2.3 million for the year ended December 31, 2008, as compared with prior year, primarily reflecting changes in the recognition of deferred taxes in Thailand based on the utilization of net operating loss carryforwards.
The Company's loss for the year ended December 31, 2008 was $10.7 million as compared to a loss of $13.5 million for the same period in 2007. The smaller loss for 2008 is due to a somewhat higher pre tax loss offset by lower income tax expense for the year ended December 31, 2008 as compared to the same period prior year.
A profit of $0.7 million was attributable to minority shareholders for the year ended December 31, 2008 as compared to a loss of $10.3 million for the year ended December 31, 2007. The loss attributable to equity holders of the Company was $11.4 million for the year ended December 31, 2008 as compared to a loss of $3.3 million for the same period prior year. The improvement in minority interest share of profit (loss) is primarily due to the improvement in operating performance and lower income tax expense, offset, in part, by higher finance expense. This improvement did not flow through to equity holders of the Company as a goodwill impairment of $11.4 million was incurred at the Retail Holdings consolidation where there is no minority interest.
The loss attributable to equity holders of the Company is equivalent to basic and diluted loss per share of $2.16 and $0.63 for the years ended December 31, 2008 and December 31, 2007, respectively.
About Retail Holdings
The Company is a holding company with three principal assets: 1) a 56.8% equity interest in Singer Asia Limited, ("Singer Asia"), a distributor of consumer durable products in selected emerging markets in Asia, with consumer credit and other financial services available to qualified customers; 2) seller notes, primarily arising from the sale of the Singer worldwide sewing business and trademark; and 3) cash and cash equivalents. ReHo has no operating activities other than those carried out through Singer Asia.
The Company is a Netherlands Antilles public company which is the successor company to the Singer Company N.V. and its predecessor companies. The Company, formerly known as Singer N.V., changed its name to Retail Holdings N.V. following the sale of the sewing business and the Singer trademark in September 2004.
Price quotations for the Company's Shares are available on the "Pink Sheets" quotation service under the symbol "RHDGF".
Additional financial and other information about the Company, including: a copy of ReHo's audited consolidated financial statements for the twelve months ended December 31, 2008, and all prior statements since September 2000, together with the Auditor's Reports thereon; the 2008 Annual Report dated April 2009, and all prior Disclosure Statements and Reports since September 2000; and copies of all semi-annual and quarterly reports and press releases since September 2000, may be found at the Corporate/Investor section of the Company's website at www.retailholdings.com.
RETAIL HOLDINGS N.V. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
31 DECEMBER
In thousands of U.S. Dollars
2008 2007
ASSETS
Property, plant and equipment 42,455 28,851
Intangible assets 3,678 15,693
Trade and other receivables
over one year 51,319 48,404
Investments in equity
accounted investees 5,165 8,053
Deferred tax assets 6,976 11,022
Other non-current assets 4,873 5,865
Total non-current assets 114,466 117,888
Inventories 60,378 56,503
Trade and other receivables 98,046 109,005
Cash and cash equivalents 19,316 22,853
Other current assets 11,666 7,437
Total current assets 189,406 195,798
Total assets 303,872 313,686
EQUITY
Share capital 53 51
Share premium 82,551 86,035
Reserves (71) (4,330)
Deficit (18,502) (7,114)
Total equity attributable to
equity holders of the Company 64,031 74,642
Minority interest 47,218 42,295
Total equity 111,249 116,937
LIABILITIES
Loans and borrowings over one year 20,137 40,061
Employee benefits 10,679 10,367
Deferred income over one year 171 498
Warranty provision over one year 195 114
Other non-current liabilities 7,912 7,974
Total non-current liabilities 39,094 59,014
Bank overdraft 33,348 29,101
Loans and borrowings 83,686 66,643
Trade and other payables 35,058 40,558
Deferred income 745 676
Warranty provision 692 757
Total current liabilities 153,529 137,735
Total liabilities 192,623 196,749
Total equity and liabilities 303,872 313,686
RETAIL HOLDINGS N.V. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
In thousands of dollars
2008 2007
Revenue 293,743 277,392
Cost of sales (182,555) (169,105)
Gross profit 111,188 108,287
Other income 4,939 2,408
Selling and administrative
expenses (91,083) (101,525)
Impairment of goodwill (12,319) -
Other expenses (2,937) (2,763)
Results from operating activities 9,788 6,407
Finance income 3,309 3,598
Finance expense (20,262) (17,138)
Share of profit of equity Accounted
investees (net of income tax) 1,204 1,741
Loss before income tax (5,961) (5,392)
Income tax expense (4,755) (8,128)
Loss for the period (10,716) (13,520)
Attributable to:
Equity holders of the Company (11,388) (3,268)
Minority interest 672 (10,252)
Loss for the period (10,716) (13,520)
Loss per share
Basic loss per share (U.S. Dollars) (2.16) (0.63)
Diluted loss per share (U.S. Dollars) (2.16) (0.63)
SOURCE Retail Holdings N.V.
RETAIL HOLDINGS N.V. 
By 
