ECS Holdings’ Q2 net profit up 11%

• North Asia revenue up 24.6% to S$578.1mil; South-East Asia up 22.1% to S$439.4mil
• Manages to weather global shift towards mobile devices such as smartphones and tablets

SINGAPORE Exchange Mainboard-listed ECS Holdings Limited has reported that net profit after tax for the second quarter ended June 30 rose 11% from the corresponding period in the previous year to S$9 million, on the back of 23.5% revenue growth to S$1.02 billion.
 
In a statement, the regional ICT solutions provider said strong sales in the distribution and enterprise segments helped its first-half revenue hit a record S$2.11 billion.
 
In Q2 2013, the distribution segment grew 25.5% or S$147 million to S$723.5 million from S$576.5 million in Q2 2012, on better sales of consumer storage, media tablets, desktop PCs and notebooks.
 
The enterprise systems segment grew 20.1% to S$285.6 million over the same periods, driven by higher sales of networking hardware, servers and enterprise storage.
 
[S$1 = US$0.79]
 
“Global shipments for desktops and notebooks fell again this first-half, with the continued shift towards mobility devices such as smartphones and tablets,” said ECS group chief executive officer Ong Wei Hiam.
 
“We have been executing strategies to increase market share and product offerings, by expanding our distribution coverage and increasing our mobility product range. These efforts have yielded positive results as our distribution segment reported a 23.9% revenue growth despite the slowdown in the demand for desktops and notebooks worldwide,” he said.
 
North Asia revenue rose 24.6% to S$578.1 million from S$463.8 million in Q2 2012, driven by stronger sales of media tablets, servers, and networking hardware; and accounted for 56.8% of sales in the quarter.
 
South-East Asia revenue rose 22.1% to S$439.4 million from S$359.8 million, respectively, on improved sales of consumer storage, media tablets and networking hardware, accounting for 43.2%.
 
Gross profit for Q2 2013 increased marginally to S$36.8 million from S$36.7 million in Q2 2012 as gross margin narrowed to 3.6% from 4.5%, mainly due to higher sales of lower-margin media tablet and lower margins from consumer storage, ECS said in its statement.
 
Additional provisions for inventory obsolescence of S$1.6 million and unfavourable trade exchange differences of S$800,000 in Q2 2013 also contributed to the lower gross margin, the company added.
 
Total operating expenses were 3.3% lower in Q2 2013 compared with Q2 2012. Total operating expenses’ percentage of revenue improved to 2.6% from 3.3% year-on-year. This was a result of lower provisions made for doubtful debts and improvements in operating efficiencies in Q2 2013, ECS said.
 
ECS also generated a positive operating cash flow of S$50.6 million in Q2 2013, reversing the negative operating cash flow of S$32.2 million in Q2 2012, mainly from higher profits and better working capital management.
 
This brings the cash and bank balances at S$92.4 million while bank borrowings stood at S$228.9 million, with a net gearing at 0.38 times as at June 30 2013.
 
Earnings per share rose to 2.45 cents from 2.21 cents in Q2 2012, while net asset value per share increased to 97.02 cents as at June 30 2013 from 92.83 cents as at Dec 31 2012.
 
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