Decreased spending by parallel traders and mainland tourists in Hong Kong, together with currency changes have hampered Singapore listed health and wellness company Eu Yan Sang in its first quarter.
The company has reported a net loss of S$144,000 and a pre-tax profit of $540,000 for the quarter to September 30.
“The weak financial performance was largely due to macro factors such as the decreased spending from parallel traders and mainland Chinese visitors in Hong Kong due to travel restrictions imposed by China. The overall weakening of the Malaysian Ringgit and
Australian Dollar further worsened the figures. Despite these challenges, earnings were partially offset by higher revenue growth in Australia and Singapore,” the company said.
Hong Kong revenue fell 30 per cent, but a strong Hong Kong dollar provided some buffer with sales down 21 per cent expressed in Singapore dollars.
Group revenue fell nine per cent to S75.18 million year-on-year, primarily due to a decline in revenue from the wholesale segment. Gross margin fell from 52 per cent to 48 per cent year on year.
Lower revenue and gross margin reduced operating profit by 84 per cent from S$3.09 million to $494,000 year on year.
Retail revenue decreased by one per cent to $61.98 million, but wholesale revenue dropped 48 per cent to $7.95 million, mainly due to the reduced spending by Chinese tourists in Hong Kong.
Eu Yan Sang CEO Richard Eu said the volatile business environments in key markets like Hong Kong and Malaysia will continue to pose “significant challenges”.
“We do not see a quick recovery in the near future. On the flip side, Australia and Singapore show escalated growth, with Australia on track to register double digit same store sales growth. Singapore has also demonstrated positive revenue growth and the wholesale business is expected to pick up momentum,” he said.
“We have started evolving our business in view of the changing consumption and retail landscape. Our TCM and wellness products from various markets are now available at tax free outlets and eCommerce channels, allowing consumers and parallel traders to purchase products previously not available in their countries. We have also taken steps to ensure we have a healthy pipeline of products that answer to the lifestyle and market demands.”
Revenue from Singapore improved by 11 per cent, mainly driven by positive consumer responses and effective promotional campaigns. During the quarter, Eu Yan Sang closed two company-operated retail outlets, but added one general TCM clinic.
“While Singapore’s positive retail performance helped to cushion the declining retail revenue of the group, clinic revenue from Singapore was affected by various subsidy schemes made available by the government to Singaporeans during the past quarter for treatments at General Practitioners clinics, causing clinic patient traffic to decline,” the company said.
Revenue from Malaysia decreased by three per cent to RM$34.07 million against the corresponding quarter last year. However, as a result of the weakening of the Malaysian currency, the revenue from Malaysia in Singapore dollars dropped by 16 per cent year on year. During the quarter, Eu Yan Sang closed five company-operated retail outlets in Malaysia.
In Australia, revenue surged 20 per cent as a result of an increase in the number of company- operated outlets and the rise in same-store sales. However, the appreciation of the Singapore Dollar against the Australian currency resulted in only five per cent growth when expressed in Singapore currency. Australia added one company-operated retail outlet while four outlets exited the group’s franchise network during the period under review.
Eu Yan Sang’s wholly-owned Australian subsidiary Healthy Life Group is considering an option to acquire seven health food retail stores owned by Venture Integrity Health, a leading health and wellness retailer in Australia.