For the year ended 31 December 2017, the Group recorded revenue of $220.9 million, up 10.0% from the revenue of $200.8 million in FY2016. The full year increase was due to a year on year growth from the Export Segment as well as improvement from Singapore and other markets, offsetting a slowdown in revenue generation from Taiwan. Profit Attributable to Owners of the Parent Company for FY2017 improved 61.0% from $34.6 million in FY2016 to $55.7 million.
Key points to note for the Group’s performance for this reporting period include:
For 4Q2017, the Group generated $37.6 million of its total revenue from Direct Selling, compared to $45.9 million generated through the same segment in 4Q2016. This decline is mainly attributable to the decline of the Group’s market of Taiwan and Singapore offsetting the improvement from Indonesia and other markets.
Due to the growing market demand for the Group’s proprietary skincare line DR’s Secret, and in anticipation of the long Chinese New Year holidays in February, our China Export Agent placed their orders for the next three to six months in 4Q2017. As a result, revenue from Export Segment increased by 144.5% to $35.1 million for 4Q2017.
For FY2017, Manufacturing/Wholesale segment which makes up 2.1% of the Group’s total revenue maintained a revenue of $4.5 million as compared to $4.7 million in FY2016.
As at 31 December 2017, total membership for the Group’s Direct Selling business increased 2.2% to 490,041 members, when compared to 30 September 2017. Active distributors, which refers to members who have received commission over the last 12 months stands at 8.7% of total membership.
Overall for FY2017, revenue from Singapore improved by 8.9% to $7.7 million due to positive response from the marketing campaigns conducted during earlier quarters of the year, resulting in an increase of new members.
Management shall engage new and existing members by implementing marketing activities to further encourage network building and launching new products in the coming quarters to continue the market’s steady growth momentum.
In line with management’s expectation, China registered a total revenue of $110.5 million in FY2017 vis-à-vis $57.9 million in FY2016, as demand for DR’s Secret in the existing cities which are represented by DR’s Secret Experience Centres continue to increase.
As mentioned previously, the Group is in preparation for the conversion of the Export segment to Direct Selling which will be carried out in phases and will have minimal impact on the Group’s profitability. Barring any unforeseen circumstances, management is optimistic that China market will continue to contribute positively to the Group moving forward.
Revenue from Taiwan declined 28.5% from $123.0 million in FY2016 to $88.0 million in FY2017. This was due to changes in strategies implemented since the beginning of FY2017, coupled with stiff market competition as well as frequent online discounting. The change in strategies was to focus on improving sales per member as well as to attract more new customers’ membership
On a positive note, revenue increased from $14.9 million in 3Q2017 to $31.3 million in 4Q2017 which represents 110% increase from the previous quarter.
For FY2017, revenue from Indonesia decreased marginally by 2.3% to $5.3 million as compared to FY2016 due to the negative exchange rate movement between IDR and SGD. In local currency terms, the decline was marginal at 1.1%.
In the second half of the year, the strategy implemented by the management continued its momentum, resulting in a 10.7% increase in revenue to $1.7 million for 4Q2017 from $1.5 million in 4Q2016.
Revenue from Other Markets increased by 34.5% in the current quarter as compared to the same period last year primarily due to the increase in revenue from Hong Kong, Vietnam, Korea and Malaysia, offsetting decline from Philippines and Thailand.
Non-current assets of the Group decreased from $26.8 million as at 31 December 2016 to $23.0 million as at 31 December 2017, mainly due to depreciation of Property, Plant and Equipment and Non-Current Other Assets, amortisation of Intangible Assets and the reclassification of certain financial assets to current assets.
Inventory decreased from $43.0 million as at 31 December 2016 to $28.0 million as at 31 December 2017 due to higher orders from our Export Agent in 4Q2017 as well as control on the inventory levels as the Group has sufficient buffer to sustain growth moving forward.
In line with higher revenue generated from the Export Segment, Trade and Other Receivables increased from $23.4 million as at 31 December 2016 to $45.1 million as at 31 December 2017.
Other Assets decreased from $12.1 million as at 31 December 2016 to $6.3 million as at 31 December 2017 mainly due to lower deposits paid to suppliers in line with the decreased orders made to suppliers as the Group currently maintains a sufficient level of inventory.
Total Other Financial Assets increased from $2.0 million as at 31 December 2016 to $10.9 million as at 31 December 2017 mainly due to increased investment in quoted securities.
Trade and Other Payables increased by $2.0 million to $45.9 million as at 31 December 2017 mainly due to increase in accruals of staff and management incentive offsetting decrease in accruals of commissions due to lower sales from Direct Selling segment.
Other Liabilities were maintained at $1.0 million as at 31 December 2017 vis-à-vis 31 December 2016.
Income Tax Payable decreased from $16.5 million as at 31 December 2016 to $10.8 million as at 31 December 2017 due to settlements of Income Tax Payable during the year as well as lower Income Tax Payable from one of our subsidiaries.
As at 31 December 2017, the Group generated net cash flow from operating activities of $57.2 million. Net cash flow used in investing activities of $11.7 million was mainly due to increase in other financial assets during the year. Net cash flows used in financing activities in FY2017 of $20.1 million was mainly due to dividends paid during the year.
As at 31 December 2017, the Group maintained a strong balance sheet and working capital position, with approximately $82.2 million of cash and cash equivalents.
As management expects growth momentum to continue from the Group’s business in China, barring unforeseen circumstances, management expects improvement in both top and bottom line for FY2018 when compared to FY2017.
Factors that may affect the Group’s performance in the next reporting period and for the next 12 months are as follows:
Other ongoing factors that affect the Group include, timeline required for product registration in various markets, natural disasters, local direct selling regulations, product registration regulations and market competition.