1Qbrief5.16Serial executive chairman Derek Goh (standing) at the 1Q briefing at Tower Club.
Photo: Samuel Tay

SERIAL SYSTEM, a distributor of electronics components and consumer products, suffered a rare quarterly loss in 1Q2016 on a rare confluence of factors, mainly forex loss and a share of loss of its Taiwan associate Bull Will.

Serial System 1Q2016
Revenue Net Loss Forex loss +
Bull Will loss
U$332.8 m
+ 27%
($6.6m) US$3.2 m + US$3.5 m

And there was a dip in gross profit margin (from 8.3% to 6.7%) at the group level and a higher provision for inventory obsolescence (US$1.9 m versus US$560,000 previously).

The lower gross margin was attributed to:

♦ Higher sales of lower-margin products in Singapore and Taiwan, and stiff competition in Hong Kong and China for the electronic components distribution

♦ Lower-margin consumer products distribution also accounted for the drop

Bull Will's loss comprised mainly of provisions for doubtful debt which may be written back if the amount owed is eventually settled by insurance, said Serial executive chairman Derek Goh at a results briefing.

Serial had profits to book from its other associated companies, though.

Its 27.34%-owned SPL Holdings (Australia) Pty Ltd and 21%-owned Tong Chiang Group contributed US$0.2 million (1Q2015: profit of US$0.1 million) and US$0.06 million (1Q2015: Nil) respectively.

In all, Serial's 1Q was a net loss of US$6.6 million, a sharp turn from the US$3.1 million profit achieved in 1Q15.

The profit and loss statement, however, did not reflect a positive event -- a fair value gain of US$7.1 million in Serial's investment in Unitron Tech Co., a semiconductor distributor which was listed on the Korean stock exchange on 2 Feb 2016.

The fair value gain was captured under "financial assets available for sale" on the balance sheet.

If and when Serial sells its Unitron shares, the profit will be captured in the P&L statement.

Serial's net asset value of 13.80 Singapore cents a share as at end-1Q16 provides some cushion for the share price, which has held steady at 12.3 cents post-1Q results. 

♦ By the end of the year....
derek agm4.13Executive chairman Derek Goh. NextInsight file photo.Outlook: Having invested in recent years in several entities (for example, Achieva and what is formerly known as JEL) involved in the distribution of finished consumer products, the Group will double down on efforts to streamline their operations and integrate them with its other subsidiaries.

"Serial aims to achieve better synergies and unified economies of scale across our entire international distribution footprint," said executive chairman Derek Goh. 

"We believe this will help improve the financial performance of some our entities in the consumer products distribution business by the end of the year."

 The briefing Powerpoint slides are here. 

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