Duty Free Q2 earnings fall 60% on lower margins, weaker RM

MAINBOARD-LISTED Duty Free International (DFI) suffered a 60 per cent fall in earnings to RM4.9 million (S$1.6 million) for Q2 ended August, hit by a narrower profit margin and lower net gain in foreign exchange. 

This translates to an earnings per share of 0.41 sen for the quarter, compared to 1.02 sen previously. 

Nevertheless, DFI has declared an interim dividend of S$0.005 per share. It did not declare a corresponding dividend last year. 

Revenue for the quarter was largely flat at RM114.7 million, up 0.2 per cent on year due to contributions from Brand Connect Group which DFI acquired in August 2018. However, this was offset by lower revenue from the trading of duty-free goods and non-dutiable merchandise.

DFI recorded a lower unrealised gain in foreign exchange of RM1.0 million, as compared to RM4.0 million a year ago. This was due to the weakening of the Ringgit against the US Dollar. The company also incurred RM400,000 in write-offs, following the closure of some outlets in Kuala Lumpur International Airport 2.

On a half-year basis, DFI saw earnings fall 43.4 per cent to RM12.1 million, while revenue ticked up 8 per cent to RM250.4 million. The company generated RM2.4 million in net cash from operations for H1 FY2020, an improvement from the RM14.5 million net cash used for operations a year ago. This was bolstered partly by the greater write-offs of inventory and property, plant and equipment. 

DFI expects business conditions to remain challenging over the next year, with continued weakness in currency movements. 

"The group will continue its efforts to enhance the range of its products and quality services, together with close monitoring of the key cost drivers. Additionally, the group will also continue to strengthen its operational efficiency and tighten its cost-control measures to remain competitive and profitable," it said in its press release on Wednesday.

As at end-August, DFI has cash of RM297.2 million and RM32.3 million in debt. Shares of the company closed flat at S$0.152 on Wednesday.