The Straits Times / The Business Times News on OSIM

Global Active loss prompts Osim to revise Q2 results

But it does not expect material impact on group earnings

OSIM International said it is revising its second-quarter results downwards following the sharp losses at 66.71 per cent subsidiary Global Active, but does not expect a material impact on group operating and net profit.

In a statement yesterday, Osim, a health-care products retailer, said it is adjusting its results for the second fiscal quarter ending June 30 to 'accurately equity account its share' of the $804,000 net loss that Global Active reported this week for the year ended March 31. On April 27, Osim reported net profit of $8.1 million for the quarter ended March 31.

'The $800,000-plus loss (of Global Active) is wider than expected,' said Osim chief financial officer Peter Lee. 'This means our share of loss has increased and this will be taken in our second-quarter results.'

Mr Lee added that Osim's group revenue and net profit for this financial year should outdo the performance last year. He expressed confidence that its group performance is consistent with its previous guidance and that Osim is on track for its 20-30 per cent growth target.

Global Active released its full-year results on Monday, posting a net loss of $804,000, or 0.35 cent per share, for FY2005 - a stark difference from last year's net profit of $5.1 million, or 3.09 cents per share.

Global Active, which sells health supplements under the GNC brand, saw turnover rise 18 per cent to $69.3 million in FY2005 due to growth in Singapore retail sales and a wider variety of products offered.

But distribution, administrative and other operating expenses soared, leaving operating profit at just $585,000. Operating profit in FY2004 was $6.5 million.

The climb in expenses was attributed to increases in staff and rental costs due to a higher number of GNC stores, pre-operating costs in China, higher head office expenditure, professional fees incurred from issuing two profit warnings this year, higher borrowings to fund acquisitions of Australian operations and additional working capital and increased share of losses in associated companies in Brunei and Malaysia. Global Active said it expects financial performance in FY2006 to improve.

Despite this unforeseen FY2005 performance at the subsidiary, Mr Lee stands by Osim's decision to raise its stake in Global Active from 40.05 per cent to 66.71 per cent as of April 28 this year.

'The short-term weaker Global Active results arising from the last 12 months have not affected our long-term view of the nutraceutical market in Asia,' he said.

'We continue to believe that the nutraceutical market in Asia is an infant one,' Mr Lee said. 'GNC is a good brand and Global Active has 143 outlets and has presence in Singapore, Malaysia, Australia, China and US military bases in Asia.'