The Straits Times / The Business Times News on OSIM

Better results at Brookstone helps boost OSIM's Q2 profit

BOOSTED by the improving performance of its US unit Brookstone as well as its core operations, OSIM International reported yesterday an 11 per cent rise in second quarter earnings.

The healthy lifestyle products group said net profit in the three months ended June 2006 increased to $13.3 million from $12 million a year ago. Excluding its share of losses from associated companies and joint ventures - mainly accounted for by Brookstone - net profit would have risen by 113 per cent to $24.6 million, it said.

"We believe we can now afford to be a little more generous.' - Ron Sim on OSIM's interim dividend

Group revenue grew 36 per cent to $183.3 million in Q2 2006, while earnings per share was 2.5 cents, compared with 2.7 cents in the previous period.

OSIM announced an interim dividend of 1.3 cents per share or about $7 million in total, up 180 per cent from a year ago and as much as the full-year dividend for 2005.

'We believe we can now afford to be a little more generous,' said OSIM chief executive Ron Sim.

The improvement in Q2 performance was driven by worldwide customer demand for the group's full range of massage chairs and new products across its growing network of sales outlets, which resulted in higher same-store sales in many of the larger and more efficient outlets, OSIM said.

Its nutritional products arm, Global Active, also improved its performance.

'At the same time, we are building new pillars of growth and are pleased that Brookstone achieved positive same-store growth this quarter after five consecutive quarters of contraction. This positive same-store growth trend is expected to continue,' Mr Sim said. As a result of the improvements at Brookstone - which dragged down first quarter earnings - the share of losses from associated companies and joint venture decreased to $11.4 million in Q2 2006 from $14.0 million in Q1 2006.

Mr Sim said the appointment of Lou Mancini as the new CEO of Brookstone early in the second quarter has produced encouraging results, particularly in putting in place a new sales culture underpinned by both individual and store incentives. 'Under the new leadership, we can expect Brookstone to continue to improve its selling culture and outlet productivity while enhancing its product mix,' he said.

Since the acquisition of Brookstone in October 2005, OSIM has been equity accounting its share of Brookstone's results. Historically, Brookstone typically incurs losses in the first three quarters of its financial year but makes a sufficiently large profit in the fourth quarter to result in full-year profitability. OSIM's target is to make Brookstone profitable throughout the year.

'In the near term, Brookstone's quarterly results will continue to be volatile but a firm foundation has been put in place,' OSIM said.

The group is maintaining its guidance for FY2006 and expects revenue and net profit for the year to exceed that of FY2005. OSIM said it will continue to grow its core operations, expand its sales network and roll out new products. The group's outlets numbered 1,060 by end-June 2006.