The Straits Times / The Business Times News on OSIM

OSIM's net profit for full year falls by 28%

OSIM International's acquisitions pulled its earnings down last year as the massage chair maker struggled to improve profitability at its joint ventures and associated firms.

The group yesterday reported net profits of $33.8 million for the year ended Dec 31, down 28 per cent from $46.7 million the previous year. The drop in earnings was the first time that OSIM's bottom line has fallen since it listed on the mainboard in 2000.

Full-year revenue, however, rose 24 per cent to a record high of $623 million last year.

The group is also proposing higher dividends for the year. Shareholders will get a final dividend of 1.48 cents per share, which brings OSIM's total dividend payout for last year to $15 million - more than double that given out the year before.

OSIM said the drop in earnings was mainly due to higher finance expenses related to its acquisition of a stake in American retailer Brookstone in late 2005. Its finance expenses from joint ventures rose to $13.7 million last year from $3.4 million in 2005.

Brookstone also reported lower contributions last year. OSIM's share of profits from joint ventures fell to $2.5 million last year from $14.7 million. This meant a loss of $11.2 million from such ventures last year, from an $11.3 million gain the year before.

The group's chief financial officer, Mr Peter Lee, said Brookstone's performance was 'not yet' satisfactory and that while the retailer's performance was 'gaining traction, it was lower than our target'.

But he added that Brookstone, which usually records low sales in the first three quarters of the year due to seasonal demand for its products, 'is working towards quarterly profitability'.

In fact, the retailer booked a US$2 million (S$3.1 million) profit under United States accounting standards, which treat interest expenses differently. It also achieved a third successive quarter of same-store growth.

Excluding joint ventures and associated companies, OSIM's net profit would have gone up 27 per cent to $45 million, said Mr Lee.

Apart from its Brookstone woes, OSIM was also hit by lower sales of its core massage products in Hong Kong and Singapore.

In the second half of last year, the group suffered from negative publicity in China, Taiwan and Hong Kong as imitators advertised false claims, leading to adverse media reports and negative market sentiment towards massage products in general.

In general, OSIM reported lower revenue growth across all regions last year compared with the year before.

But chief executive Ron Sim is forecasting a better showing this year. He said OSIM will expand to at least five more countries including Kuwait, Qatar, Russia and Turkey. It will also add more than 100 new outlets this year, compared with 99 last year.

Earnings per share for OSIM slipped to 6.25 cents for the full year, down from 8.68 cents for 2005. Net asset value per share also fell to 30 cents as at Dec 31, from 36 cents a year earlier.

OSIM shares rose four cents to close at $1.01 yesterday