KUALA LUMPUR: ELK-Desa Resources Berhad, a non-bank lender focused in the used-car segment, reported today that the Group registered a 12% increase in revenue to RM40.30 million compared to RM35.96 million in the corresponding quarter a year ago as a result of higher contribution from its hire purchase segment.
Similarly, the Group's profit before tax for the quarter also increased by 32% to RM9.95 million from RM7.53 million due to higher contribution from both its hire purchase and furniture segments.
This was disclosed today when ELK- Desa Resources Berhad announced its financial results for the fourth quarter which ended March 31, 2023.
On a cumulative basis, the Group revenue was 20% higher at RM155.24 million compared to RM128.89 million last year while profit before tax jumped by 81% to RM63.31 million compared to RM34.89 million a year ago. The improved performance was a reflection of higher contribution from its hire purchase and furniture segments in tandem with Malaysia’s post pandemic recovery.
Hire purchase receivables as at March 31, 2023 increased by 23% to RM575.10 million from RM468.05 million last year. This was in line with the Group’s efforts to normalise hire purchase receivables growth in view of the recovering macro-economic landscape as well as the reduced risks of further disruptions to its operations caused by the Covid-19 pandemic.
The expansion of the Group’s hire purchase portfolio saw the segment’s revenue increase by 18% to RM100.76 million from RM85.30 million a year ago. Profit before tax for the segment climb by 77% to RM57.82 million from RM32.72 million, primarily due to the larger hire purchase portfolio as well as lower impairment allowances.
Year on year, impairment allowance decreased by 68% to RM6.99 million. Credit loss charge (i.e. impairment allowance over average net hire purchase receivables) decreased from 4.13% to 1.23%. The exceptionally low credit loss charge was a result of positive recovery activities and our hirers' continuous repayment trend in FY2023 especially in the first quarter of the financial year. Net impaired loans ratio also decreased to 1.92% as at 31 March 2023 from 2.89% as at March 31, 2022.
Finance cost decreased by 8% to RM8.76 million mainly due to full redemption of Medium Term Notes but was offset by the higher block discount interest expenses as a result of higher drawdown of block discounting facilities to support the increased hire purchase receivables.
In FY2023, the Group’s furniture segment recorded a 25% increase in revenue to RM54.48 million and a notable 153% rise in profit before tax to RM5.49 million due to higher furniture sales as well as increased gross profit margin from 33% to 38%.
ELK-Desa Resources Berhad executive director and chief financial officer Teoh Seng Hee said, “Our performance in FY2023 was exceptional given that our net hire purchase receivables had recovered by 21% when compared against FY2022.”
“As we move forward into our 2024 financial year, we are not expecting a similar sharp expansion in hire purchase receivables in view of the macro-economic uncertainties. In addition to external risks and inflationary pressures, the used car financing industry may also require process changes to adapt to the new regulatory oversight by the Consumer Credit Oversight Board, which is expected to come into effect in 2024,” Teoh added.
“Nevertheless, we remain confident that demand for used car financing will continue to out-strip supply, more so within the niche and underserved used car financing market that we operate in. As such, we intend to continue to grow our hire purchase receivables in FY2024, albeit at a more moderate pace,” he explained.
Teoh also said that ELK-Desa will remain focused on reducing its impaired loans ratio, which remained relatively high due to the operational disruptions caused by the Movement Control Order as well as its adherence to the Covid-19 Act that had limited credit recovery efforts.
For the furniture segment, ELK-Desa will stay on track with its strategic direction to grow organically, focusing on the domestic wholesale market to distribute its furniture products to more than 800 furniture retailers throughout Malaysia, especially in Sabah and Sarawak. The Group will continue to source for quality and affordable furniture in order to address the potentially tighter disposal incomes faced by consumers.
The Board of Directors has declared a second single tier interim dividend of 3.50 sen per share in respect of the financial year ended March 31, 2023. The dividend will be paid on June 22, 2023 to the shareholders whose name appear in the record of depositors of the Company as at June 9, 2023.
In addition to the first single-tier interim dividend of 4.50 sen per share (3.00 sen per share after restated for bonus issue) which was paid on December 16, 2022, the total dividend for the financial year ended March 31, 2023 would be 6.50 sen per share (FY2022: 3.50 sen after restated for bonus issue). This represents a dividend payout ratio of approximately 62% of the net profit, which is higher than the dividend policy of 60% set by the Board.
Source: The Sun Daily
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