ELK-Desa 3 rd Quarter Profit Improved By 16%

KUALA LUMPUR 18 Feb – ELK-Desa Resources Berhad, a non-bank lender focused in the used-car segment, registered a higher revenue of RM38.20 million in the third quarter ended 31 Dec 2021 (3QFY2021: RM37.20 million) due to higher contribution from its furniture segment.

The Group’s revenue for the quarter was higher at RM38.20 million (3QFY2021: RM37.20 million) due to higher contribution from its furniture segment.

Profit before tax for the quarter was also higher at RM14.12 million (3QFY2021: RM12.39 million), a 14% increase, as a result of stronger contribution from the Group’s hire purchase financing and furniture segments.

Nevertheless, the Group’s revenue and profit before tax on a cumulative bases decreased to RM92.93 million (9MFY2021: RM105.00 million) and RM27.36 million (9MFY2021: RM28.48 million) respectively.

The decline was mainly due to business and operational disruptions to the furniture segment caused by the Movement Control Order implemented by the Government from June to September 2021 in light of the COVID-19 crisis.

As at 31 December 2021, the Group’s hire purchase receivables was recorded at RM469.29 million, which was 10% lower compared to RM523.13 million a year ago.

This was a result of the Group embracing a more cautious stance to preserve asset quality.

The Group’s bank borrowings as 31 December 2021 decreased by 17% mainly due to repayment of block discounting facilities and term loans.

There was no outstanding balance for Medium Term Notes as they were fully redeemed during the financial period. Gearing remains at a low level of 0.30 times, which was even lower compared to a gearing of 0.49 times a year ago.

For the Group’s hire purchase segment, the quarter under review saw hire purchase revenue decline by 3% to RM22.35 million against the corresponding quarter last year. However, profit before tax was 9% higher at RM12.29 million due to lower borrowing cost and impairment allowance.

Year-to-date, the hire purchase financing segment reported a 9% decline in revenue to RM63.85 million compared to RM69.81 million last year while profit before tax saw a slight improvement of 2% to RM25.95 million from RM25.39 million last year.

The first nine-month of the financial year saw the hire purchase segment recording a 22% decrease in impairment allowance to RM15.64 million.

Credit loss charge (i.e. impairment allowance over average net hire purchase receivables) during the period fell to 2.92% from 3.41% a year ago.

The lower impairment allowance and credit loss charge were mainly due to the hirers’ continuous repayment trend during the said period.

The Executive Director and Chief Financial Officer of ELK-Desa Resources Berhad, Teoh Seng Hee said, the Group’s improved performance in the 3rd quarter is in tandem with the normalisation of business operations following the MCO.

''While there are less uncertainties currently compared to 2021, the operating landscape in the immediate term remains challenging. The recent floods in the Klang Valley may affect our customers ability to fulfill their loan obligations. We are monitoring the situation very closely.”

“Moving forward in the shorter term, we will continue to take a prudent approach in managing our hire purchase portfolio, ensuring asset quality while sustaining, if not growing our hire purchase receivables.

“We remain positive on our prospects in the medium to long term as hire purchase solutions in the used car niche market is still robust, more so as macro-economic indicators like job security, consumer and business confidence as well as the overall economy are trending towards the path of recovery,” he concluded.

For the Group’s furniture segment, revenue decreased by 17% to RM29.08 million mainly due to disruptions caused by the MCO as no delivery of goods could be made during the MCO period.

In spite of this, the segment recorded a profit before tax of RM1.41 million for the 9 months period ended 31 December 2021 due to the continue demand for quality and value-for-money furniture products. - DagangNews.com