Goodwill impairement drags down OldTown's net profit

by **Cals** Thu 21 May 2015, 22:34

Goodwill impairement drags down OldTown's net profit

KUALA LUMPUR (May 20): OldTown Bhd ([You must be registered and logged in to see this image.] Financial Dashboard)’s net profit dropped 14.8% to RM10.17 million for the fourth quarter ended March 31, 2015, from the RM11.95 million collective in its previous corresponding quarter.
In a filing to Bursa Malaysia today, the group attributed the drop in net profit on the RM3.5 million goodwill written off. “One of our acquired subsidiaries, which operates café outlets, has demonstrated risk of impairement primarily attributed to the unanticipated change in the business climate, which includes, amongst others, construction projects in the surrounding areas which caused lower customers’ patronage and also increase in competitors in the area.
“While these affected café outlets have, and will continue to contribute positively to the EBITA of the Group, they are unlikely to be at the scale previously anticipated. Therefore, we have decided to write down a portion of the allocated goodwill of RM3.5 million based on the recoverable amounts projected using present value of future cash flows generated by these cash generating units," it explained in the note.
Despite this, the group managed to record an increase in revenue for the quarter at RM105.14 million, a 10.71% increase from the RM94.97 million in the previous year.
For the full financial year ended March 31, OldTown posted a cumulative net profit of RM47.49 million and a revenue of RM397.74 million.
Moving forward, the group said in its statement today that it plans to expand by opening more outlets in Malaysia and Singapore, as well as re-launch operations in China in FY16. “The Group shall continue its efforts to maintain its margin and improve its topline growth for café chain operation through various initiatives namely streamlining the menu offerings and focusing on building brand loyalty among customers via consistent product quality and customer service.”