Chairman's Statement
(Extracted from Annual Report 2011)
On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and the Company for the financial year ended 30 June 2011.
PERFORMANCE REVIEW
During the year under review, Singapore's economic growth moderate to a more sustainable pace after the sharp recovery in 2010 from the global financial crisis that started in 2008. Singapore's GDP growth for second quarter 2011 slowdown to 0.9% compared to 9.3% in the first quarter of 2011 and 14.5% growth for the full year of 2010.
In tandem with the economic slowdown, the Group profit after tax for the current year was $9.5 million, a decline of 20.0% from the previous year. The weaker performance was primarily due to lower net interest income as interest margin was squeezed under a low interest rate environment and intense price competition from other financial institutions.
Net interest income for the financial year declined by 16.4% as a result of lower interest yields from the interest-earning assets. The Group's net interest margin as a percentage of the interest earning assets narrowed by 58 basis points to 2.67% as our asset yields fell faster than the cost of funds. Due to the Group's disciplined approach to cost control, operating expenses were broadly the same as last year. The increase in the staff costs, due to the absence of Job Credit Scheme in the current year, was largely offset by the decrease in the commission expenses to car dealers as the volume of new auto loans contracted during the year.
Group profit before tax was $10.8 million, following a $0.2 million writeback of allowances for loans. The Group continues to set aside adequate individual and collective allowances for the loan portfolio.
Total loans and advances net of allowances declined by 5.0% to $488 million compared to $514 million a year ago as our auto loan portfolio contracted due to the sluggish car sales volume arising from the sharp decline in the Certificate of Entitlement ("COE") quota during the year under review. In line with the lower loan balance, the Group has also actively managed the total deposits downwards from $602 million to $515 million as at 30 June 2011. The Group's total equity as at 30 June 2011 rose to $170 million contributed by $2.2 million growth in the reserves.
DIVIDENDS
Subject to approval of shareholders at the forthcoming Annual General Meeting, the Board is recommending a first and final one-tier tax exempt dividend of 6 cents per share and a special one-tier tax exempt dividend of 2 cents per share for the year under review. The total distribution of 8 cents per share for the year will amount to approximately $6.35 million.
OPERATIONS REVIEW
Amidst the volatile economic operating environment, the Group is ever mindful of the need for strong vigilance and governance over the management of risks within the Group. Since August 2010, the Group has reconstituted the composition of the Risk Management Committee and made it to a full Board Committee, chaired by an independent director. under the guidance of the Risk Management committee, the group has continued to seek ways to strengthen and improve our risk management policies and processes and ensure that our credit lending standards remain robust.
As part of an ongoing effort to improve our customer services, the group has extended the operating hours to 5.30pm on weekdays for our two customer centres, namely Bedok and Ang Mo Kio, to provide greater convenience to our customers in the heartlands. the group has also sought to maximise the location of our customer centres. By the end of this year we will relocate our customer centre at Bugis to Woodlands town, where we will endeavour to serve an enlarged pool of customers in the Northern part of the nation.
For the fourth year running, as part of our corporate social responsibility programme, we continue to sponsor 18 children from the Spastic children's Association of Singapore, cerebral Palsy centre in their participation of the "Cold Storage Kids Run 2011". this is an event where the group has been one of the main sponsors since its inception in 2008. the event has been a huge success where both our staff and the children from the Association had a fun time spurring each other to complete the race. it was also a great opportunity for the group to create greater awareness of our brand and products.
LOOKING AHEAD
Going forward, the economic outlook for the coming year is less sanguine compared to a year ago and uncertainties have clearly increased. the anaemic growth and weak employment prospects in the US economy coupled with the sovereign debt crisis in the euro zone are likely to cause sluggish global growth. Singapore being an open economy will not be insulated from the external headwinds and is expected to experience moderation in economic activities in the year ahead.
In the midst of this challenging environment, the group will continue to focus on our niche markets with prudence and seek out other business opportunities to grow our business. the group will also continue to seek ways to improve our customer services through extended banking hours and relocating our customer centre to serve a wider pool of customers. With our strong capital position and focus strategy, the group is confi dent that we will be able to meet all the challenges as well as opportunities ahead.
APPRECIATION
On behalf of the Board, i would like to thank our shareholders and customers for their continued support. My appreciation goes to all staff and management for their unwavering dedication and hard work. Finally, i would like to express my gratitude to my fellow Board Members for their wise counsel and invaluable contributions during the past year.
Teo Chiang Long
Executive Chairman
Singapore, 22 August 2011