CEO's Message
Dear Shareholders,
On behalf of the Board, I am pleased to present the Group's Annual Report for the financial year ended 31 December 2006.
For the year under review, Novena Group's turnover increased by 10% from S$70 million to S$77 million. The profit before tax for the year increased by 86% from S$2.13 million to S$3.97 million as compared to prior year. The improvement in revenue and profit was largely due to a general improvement of the existing businesses and the incorporation of the full year results of a new subsidiary Chuan Seng Leong Pte Ltd acquired in 2005 and to a write back of impairment loss on property of S$0.72 million.
On 21 February 2007, the company announced the decision of its Board of Directors to divest its furniture business to TT International Limited. The Board has considered several strategic options for the growth of its furniture business. One of these options was to continue to grow the furniture business. However, such growth would require expansion of its distribution network both locally and the development of an overseas distribution arm. Currently, the furniture business has minimal oversea presence. This strategy, which would entail significant risk, human resource investment and capital with a disproportionate uncertainty of a good return commensurate with the risk.
The proposed divestment offers the Group an attractive premium to the net tangible asset value of the furniture business. In addition, the Company has also entered into separate subscription agreements with TT International to subscribe for additional shares. Upon completion of the proposed transactions the Group would emerge holding approximately 16.7% of the enlarged share capital of TT International. TT International is a leading Singaporebased player in the global trading of consumer electronics and household appliances, including its own house brand AKIRA, sells such products to over 60 countries worldwide. It has an established network in emerging markets particularly in South East Asia such as Indonesia, Malaysia and Vietnam. It also has proven strengths in brand building and distribution. The proposed divestment will give the Group an opportunity to participate and leverage in the future growth of TT International's business via its shareholding. The proposed divestment is due to be completed in the second quarter of 2007.
Novena Group will continue to grow its beauty division under its wholly owned subsidiaries Beaute Spring Pte Ltd, Niclas International Pte Ltd, Fasta International Pte Ltd and B.S.P. Global Pte Ltd, as well as its interest in the distribution of FMCG (fast moving consumer goods) products through its 80% owned subsidiary, Chuan Seng Leong Pte Ltd.
The retail industry remains a challenging environment notwithstanding the improvement in the economy. In our ongoing process of expansion of the beauty division, the Group remains committed to sourcing for products of the highest quality for our customers. We will continue to strengthen our branding and retail concepts, and widen our range of beauty products. Moving forward, the Group intends to source for new businesses that will create good value and benefit the shareholders and the Company.
As in previous years, community development and charity efforts continue to be one of the key priorities in the realization of our values in being creative, sincere and caring. We believe in making a difference in people's lives. Knowing that all it takes is a little care and concern, we hope that our efforts will go a long way in making a difference in the lives of each and every underprivileged individual we touch. During the year, the Group contributed approximately S$192,000 in cash and kind to various charity events and organizations.
I am pleased to inform that the Board has recommended a first and final dividend of 1 cent per ordinary share. In addition, I would like to express my heartfelt gratitude to all our loyal customers in supporting our brands in both the beauty and furniture segments as well as to Board of Directors and shareholders for their commitment and support this past year. Last but not least, a big thank you for the contributions and support from all my staff and business associates. I look forward to your continued support for the group in the year ahead.
Thank you for your continuous support.
Toh Soon Huat
Acting Chairman & Chief Executive Officer