Dear Shareholders,
Year 2007 contained its fair share of upheaval with continuous double digit inflation inflicting on the relative stability of our economy, while a return to arms in the North shrank market potential therein, followed by resulting unfavourable consequences in the South. Despite prevailing uncertainty, the economy grew by an estimated 6%-7%.
Meanwhile, the global economy grew at around 3.6% and China and the newly emerging prosperity experienced in India and Russia enabled these 3 nations to contribute more than half this growth, significantly shifting the axis of the world economy for bi-lateral trade.
Group Revenue grew by 12.8% followed closely by Company Revenue of 12%. We were unable to explore our traditional strength in the North East, though the Eastern Province returned to normalcy towards the 2nd Half with prevailing hope for the future.
During the year under review, your Company moved ahead to retain its position as a national retailing icon, with consumer-centricity as our focal point. ‘Acquisition’ of Hayleys Consumer Products Channel shortly after Balance Sheet date underpinned progression towards a comprehensive expansion of our retailing presence throughout the island nation and furthered our goal towards mid term market dominance.
It is pertinent to record that the Company’s focus shifted somewhat towards Channel Management, away from its customary emphasis on Brand and Category Management. We built further on the strengths of our Retail Channels namely ‘Singer Plus’, ‘Singer Mega’, ‘Sisil World’ and ‘Modern Homes’ along with the Trade and Institutional Channels. Channels of Distribution are the conduits by which our multifaceted Brands and Categories are introduced to consumer’s homes and it is imperative that the foundation of a strong retailing presence must rest therein.
During the year under review, we established world class merchandising standards for retailing across these distribution network, substantially increased product knowledge of our sales teams through continuous training and filled gaps in the distribution network with new stores. These initiatives further enabled us to standardise our consumer offer across the nation, overcoming disparities between the Urban Rural divide.
New membership of our major customer loyalty programmes ‘Mega Money’ and ‘Singer Plus Rewards’ further strengthened our bond with a consumer base, which we believe is now represented by over 4 million households. To fall behind a wide and dispersed consumer community, we also expanded our after sales service presence into new territories.
Recognition by Brand Finance PLC, the world’s leading independent brand valuation and rating organisation, as the ‘Most Powerful Brand’ in the country with an AA award and AC Nielsen/SLIM poll which ranked us as the ‘Most Popular Brand’ and also the ‘Most Popular Teen Brand’ of the Year bear ample testimony of the esteem that both Brand and Corporate enjoy in the minds of our populace. We have vowed to maintain Best Global Practices in serving our massive consumer base on to the foreseeable future.
Continuous double-digit inflation must have an impact on cash flows of an organisation the size of ours. Growth in Finance Cost during 2007 is a cause for concern. This trend led to an impact on our net income position, which declined in consequence. Recognising the importance of tighter Balance Sheet management in this emerging scenario, we enhanced our debt collection effort, resulting in an all time low in arrears of 1.2% of Gross Hire Purchase Receivables, one of the core areas of our business. Meanwhile, new brand introductions in line with worldwide technological innovations results in a perpetual cycle of model obsolescence, an inevitable consequence for a multi brand retailer. As a national distributor of more than 10 international market leader brands, we are caught up in this matrix of attrition. Obsolescence was reduced to a minimum by conducting off site clearance sales in urban centres around the country. Provisions are made to hedge against the remainder, which are due for clearance in 2008. By enhancing the strength of Internal Audit teams and National Supervision, we are recognising the need for tighter controls in Field Operations to secure a substantial portion of our current assets, which is in the Field. Detailed information of Financial and Operational Reviews are presented elsewhere in this report and you are advised to read these to obtain a wider grasp of our business fundamentals in 2007.
I like to report to you now on the substantial progress achieved in 4 Sectors of our Group activities, which have surfaced to the forefront over the last several years.
- 1. Firstly, let me touch base on Furniture manufacture, which has matured into a front ranking industry. Set up in 1993, our Piliyandala Plant now manufactures arguably the best quality of domestic furniture in the country, providing model options such as ‘Diners’, ‘Sitters’, bedroom suites, kid’s furniture formats and office and kitchen layouts. Furniture is offered through an exclusive Furniture Chain ‘Modern Homes’ located in urban centres across the nation. We propose expanding our revenue growth to local and export markets through a dual pronged strategy of more stores and increasing product range. We believe that Furniture will represent a significant position in our forward growth strategy in response to changing lifestyles of the emerging population.
- The need to service A & B Socio Economic Categories (SEC) of consumers led us to believe in a multifaceted Department Store format under the label of ‘Singer Mega’. Initiative commenced with the opening of our first store in Kandy in 1998 as a test bed in a town traditionally identified for market testing new models and formats, due to its cosmopolitan character.
10 years later, with a total of 9 stores under Management’s purview, we have the widest retail coverage for Department Stores in the country, consisting of 95,400 square feet of retailing space. In 2007, the footfall reached a new high of 557,885 persons and the Channel contributed
Rs. 1.038 billion in net revenue. Singer Mega has a substantial top of the mind brand awareness and recall amongst urban consumers. We plan to move the brand to National Icon status via expansion of new stores into selected suburban areas, in recognition of its outstanding success.
- Our journey into multi-branding commenced in 1996. With Singer as the parent retailing brand, we have acquired distribution rights for some leading brands in the world picked by a careful selective process. Among brands falling within our supervision are Whirlpool - No. 1 Home Maker in the World, TCL - largest manufacturer of Televisions worldwide, Hitachi - the Japanese leader in Electronics and two heritage brands Sisil and Panasonic.
The recent appointment as National Distributor for Samsung, leading electronics brand in the world and Philips, another global heritage brand, exemplifies our diversity and we believe will significantly add to our future revenue earning potential.
- Singer Finance Lanka Ltd., a fully owned subsidiary was incorporated in 2004 under Central Bank supervision. Singer Finance with its growing branch network and deposit mobilisation capability is poised to play a supportive role in the growth of the Group and add to the progress of our consumer base.
The above 4 initiatives have significantly changed the face of the Singer Group in modern times and enabled us to better face the challenges of the 21st Century.
This is an occasion to appreciate the absolute dedication of the staff and their adherence to good business ethics in a difficult period. It is people who make organisations successful as amply demonstrated in our case.
This is also an opportunity to thank our Board of Directors who are from diverse business Groups both from Sri Lanka and internationally for their valuable guidance, assistance and advise and shareholders for reposing confidence in the Board of Directors and Management Team once again.
