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Dear Shareholders,
On behalf of the Board of Directors, I present to you the Annual Report and the Audited Financial Statements of Ogawa World Berhad and its subsidiary companies (“the Group”) for the financial year ended 30 June 2009.
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FINANCIAL PERFORMANCE
The Group achieved consolidated revenue of RM 128.5 million, representing a reduction of 3.6% as compared to RM 133.3 million achieved in the previous fi nancial year. Net Loss after taxation attributable to equity holders widened to RM 12.4 million as compared to the Net Loss after taxation of RM 8.4 million recorded in the previous financial year.
The Group made a net provision for doubtful debt of RM 9.15 million during the financial year compared to the RM 4.15 million provisions in the previous year. The provision was necessary as the economic conditions had affected the businesses of our distributors and their abilities to make regular repayment towards their outstanding position. The Group is continuing to pursue repayment of accounts receivable while taking steps to improve the businesses. Excluding the doubtful debt provisions of the respective years above, Net Loss after taxation attributable to equity holders for the fi nancial year ended 30 June 2009 amounted to RM 4.36 million as compared to the Net Loss of RM 4.22 million recorded in the previous financial year.
Despite the loss, the Group is financially strong with net cash holdings of RM 42.4 million or 35.4 cents per share as at 30 June 2009 compared to RM 32.4 million or 27.0 cents per share the previous year.
OPERATIONAL REVIEW
The global financial and economic crisis brought about by sub-prime crises had affected consumer confidence which in turn resulted in lower retail patronage. The Group responded by reducing exposure and focused instead on operational efficiency to address the weaker demand. The number of outlets was reduced by 11.24% from 169 to 150 while consolidated revenue reduced 3.6% to RM128.5 million compared to previous financial year’s consolidated revenue of RM133.3 million.
Geographically, the Malaysian market remains the largest revenue contributor with RM 85.7 million, accounting for 66.7% of Group revenue but overseas business had increased to 33.3% at RM 42.8 million compared to 28.0% in the last financial year.
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FY09 |
FY08 |
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Revenue (RM'million) |
No. of Outlets* |
Revenue (RM'million) |
No. of Outlets*
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| Malaysia |
85.7 |
59 |
96.0 |
71 |
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| Overseas |
42.8 |
91 |
37.3 |
98 |
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| Total |
128.5 |
150 |
133.3 |
169 |
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* Include distributors' outlets
During the financial year, we have successfully penetrated into Saudi Arabia with the appointment of a distributor. Today, Ogawa’s products can be found in 10 outlets in Jeddah and Riyadh. The distributor in Thailand had however ceased operations in January 2009. Therefore, we are now in 9 countries namely Malaysia, Singapore, China, Hong Kong, Australia, Indonesia, Vietnam, Myanmar and Saudi Arabia with a total of 150 outlets.
Affordable Products and Tactical Advertising
The Group had launched a number of key products during the financial year including Ogawa SmartAire Massage Chair, Comfort Massage Chair, Mobile Shiatsu, upgraded version of Mobile Seat, Foot Master Massager, Arm Blood Pressure monitor and etc which have receive great response from the market.
The focus on product attributes, especially on Ogawa SmartAire Massage Chair had enhanced the value and image of the brand as being technically advanced.
The Group intends to intensify the introduction of new products and share with the world our passion for healthy living.
Malaysian operations
The Group had opened 7 new outlets and closed 20 outlets in Malaysia as we continue to keep abreast of the changes in shopping behaviours of Malaysians. The new outlets are in Aeon Seberang Prai, Giant Tawau, 1 Borneo Kota Kinabalu, Boulevard Kuching, Aeon Bukit Indah Johor Bahru, Kluang Mall and Wetex Parade Muar.
The Group is constantly on the lookout for good retail locations and shall consider sites with good pedestrian traffic flow of the target consumer profile. In the meantime, the Malaysian focus shall be on roadshows and exhibitions to promote Ogawa brand and raise awareness on the therapeutic benefi ts of our products.
Overseas operations
During the financial year, the Group completed its consolidation exercise of its overseas outlets to rationalize its operations. Inclusive of distributors’ outlets, the Group now has presence in 91 locations overseas. The exercise has been promising as revenue generated from overseas has been promising as revenue generated from overseas 37.3 million in the previous financial year despite fewer sites and the weak economic environment.
The Group had assumed the sales and distribution of Ogawa products in Australia via a newly incorporated wholly-owned subsidiary, Ogawa International (Aust) Pty Ltd since 1 May 2009. The operating results since commencement have been encouraging.
CORPORATE DEVELOPMENT
On 2 March 2009, the Group had through its wholly-owned subsidiary Healthy World Lifestyle Sdn Bhd (“HWL”), incorporated a wholly-owned subsidiary company in Hong Kong, Ogawa International Limited (“OIL”) for international business development. On 8 April 2009, HWL had also incorporated a wholly-owned subsidiary, Ogawa International (Aust) Pty Ltd (“OIA”) in Australia to undertake the sales and distribution of Ogawa’s products in Australia.
Subsequent to the financial year end, on 8 October 2009, the Group had through Ogawa Health-Care (Selangor) Sdn. Bhd., a wholly-owned subsidiary signed a sales and distributorship agreement with V-Patch Medical Systems Pty Ltd (“VPMS”) to distribute health care products in mutually agreed jurisdictions. VPMS is an Australian based company that specializes in the design and supply of non-invasive biosensors with wearable patches and modules connecting to mobile phone networks and the internet.
DIVIDEND
The Board is of the view that the cash holding can be better utilized to enhance operations and consequently, create a sustainable long-term shareholders’ value. Therefore, no final dividend is recommended for the financial year ended 30 June 2009.
PROSPECTS AND OUTLOOK
Consumer confidence has improved compared to a year ago but most countries have yet to emerge from the global fi nancial crisis that ravaged their economies. In this environment, the Group sees opportunities for growth and expansion at relatively low cost to new markets.
With our asset light business model, strong product design and development team, cost containment efforts and high cash position, the Group is aiming for better results in the new financial year.
ACKNOWLEDGEMENT
The Board would like to extend our sincere gratitude and appreciation to the management and staff at all levels for their dedicated effort and commitment. We are also grateful to our loyal shareholders as well as our customers, suppliers and business associates for their continuing confidence and support of the Group.
Wong Lee Keong
Executive Chairman
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