KUALA LUMPUR: ELK-Desa Resources Bhd recorded a lower net profit in its fourth-quarter (Q4) ended March 31, 2022 (FY22) at RM5.54 million, down by 60.9 per cent year-on-year (YoY) against RM14.16 million in the same period last year.
Revenue for the quarter slipped 7.9 per cent YoY to RM35.69 million from RM38.75 million in Q4 2021, while pre-tax profit also decreased by 57 per cent to RM7.53 million from RM17.54 million compared to Q4 2021.
In a statement, the company noted the decrease was primarily a result of lower contributions from the hire purchase financing segment.
On a cumulative basis, the company's net profit came in 27 per cent lower YoY at RM25.77 million against RM35.29 million registered in the corresponding period last year.
Revenue was down by 10 per cent YoY at RM128.89 million compared to RM143.75 million, and pre-tax profit dropped 24 per cent to RM34.89 million compared to RM46.02 million a year ago.
The decline was also mainly due to the lower contribution from the company's hire purchase financing segment, which remains its core business activity and primary income contributor.
As of March 31, 2022, hire purchase receivables dropped by 10 per cent to RM468.05 million from RM522.80 million last year.
This was in tandem with the company's cautious stance to preserve asset quality instead of driving receivables growth.
The hire purchase financing segment's revenue for FY22 slipped nine per cent to RM85.30 million from RM93.31 million a year ago due to the smaller hire purchase portfolio.
Profit before tax for the segment decreased by 22 per cent to RM32.72 million from RM41.78 million mainly due to lower hire purchase revenue and higher impairment allowances but was mitigated by lower finance costs.
On a YoY comparison, impairment allowance rose 19 per cent to RM22.15 million while credit loss charge also increased to 4.13 per cent from 3.15 per cent.
The higher impairment allowance and credit loss charge were mainly due to an increase in impaired loan accounts during the year, primarily caused by the disruptions of the hirers' repayment patterns amidst the movement restrictions and lockdowns imposed between June to September 2021.
Executive director and chief financial officer Teoh Seng Hee said the company's performance during the year under review was within expectations as the Movement Control Order declared by the government from June to September 2021 had impacted its operations.
"With the high vaccination rate in Malaysia, we believe that the threat of future operational disruptions caused by MCOs will abate.
"Moreover, the normalisation of business activities as Malaysia moves closer to the endemic phase is also expected to contribute to economic rejuvenation, foreign direct investments, job creation, and macro-economic factors critical to our hire purchase financing and furniture business," he said.
Moving forward, Teoh said ELK-Desa aims to gradually bring its hire purchase receivables portfolio towards pre-pandemic levels while taking a cautious approach to protect the group's asset quality.
"We believe that the overall demand for used-car hire purchase financing will remain strong as the economy shifts towards recovery," said Teoh.
The board of directors declared a second single-tier interim dividend of 3.25 sen per share for the financial year ended March 31, 2022. ELK-Desa Resources will pay the dividend on June 16, 2022.
With the second interim dividend declaration, the board of directors will not recommend any final dividend for the financial year ended March 31 2022.
In addition to the first single-tier interim dividend of two sen per share, which was paid on December 16, 2021, the total dividend for the financial year ended March 31, 2022, is 5.25 sen per share, which represents a dividend payout ratio of approximately 61 per cent of the net profit, higher than the dividend policy of 60 per cent set by the board.