KPG, profit vs loss,
Monday November 16, 5:00 pm Eastern Time
Company Press Release
SOURCE: King Power International Group Co., Ltd.
King Power Group Announces Third Quarter Results
BANGKOK, Thailand, Nov. 16 /PRNewswire/ -- King Power International Group (Amex: KPG - news) announced results
for the nine and three months ended September 30, 1998.
Results of operations for the nine months ended September 30, 1998 and 1997
Sales revenue for the nine months ended September 30, 1998 was approximately $62.3 million as compared to approximately
$66.6 million for 1997 or a decrease of 6.46%. This decrease is directly attributable to the devaluation of Baht that took place
during the last half of 1997. The overall sales revenue in Thai Baht increased over 11.90% from Baht 2,286.0 million for the
nine months ended September 30, 1997 to Baht 2,558.0 million for the same period in 1998. However, the average exchange
rate of Baht 40.697 to $1 was used to convert the 1998 figure into US dollars, compared to the average exchange rate of
34.306 for 1997 or a decrease of 18.63%.
The cost of merchandise sold for the nine months ended September 30, 1998 and 1997 was approximately $26.3 million and
$27.0 million, respectively. The principal factor causing this decrease is directly related to the average exchange rate that is
used to compare the two periods. In Baht, the cost of merchandise sold increased from Baht 925.1 million for the nine months
ended September 30, 1998 to Baht 1,089.8 million for the same period this year or an increase of 17.8%. This increase is due
to the expansion of the KPD subsidiary and a larger number of customers at the KPT stores for consumer goods. In addition,
KPT's concession agreement to maintain its locations within the Thai airports requires payments based upon a fixed amount.
Due to the higher sales volume, comparing the time period ended September 30, 1997 to the time period ended September 30,
1998, the ratio of Company's concession fee to sales revenue dropped from approximately 36.30% in 1997 to approximately
29.66% in 1998. The reason for this decrease is an increase in sales volume, together with the fact that starting March 19,
1998, the Thai Customs Department removed the additional customs duty of 15% on gross sales, which it had previously
imposed on KPD. KPD expects this favorable treatment to continue indefinitely.
Gross profit margin has improved from 23.27% in September 30, 1997 to 28.25% in 1998.
Direct selling expenses, excluding depreciation and others, were approximately $6.05 million for the nine months ended
September 30, 1997 and approximately $7.2 million for the same period in 1998. In terms of percentage of sales, 1997
expenses were approximately 9.08% of sales and 1998 expenses were approximately 11.48% of sales. Management has
made a commitment to improve this ratio by improving the effectiveness and efficiency of the Company's sales force that should
result from additional training and management supervision.
Administrative expenses for the nine months ended September 30, 1998 and 1997 were approximately $3.4 million and $2.2
million, respectively. As a percentage of total sales, these expenses were approximately 5.51% and 3.37%, respectively.
Administrative expenses have grown due to the growth in the Company's business. Management has designated these expenses
for constant monitoring in order to control their levels in relation to the Company's size, sales volume and operational necessity.
Net income for the nine months ended September 30, 1998 was approximately $3.6 million (5.78% net margin), or $0.18 per
share (basic), and approximately $3.0 million (4.50% net margin), or $0.15 per share (basic), for the nine months ended
September 30, 1997 or an EPS increase of 20%. The increase was mainly caused by a significant increase in sales in Baht and
the effect of the Baht devaluation on July 2, 1997 which caused an exchange loss of $2.5 million in the Third Quarter last year.
Results of operations for the three months ended September 30, 1998 and 1997
Sales revenue for the three months ended September 30, 1998 was approximately $18.6 million as compared to approximately
$10.7 million for 1997 or an increase of 73.83%. This increase is directly attributable to the Company's stores expansion and
the increase in tourists into Thailand due to the ''Amazing Thailand'' campaign and the social and government stability that
makes Thailand more attractive to tourists than other tourist-promoted countries in the region.
The cost of merchandise sold for the three months ended September 30, 1998 and 1997 was approximately $8.4 million and
$3.3 million, respectively, or an increase of 154.55%. This increase is due to the expansion of the KPD subsidiary and a larger
number of customers at the KPT stores for consumer goods. Due to the higher sales volume, the ratio of Company's
concession fee to sales revenue dropped from approximately 37.69% in 1997 to approximately 28.10% in 1998. The reason
for this decrease is an increase in sales volume, together with the fact that the additional custom duty of 15% on gross sales
previously imposed on KPD was exempted by the Customs Department starting March 19, 1998 and is expected to continue
indefinitely.
Gross profit margin has declined from 31.78% for the three months ended September 30, 1997 to 26.88% in 1998.
Direct selling expenses, excluding depreciation and others were approximately $1.4 million for the three months ended
September 30, 1997 and approximately $2.4 million for the same period in 1998. In terms of percentage of sales, 1997
expenses were approximately 13.31% of sales and 1998 expenses were approximately 12.72% of sales. Direct selling
expenses have declined due to the increase in sales.
Administrative expenses for the three months ended September 30, 1998 and 1997 were approximately $1.3 million and $0.4
million, respectively. As a percentage of total sales, these expenses were approximately 6.91% and 3.29%, respectively.
Administrative expenses have grown due to the growth in the Company's business.
Net income for the three months ended September 30, 1998 was approximately $0.1 million, or $0.01 per share (basic),
compared to a loss of approximately $2.4 million, or $.12 per share (basic), for the three months ended September 30, 1997.
The increase was mainly caused by a significant increase in sales and the effect of the Baht devaluation on July 2, 1997 which
has caused an exchange loss of $2.5 million in the Third Quarter last year.
For the quarters ended September 30, 1998 and 1997, the Company had working capital of approximately $10.6 million and
($4.9 million), respectively. The improvement of this figure is primarily due to growth in most categories of receivables that has
paralleled the Company's business expansion. The Company used cash in operations of approximately $5.7 million during the
mine months of 1998 as compared to $2.7 million during the same period of 1997. This increase is mainly due to the advance
to related companies for the purpose of pilot projects for future expansion. Management is trying to minimize such exposure by
trying to find ways for these related companies to either pay down such loans or to acquire profitable related companies to
become part of KPG directly.
Results of Subsidiaries
King Power Duty Free Company, Limited (KPD) reported a financial gain of $4.6 million for the nine months ended
September 30, 1998 compared to $3.0 million for the same period in 1997 or an increase of 53.3%. The increase is mainly
due to KPD's ability to attract more buyers via store expansion together with its unique store decoration, capable sales force
and customized merchandise selection.
KPT's financial results for the nine months ended September 30, 1998 was recorded at a loss of $0.6 million compared to a
gain in the same period last year of $2.9 million. The current period loss is primarily attributed to the fact that KPT's concession
fee is based upon a fixed amount. Therefore, with the aggressive store expansion during the past years and the sales volume
that has yet to fully materialize from such expansion, KPT has recorded the loss.
The overall effect of the Thai Baht devaluation was an increase in the attractiveness of Thailand as a tourist destination. This
increase in tourists had a direct impact on increasing the Company's sales in the post-devaluation time period.
KPG is the largest Asian, publicly traded operator of duty-free and tax-free retail stores, with 47 locations, primarily in airports
throughout Thailand. KPG's stores provide a wide variety of brand name merchandise, including liquor, perfumes, tobacco,
cosmetics, leather goods, watches and other quality products free of duties, excise taxes and value added-tax of Thailand,
resulting in a significant savings to customers. The company holds one of two exclusive licenses granted by the Airports
Authority of Thailand. KPG currently controls more than 60 percent of the duty-free and tax-free market in Thailand's airports.
Note: News releases and other information on King Power International Group can be accessed at www.kingpower.com and
www.kingpowerinternational.com on the Internet.
This report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of
the Company or management as well as assumptions made by and information currently available to the Company or
management. When used in this document, the words ''anticipate,'' ''believe,'' ''estimate,'' ''expect,'' and ''intend,'' and similar
expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such
statements reflect the current view of the Company regarding future events and are subject to certain risks, uncertainties and
assumptions, including the risks and uncertainties noted. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. In each instance, forward-looking information should be considered in light of the
accompanying meaningful cautionary statements herein.
SOURCE: King Power International Group Co., Ltd.
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