One of the oldest companies in South Asia Singer Pakistan Limited's presence in the subcontinent goes as far as 1877 when the first Singer sewing machine went on sale at Singer store in the region. Now, it has become a well-diversified company that has its presence all over Pakistan. The Company claims to have the largest retail network in South Asia with over 750 stores and has its presence in Stock Exchange since 1985.
Singer is known for its excellent sewing machines but over the years, Singer's product portfolio has diversified to encompass a highly successful multi - brand strategy combining products of top world marquis with the company's own products across a range of household and industrial categories. At the moment Singer (Pakistan) B.V. holds 70.28 percent of the issued shares capital of Singer Pakistan Limited.
Financial performance in 2014 The performance of Singer Pakistan Limited has stayed quite robust from 2010 to 2013 even though the Company faced massive damages to its retail stores during the floods of 2010. However, after 2013, Singer was failed to perform according to the market's expectations.
For the first time in recent history, the Company reported a massive loss of Rs 285.7million in the year-on-year comparison, and Singer saw its top line decreased by 25 percent year-on-year. There were multiple reasons behind this fall, but the main issue was the policy decision the Company had made to reduce the credit sales to improve its cash flows. The tightening of credit sales helped the Company to strengthen collections and to improve its cash sale by 19 percent, but this policy put significant pressure on the overall top line of the company that was already under the pressure of the growing competition in the household goods market.
It was an interesting move from a Company which is known as the pioneer in Pakistan in selling its products on instalments and giving credit lines to its consumers. When the company put a control on its credit line, the customer showed their disapproval and the sales declined to 25 percent in the year-on-year analysis.
As it mentioned above, the company is facing tough competition not only from local manufacturers but also from Chinese origin products. The competition has forced Singer Company to gradually increase its marketing, selling and distribution budget since CY10 and the pattern is continued in CY14. The operating expenses during the period under discussion increased quite a bit mainly due to provisions taken against trade and other receivables.
Higher costs along with a significant dent in the top line were more than enough for the company margins to handle. The sale mix was the main reason gross profit margin declined by 100 bps. With a loss of Rs 285.7 million, the net margin drops to 17 percent in CY14 from the positive of two percent in CY13.
Financial performance in CY15: The CY15 has once again not a good year for Singer Limited so far and it has found itself once again under the same problems which it has faced in CY14.Singer Pakistan Limited again reported a loss of Rs 61 million compared to Rs 99 million that is decline of 38 percent during the nine month period under discussion of CY15.
Singer again witnessed top line decrease of five percent in the year-on-year analysis because the company is finding it challenging to compete due to fierce competition in the consumer appliance market. Similarly, the company's top line further declined because it is still focusing more on cash sale.
During the nine month the marketing, selling and distribution expenses of the Company have come down slightly by five percent in year-on-year comparison. The other operating expense has declined substantially as the Company has taken for doubtful debts against trade debts and other receivable due to reduction in provisions. Similarly, the finance cost has also declined by 18 percent in year-on-year comparison due to reduced borrowing and decrease in the interest rates.
Outlook: The Company is following the policy to cut its credit sales to improve cash flow and reduce borrowing cost. The strategy has successfully helped the company to reduce the finance cost but it is hurting the top line, and it significantly decreases the sales growth of Singer Pakistan. But, it is following this strategy for few years and seems it still wants to continue.
Singer Pakistan Limited is working in a very competitive business where it's facing not only local but also foreign specifically Chinese competition. At this time, if the Company discourages sale on credit or on the instalment basis, it would certainly face a crisis since the core consumer gets directly affected.
The company is planning to focus more on institutional sales to improve profitability. Also, the company is considering sales of multi-brand products of other leading brands, both local and imported and also to introduce new models at competitive prices. However, Singer should be careful as the primary consumer of Singer Pakistan is not the upper class; they are rather the lower or middle class, and by introducing high-end brands the company might alienate its core customer.
Singer Pakistan LTD
Rs (mn) 9QCY14 9QCY15 YoY
Net revenue 1,317 1,251 -5%
Cost of sales 955 938 -2%
Gross margin 353 313 -11%
Marketing, selling and distribution cost 231 219 -5%
Administrative expenses 41 42 2%
Other operating expenses 101 21 -79%
Finance cost 148 121 -18%
Other income 13 11 -15%
(Loss) / Profit before taxation -145 -78 -46%
Taxation 47 17 -63%
(Loss) / Profit after taxation -99 -61 -38%
Gross profit margin 27% 25% Down 200 bps
Net profit margin -8% -5% -