Elk-desa 2Q earnings increase 143%

JAYA: Elk-desa Resources Bhd’s earnings for the second quarter of its financial year 2023 (2Q23) jumped 143% year-on-year (y-o-y) to Rm11.53mil on the back of higher contribution from its hire purchase and furniture segments.

The non-bank lender with a focus on the used-car segment financing noted that revenue for the quarter rose 54% y-o-y to Rm36.04mil.

Elk-desa, in a statement, noted its hire purchase segment saw revenue increasing by 29% to Rm24.09mil during the quarter, as a result of the expansion of the group’s hire purchase portfolio.

Impairment allowance decreased by 67% on-year to Rm1.78mil, while credit loss charge also decreased from 1.01% to 0.32%.

“The lower impairment allowance was due to a decrease in the non-performing accounts during the quarter, a reflection of robust credit recovery initiatives, as well as hirers’ continuous repayment trend,” it said.

The net impaired loan ratio decreased from 1.83% as at June 30 to 1.62% as at Sept 30.

The combination of a larger hire purchase portfolio and lower impairment allowance during the quarter resulted in a notable 114% y-o-y jump in pre-tax profit for the segment to Rm14.10mil, it added.

The company added that as at Sept 30, its hire purchase receivables stood at Rm521.12mil, which were 11% higher than the previous year.

“In support of the increase in hire purchase receivables, the group’s bank borrowings rose by 37% as a result of the higher drawdown of block discounting facilities,” it said.

Despite the increase in borrowings, Elk-desa’s gearing ratio remained at a reasonable level of 0.43 times.

Its furniture segment, on the other hand, recorded a revenue growth of 152% y-o-y to Rm11.95mil.

The business recorded a pre-tax profit of Rm1.13mil in the quarter, as compared to a pre-tax loss of Rm0.27mil in the corresponding quarter a year ago.

“This improved performance was mainly due to higher furniture sales in this quarter as compared to movement control order disruptions to the furniture operations in the previous corresponding quarter,” the statement said.

Elk-desa’s basic earnings per share for 2Q23 stood at 3.80 sen.

It has declared a first interim dividend of 4.5 sen a share, payable on Dec 16.

The company has also declared a bonus issue of 151.6 million new shares on the basis of one new Elkdesa share for every two existing shares held.

The entitlement date will be determined later and the bonus shares will be issued as fully paid at nil consideration.

For the first half of its financial year 2023 (1H23), Elk-desa’s revenue increased 37% y-o-y to Rm74.99mil, while net profit rose 200% y-o-y to Rm29.12mil as a result of higher contribution from both the hire purchase and furniture segments.

Executive director and chief financial officer Teoh Seng Hee said the group achieved better financial performance in 1H23 compared to the entire FY22.

This reflected the normalisation of its business activities following the disruptions to operations caused by the pandemic. He expects demand for used-car hire purchase financing to remain strong in line with the normalisation of economic activity.