Modern Beauty Salon Holdings posts profit plunge
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Modern Beauty Salon Holdings has reported an 87.4 per cent plunge in first half profits as consumers restrain their discretionary spending.
Modern Beauty runs 42 service centres in Mainland China, Hong Kong and Taiwan, 16 in Singapore and three in Malaysia. The company’s 17 retail stores trade under the banners Pen and Be Beauty Shop across Hong Kong, Kowloon and the New Territories.
Group revenue across the markets fell 12.2 per cent to HK$402.7 million year on year, while gross receipts from the sale of prepaid beauty packages decreased from $387.5 million to $350.4 million. That produced a profit attributable to shareholders of just $5.7 million, compared with $45.5 million for the same period last year.
The company said a volatile financial market and weakened Hong Kong economy made people more conservative on their spending.
“Our beauty, slimming and wellness service business in Hong Kong was inevitably affected. Nevertheless, leveraging on our excellent service management that facilitate greater quality assurance, our management is confident of the further prospects of our business.”
The company says despite the retarded economic growth in Mainland China, it still believes the beauty, slimming and wellness market there will continue to prosper with a growing demand because “as a larger portion of the population moves up to the bourgeoisie”.
“That produced a profit attributable to shareholders of just $5.7 million, compared with $45.5 million for the same period last year.”
“Our brand name has secured a presence in the Mainland China with a solid foundation that we have established for years in Beijing, Shanghai and Guangzhou. Plans to open more stores in the Mainland China are afoot.”
In Singapore and Malaysia, receipts from sales of prepaid beauty packages amounted to $37,768,000, while revenue from services rendered amounted to $55,673,000, down 35 per cent and 36.6 per cent respectively.
“The drops are mainly due to the new government policies in Singapore and Malaysia. For Singapore, from June 2015, if a local person’s aggregate interest-bearing outstanding balance on all credit cards and unsecured credit facilities exceeds 24 times his monthly income for three consecutive months, his credit lines will be suspended. This means that he will not be allowed to charge new amounts to his existing credit cards and/or unsecured credit facilities. For Malaysia, from April 2015, a GST of six per cent was imposed on local services providers, including beauty services. These policies have hurt the local consumption sentiments significantly.
“The group will continue to carry out its local business development prudently and we believe that the local people will accustom to the new policies and the consumption sentiments will recover as time goes by.”
Modern Beauty says it plans to launch an eCommerce website during the next six months.
Questions & Answers
Q.What were the primary reasons for the significant drop in profits reported by Modern Beauty Salon Holdings?
What were the primary reasons for the significant drop in profits reported by Modern Beauty Salon Holdings?
The company attributed the profit plunge mainly to consumers restraining discretionary spending due to a volatile financial market and weakened Hong Kong economy. New government policies in Singapore and Malaysia also hurt local consumption sentiments.
Q.Which specific policies in Singapore and Malaysia contributed to the decline in revenue from prepaid beauty packages and services?
Which specific policies in Singapore and Malaysia contributed to the decline in revenue from prepaid beauty packages and services?
Singapore's policy on suspending credit lines for individuals exceeding 24 times their monthly income for three months, and Malaysia's introduction of a six per cent GST on local services, including beauty services, were cited.
Q.Despite the overall profit plunge, where does Modern Beauty Salon Holdings see growth potential?
Despite the overall profit plunge, where does Modern Beauty Salon Holdings see growth potential?
The company believes the beauty, slimming, and wellness market in Mainland China will continue to prosper due to a growing demand as a larger portion of the population becomes affluent. They plan to open more stores there.
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