"We think the worst is over. We are positive and confident that net profit this year would be better than last year's ... that it would be at the level of 2007," its executive director Stephen Choong told Business Times in an interview.
The company reported a fall in net profit of 21 per cent for the financial year ended December 31 2008 to RM14.0 million compared with RM17.8 million the previous year.
However, net profit recovered by 10 per cent last year to RM15.4 million.
"Net profit stood at RM3.1 million for the first three months of 2010. We hope to maintain that amount in the second quarter and we traditionally perform better in the second half of the year," he added.
Stephen said confidence plays an important part in consumer spending.
"Our customers generally fall into two categories. The first are those who would spend regardless of good or bad times for occasions such as weddings, anniversaries and birthdays.
"But the ones who make a difference are those who spend big, and that depends on their confidence in the economy. When the market is uncertain, people tend to hold back their spending. They would wait to see if prices would go down further," he said.
Paul Choong, DeGem executive director and older brother of Stephen, said even though the company saw its revenue grow substantially to RM209.2 million during the economic downturn in 2008, from RM157.9 million in 2007, its profit was affected by weak markets.
"You'll probably have more promotions during bad times to push your products. Thus, revenue will increase, but profits will be affected," he explained.
DeGem's jewellery products are marketed under the DeGem and the Diamond & Platinum brands. The DeGem brand caters for the mid- to high-end segment of the consumer market, while The Diamond & Platinum brand offers more affordable jewellery pieces that appeal to the younger consumer market.
Stephen said the company has since moved away from selling gold jewellery to focus on diamond and coloured gemstones.
On its expansion plans, DeGem will open its second outlet in Singapore this month, at Marina Bay Sands.
"Our capital expenditure this year will be small. To open the new outlet (in Singapore) would just require a few hundred thousands. We invest in new technology, but these are small machineries.
"We have no plans to open any new outlet in Malaysia as we have covered almost all targeted areas," said Stephen.
But Paul added that the company is looking to venture abroad, particularly Vietnam and China.
"We think the overseas market has a bigger potential (for growth). But we must first look for the right partner because regulations in Vietnam and China do not allow full ownership of retail businesses by foreigners," he said, adding that DeGem is not interested to venture into Europe and the US due to high overhead and capital costs.
Today, over 80 per cent of the company's revenue comes from the domestic market, and the rest from its operations in Singapore, Indonesia, Brunei and Hong Kong.
"We don't expect the Singapore outlet to start contributing to our profit in the short term since a new outlet generally takes three years to recoup its investments," said Stephen.
By Kang Siew Li
No comments:
Post a Comment