Not the Best World for shareholders

Its executive directors receive generous pay even as the company has not declared dividends in recent years

 

SGX had queried Best World, saying its directors were paid handsomely even as no dividends have been declared. 

SINGAPORE &ndash Best World International has said that although it stopped paying dividends during its trading suspension period, it gave some $140 million in cash back to its shareholders through off-market equal access offers twice in 2022.

 

&ldquo It should be noted that these equal access offers were extended to all shareholders and amounted to a significant amount distributed to shareholders, enhancing total shareholder return,&rdquo said the beauty products distributor on Thursday.

 

Best World was responding to Singapore Exchange (SGX) queries on the company&rsquo s dividends and remuneration policy, on the back of information received by SGX that the company&rsquo s directors were paid handsomely, even as no dividends have been declared.

 

The total remuneration of Best World&rsquo s executive directors ranged from $7.5 million to $12.8 million each for the financial year ended December 2022.

 

In its filing, Best World clarified that more than 90 per cent of each executive director&rsquo s annual compensation was in the form of performance-based bonuses that were calculated based on the audited group profit before tax of the preceding financial year.

 

The group said: &ldquo The annual remuneration package for each of the executive directors has progressively been more performance-based as the group increased its turnover and profitability over the years.

 

&ldquo The remuneration policy for the executive directors is also consistent with the board&rsquo s aim to continually create and sustain long-term growth and profitability of the group.&rdquo

 

Best World added that its remuneration committee engaged human resource advisory firm HRGuru for a benchmarking exercise that was completed in August 2023.

 

The results of that exercise will be announced in its upcoming financial year 2023 annual report.

 

Addressing concerns regarding &ldquo a lack of dividends&rdquo mentioned by SGX, Best World estimates that it paid out more than $121 million in dividends from 2004 to 2019. The company said it did not pay out dividends in recent years to conserve cash.

 

This was primarily to support its &ldquo operating cash needs, expansion into new markets, investing in production capabilities, setting up or refurbishing two to three regional centres per year, current merger and acquisition (M& A) obligations, and capitalising on M& A opportunities that may arise&rdquo .

 

It further expects a continued decline in revenue contributions from China in the face of consumers&rsquo &ldquo growing feeling of economic uncertainty ahead&rdquo .

 

&ldquo On the grounds of prudence, the company conserves cash to address uncertainties that may arise, especially given the current high interest rate environment,&rdquo it said.

 

Lastly, Best World said it conducted share buybacks totalling about $14.6 million from November 2022 to Thursday, since the group&rsquo s trading suspension was lifted. This would provide liquidity opportunities for thinly traded shares such as Best World&rsquo s, said the firm, adding that the practice is &ldquo widely recognised&rdquo for returning shareholder value over the long term.

 

&ldquo Moving forward, the company will review its cash requirement and re-evaluate accordingly if circumstances change for the group in the short to medium term.&rdquo
 

 

BEST World International : CGN +4.38% posted a 0.6 per cent drop in net profit to S$38.7 million for its second quarter ended June, from S$38.9 million in the previous corresponding period.

 

This came as the mainboard-listed group recorded slightly lower revenue and higher cost of sales, partially offset by higher interest income.

 

Earnings per share (EPS) stood at S$0.089 for the period, up from S$0.0806 in the same period last year, the group said in its financial results released late on Wednesday (Aug 9).

 

Revenue for Q2 slipped 1.3 per cent on the year to S$128.8 million from S$130.5 million. The group recorded a drop in revenue contributions from its franchise segment on weaker-than-expected post-Covid economic recovery in China, macroeconomic challenges and cautious consumer spending.

 

Cost of sales rose 8.4 per cent to S$26.5 million during the quarter on higher packaging charges and overheads linked to the group&rsquo s Tuas manufacturing facility.

 

Distribution costs for the quarter were also up 9.2 per cent to S$33 million, from S$30.2 million in the same period a year ago. Best World attributed the increase to higher freelance commission, event, convention and exhibition expenses, even though sales-related expenses from its franchise segment were lower.

 

Interest income for the quarter, meanwhile, was up 92.2 per cent on the year to S$3.1 million from $1.6 million. The group recorded higher interest from its cash placed in structured and fixed deposits with banks.

 

For the six months ended Jun 30, net profit was down 11 per cent on the year to S$59.2 million from S$66.5 million, translating to an EPS of S$0.1361, from S$0.1313 the same period last year.

 

Revenue for the six-month period ended June fell 15.2 per cent to S$208.7 million, from S$246.1 million the same period a year ago.

 

&ldquo The decline in China was offset by improvements in our direct-selling segment which narrowed revenue decline for H1 2023 to 15.2 per cent, versus a 30.8 per cent decline in Q1 2023,&rdquo Best World added.

 

No dividend was declared for the period, unchanged from the year before.