LONDON (Alliance News) - Chinese property fit-out company Jiasen International Holdings Ltd on Friday said an expected deterioration in margins in the first half meant its pretax profit fell despite higher revenue, as it continues to diversify its product range in order to mitigate the pressures it faces from a competitive market.
Jiasen said its pretax profit in the six months to the end of June was CNY93.0 million, down from CNY122.0 million a year earlier as the group's gross margin deteriorated significantly, down to 27.5% from 35.5%, though in line with Jiasen's guidance for it to fall to between 27% and 30% in the half.
The group said its margin was hit hard by competitive pricing in the bulk door-supply business, and it has been working to diversify its product mix away from its previous reliance on doors. The margin weakness also was driven by an increase in material costs and the pricing strategy the group put in place in 2014, which was designed to secure large, multi-product orders and deliver a more predictable revenue stream.
Revenue was up in the half, however, to CNY427.0 million from CNY416.0 million, thanks to a stabilisation in the Chinese property market after the relaxation of regulatory limits which had been placed on home purchases, along with more favourable Chinese monetary policy. Jiasen also has been focusing on winning bigger and more luxurious projects and is planning to expand its sales and marketing push on higher-margin non-door products.
It said, however, that trading in the year to date has been slightly below its expectations.
"These results reflect the company's hard work to drive the business forward, and we are pleased that our strategy to pursue larger and more luxurious projects has delivered a strong order book thereby ensuring a visible and predictable revenue stream," said Executive Chairman Weigang Chen.
In a separate statement on Friday, Jiasen said has hired Yip Ming Wong as its finance director, replacing Kian Tan who resigned in July for "personal family reasons". Wong is a former audit manager at accountancy Crowe Horwath (HK) CPA Ltd.
Jiasen shares were up 9.6% to 6.30 pence on Friday.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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