Creative reverses into the red in FY19 on lower sales, absence of settlement from patent lawsuits

SINGAPORE (Aug 22): Creative Technology reversed into the red for FY19 ended June, reporting a net loss of US$3.8 million ($5.3 million), compared to earnings of US$40.4 million in the preceding year.

Revenue for the year fell 17% to US$54.9 million from US$66.1 million back in FY18 although cost of goods narrowed 18% to US$38.9 million from $47.6 million last year.

The lower revenue was largely due to uncertain and difficult market conditions which affected the sales of the group’s products. Sales in Asia Pacific and Europe regions fell by 22% and 19% y-o-y respectively, while sales in America increased by 5%.

Gross profit fell 14% to US$16.0 million from US$18.5 million in the preceding year, with gross profit margin increasing to 29% from 28% in FY18.

Total expenses for the year fell 7% to US$40.3 million, due primarily to a 12% drop in selling, general and administrative expenses to US$27.1 million as a result of lower sales volume.

Notably, other gains for the quarter fell 73% to US$17.2 million from US$64.1 million in FY18, due mainly to US$17.9 million received from settlement of patent lawsuits in FY18, offset partially by US$0.5 million fair value loss on financial assets at FVPL and foreign exchange loss of US$0.4 million.

As at end June, cash and cash equivalents stood at US$107.8 million.

Earnings per share fell from 57 US cents to -5 cents per share, on both a basic and diluted basis.

In its outlook statement, Creative says that is expects to report an operating loss for the quarter. However, regardless of the uncertain global economic conditions and ongoing trade tensions, it will be targeting an improvement in revenue from the current level – as the coming introduction of new products is expected to provide potential revenue growth opportunities.

As at 11.13am, shares in Creative are trading 29 cents lower at $3.13.