August 18, 2015

SSI Group Inc posts 20% hike in 1H15 net income

In a disclosure to the Exchange, SSI Group Inc (SSI) reported 1H15 net income of P586m, up 20% YoY on the back of revenue growth of 18.5% to P7.91b. Its GPM slowed to 55.3% in 1H15 from 56.8% in 1H14 due to the earlier end of season sale which has historically been held in the third quarter of the each year. However, SSI was able to compensate for the drop in GPM through efficient cost management leading to a 100bps YoY increase in EBITDA margins to 21.5%. SSSG through the first half stood at -2% although management expects this recover and end up flat for the full year.

SSI also provided updates on its e-commerce venture called SSI Life which currently has 43 exclusive SSI brands. While the company is still in the process of tweaking the site, it has already garnered 196,000 users, with strong demand for beauty and footwear products.

SSI has lowered its projected store openings for the year due to the delay in the opening of Megaworld Corp’s Uptown Mall in Fort Bonifacio. From a target of 21,000 sqm in new selling area, SSI now plans to open just 13,000sqm in new selling area for 2015, with the balance of 8,000 sqm to be opened early next year with the opening of Uptown Bonifacio. The company has likewise mentioned that it was able to cancel some of its inventory orders due to the delay in store openings.

Of some concern however, is the cash flow of the company owing to the increase in inventory days and decrease in days payable causing YTD cash flow from operations to reverse to a negative P1.47b in 1H15 from +P203m in the same period last year. YTD cash flows from investing activities stood at negative P1.51b as the company continued its store expansion program while cash flows from financing amounted to P1.9b as the company took on more short term debt. Total debt increased to P7.46b for 1H15 with cash in bank falling to P1.43b.

Our take: SSI’s 1H15 financial results accounted for 45% of full-year consensus forecasts despite the slowdown in its second quarter results. The company has a leeway to pick up pace in the second half especially towards the holidays in 4Q. – WealthSec