|Chasen Holdings said all its subsidiaries in Southeast Asia and the People’s Republic of China (PRC) have fully returned to work except for the Technical & Engineering (T&E) subsidiaries in the construction industry in Singapore, which is still under lockdown.
It "continues to perform robustly amidst the very challenging operating environment since the start of the pandemic," said Chasen in an update today.
The classification of the 3PL business as an essential service by these countries’ governments was key.
On a selective and opportunistic basis, some margin expansions were captured in the past few months.
Ad hoc projects with new customers on cross border freight due to failure of their original service providers provided further opportunities for the 3PL business segment.
"The Board is of the view that 3PL will continue to be resilient in the coming months as the COVID-19 response evolves in each of the Group’s countries of operation."
As such the Group intends to seek out and pursue opportunities to expand and establish a more sustainable foothold in this business segment.
But the earlier impact to its business in the PRC, Singapore and elsewhere has led the Group to review its operating cost structure.
Cost cutting measures are being considered to mitigate further impact to the business and respond to changes in the market going forward, it said.
Since January 2020, the COVID-19 outbreak and its disruptions to business operations have significantly impacted the progress of the Group’s operations in Southeast Asia and the PRC.
While the Group’s subsidiaries in the PRC have returned to work since April 2020 with the gradual lifting of lockdowns throughout the country, the total shutdown of the country in the first quarter of calendar year 2020 had significantly impacted the Group’s operating performance for the 2HFY2020.
"As our PRC subsidiaries were in the midst of executing several relocation projects it was not possible to downsize the workforce or terminate equipment rental contracts.
"Similarly, our manufacturing subsidiary had firm orders for delivery after the Lunar New Year holiday period. Operational costs thus continued to be incurred without corresponding revenue earned as all business activities came to a halt."
This aggravated an already weak performance by the PRC subsidiaries earlier in financial year ended 31 March 2020 (“FY2020”) due to a slowing Chinese economy.
By March 2020, Malaysia, Vietnam and Singapore were also at various stages of lockdown, which disrupted operations of the Group’s Specialist Relocation and T&E business segments.
Only the Group’s 3PL business segment was not adversely affected as it was deemed an essential service in these countries.
3PL accounted for less than 20% of the total Group revenue for the past two financial years.
Various Government schemes to support jobs and businesses came into effect in Singapore and Malaysia only from April 2020.
|As a result of the above, while the Group expects to record a gross profit from its operations, it expects to report a net loss in 2H2020.
This is after deducting operating expenses and making provisions for certain receivables arising from customers’ reluctance to compensate for project delays as well as for payments adversely delayed by the business disruptions caused by the pandemic.
"The Board has taken a conservative approach and has therefore made the corresponding receivable provisions."
Accordingly, while the Group expects to record a gross profit, it expects to report a net loss for the whole of FY2020, it said.