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Creative suffers drop in net sales, resulting in a net loss of USD 3.8 million in FY 2019 - 2019 Annual Report

2020/02/04

Source: Canva

Creative Technology Ltd (Creative)

Source: Creative

Creative is a worldwide leader in digital entertainment products. Founded in Singapore in 1981 and listed on the SGX main board since June 1994, Creative's global corporate headquarters is located in Singapore. It also has regional business units in Europe and the US.

FY 2019 Financial Highlights:

Source: Creative FY 2019 Annual Report

  • Creative’s net sales for the year ended 30 June 2019 (FY 2019) dropped by 17% year-on-year to SGD 54.9 million as a result of the uncertain and difficult market conditions which affected the sales of the company’s products.
  • Even though gross profit margin improved slightly from the 28% in FY 2018 to 29% in FY 2019 –total gross profit decreased to USD 16.0 million in FY 2019, a 14% decline compared to the previous financial year.
  • Consequently, Creative suffered a net loss in FY 2019 of USD 3.8 million, compared the net profit of USD 40.4 million in FY 2018.
  • Net loss in FY 2019 included interest income of USD 1.7 million and other gains (net) of USD 17.2 million.

Performance Drivers:

Source: Creative FY 2019 Annual Report

Performance Drivers (Positive Factors)

  • Sales by Region (Americas)

Sales in the Americas region for FY 2019 increased by 6% year-on-year to SGD 11.0 million. As a percentage of total sales, this region also saw improvement from the 16% in FY 2018 to 20% in FY 2019.

  • Other Gains

Creative received USD 17.9 million from a litigation settlement, which comprised amounts collected by wholly-owned subsidiary ZiiLabs – from a patent aggregator arising from settlement of ZiiLabs’ patent infringement lawsuit filed in the US during FY 2018. This gain was partially offset by fair value loss (USD 0.5 million) and foreign exchange loss (USD 0.4 million).

  • Super X-Fi Technology

Creative introduced its new Super X-Fi technology in FY 2018, which has garnered good reviews from industry insiders and expert reviewers, including at the CES (Consumer Electronics Show) Las Vegas 2019, where Super X-Fi won 15 Best of CES 2019 Awards. In FY 2019, Creative has commenced shipment of the first series of products incorporating the Super X-Fi technology and also introduced new Super X-Fi products which are slated for shipment later this year.

Performance Drivers (Negative Factors)

  • Sales by Product Category

Sales of all product categories were lower in FY 2019 compared to FY 2018. “Audio, speakers and headphones” dropped by 14.9% to SGD 53.0 million; “Personal digital entertainment” declined by 28.6% to SGD 1.5 million; and “Other products” decreased by 76.5% to SGD 0.4 million.

  • Sales by Region (Asia-Pacific and Europe)

Sales in the Asia Pacific region for FY 2019 dropped by 23% year-on-year to SGD 28.2 million. As a percentage of total sales, the Asia Pacific region declined from the 55% in FY 2018 to 51% in FY 2019.

Sales in the Europe region for FY2019 also dropped by 19% year-on-year to SGD 15.7 million. As a percentage of total sales, the Europe region managed to maintain its same share of 29% for both FY 2018 and FY 2019.

Source: Creative FY 2019 Annual Report

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