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Distribution and Retail Chain
During the financial year ended 31 March 2009, turnover from the segment, which include both the retail
chain business and distribution channels for the prepaid calling card operation,
decreased by 21% to HK$89,237,000. This turnover accounted for 43% of the Group's
turnover for the continuing operations. The decrease was primarily attributed
to the lower unit sales of handsets, which resulted from the weakening economy
affected by the global financial industry meltdown. Gross margin improved
to 33% from 29% a year ago due to a mix of revenues that shifted towards
the higher margin service business.
The segment incurred an operating loss of HK$18,780,000 because of higher
rental expenses associated with the retail outlets and the high overhead cost.
As the economy began to worsen towards the second half of the fiscal year,
consumers were reluctant to spend or began to reduce their spending on non-necessity
goods and services. This slowdown in spending had impacted our retail chain business
since the second half of the fiscal year. Handset and service plan unit sales were
down 10% and 21% respectively versus the year before.
In view of the uncertainty in the economy, the Group has adopted various measures
to enhance competitiveness and efficiency in its operation.
It had begun to swap out the high cost retail outlets with some lower cost ones
in new development towns with the objective to align the overall cost of the rental
with the turnover. At the end of the financial year ended 31 March 2009, there were 19 "CM Concept"
retail shops, down from 22 at the beginning of the year, serving as a one-stop-shop
platform for telecommunications products and services.
In early April 2009, the Group had decided to divest the local prepaid calling card
business which consisted of IDD and mobile prepaid calling card services.
The combined prepaid calling card service had a turnover of HK$30,501,000 during
the year and incurred an operating loss of HK$2,992,000.
The divestiture allows the Group's MVNO business more flexibility to develop other
wholesale business and sales channels which otherwise would create channel conflict issues.
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