Osim FR 050407.indd

ProfitabilityIn FY2006, buoyant revenue growth and improving operatingefficiencies resulted in group EBITDA rising 41% to $77million. The improvement in performance was firmly supportedby an expanding OSIM global point-of-sales network and theintroduction of numerous innovative healthy lifestyle productsduring the year.With the benefit of a restructuring in FY2005, Global ActiveLimited turned around from a loss of $4 million in FY2005to a net profit of $4.5 million in FY2006.Higher finance expenses were incurred in FY2006 due tobank borrowings to fund the acquisition of the stake in OSIMBrookstone LP.The Group equity accounts the results of its Joint VentureOSIM Brookstone LP. In FY2006, Brookstone’s revenue wasa record US$512 million and net profit was US$2 million.The company posted its third successive positive same storegrowth in 4Q FY2006. It achieved an annual 1.8% positivesame store growth, a significant improvement over thenegative 8% recorded in 2005.More importantly, Brookstone is profitable and cash positivein FY2006. It paid US$22m of bond interest expenses duringthe year. Notwithstanding Brookstone’s profitability underUS accounting rules, when OSIM equity accounts its shareof Brookstone’s results under SFRS (Singapore FinancialReporting Standards), the rules are different from US GAAPand it has to recognise payment (“OBH cumulative dividend”)to preference shareholders as a financial interest expense,thereby resulting in a share of loss in joint venture of $12.6million.After accounting for Associates & Joint Venture using thismethodology, Group net profit after tax declined 28% to$33.8 million in FY2006.Excluding OBH cumulative dividend, Group net profit aftertax would have been $47.5 million in FY2006 or a decreaseof 5% vs 2005.Performance Review 32 Annual Report 2006