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<img src="/images/gtvmain.jpg" border="0" alt="GemsTV" title="GemsTV's Quarterly loss halved to $9.5 million" hspace="4" align="right" />Gems TV Holdings Limited (“Gems TV”) or the (“Group”) today announced third quarter financial results for the period ending 31 March 2009, posting an after-tax loss of $9.5 million, representing a halving of losses compared to a loss of $18.5 million the previous quarter.<br /><br />The Group’s financial performance continued to be affected by the weak economic conditions in its main markets, the US and the UK, although the decline in revenue was partially offset by the encouraging topline growth from its Japanese operations.<br /><br />Mr Tony Hillyer, CEO of Gems TV said, “We continue to experience difficult trading conditions in the US and the UK, where consumer spending continues to be weak. However, we are heartened by the growth in the Japanese market and by the progress we have made in shaping Gems TV into a more efficient business through our comprehensive cost-cutting measures and the refinement of our product offering.”<br /><br />Product revenue for Q3 FY2009 decreased 32% from $55.3 million to $37.4 million on a year-on-year basis. Compounding the issue of poor consumer confidence was the steep depreciation of the British Pound, which accounted for approximately 8% of the fall in revenue. Barring the foreign exchange impact, product revenue for the quarter would have decreased by 24%.<br /><br />Gems TV’s US operations saw a 21% decrease in product revenue for the quarter, from $31 million to $24.6 million. On a nine-month (“9M”) basis, Gems TV recorded a 17% decline in revenue to $82.1 million for 9M FY2009, compared to $99.2 million for 9M FY2008. This decrease was a function of a reduction in items sold and a lower average selling price (“ASP”), which fell 5% and 14% respectively. 835,529 itemswere sold for 9M FY2009, compared to 883,857 items for 9M FY2008. The fall in ASP from $105.0 in Q3 FY2008 to $90.0 in Q3 FY2009 was a result of the Company’s deliberate effort to move more items through clearance sales in order to attract a larger customer base.<br /><br />In the UK, a highly price-competitive and promotion-driven environment led to a sharp decrease of 59% in Gems TV’s Q3 product revenue on a year-on year basis, from $22.6 million to $9.2 million. Excluding the previously-mentioned foreign exchange impact, product revenue would have fallen 43%. Total UK revenue for 9M FY2009 fell 58% from $87.2 million to $36.8 million as compared to 9M FY2008. Total items sold decreased 41% from 941,726 to 556,343, while ASP decreased 27% from $84.8 to $61.7 as a result of the significant depreciation of the British Pound and competitive pressures.<br /><br />The Group saw good growth momentum from its Japanese operations as the active customer base continued to grow. Total revenue for Japan for 9M FY2009 rose three-fold to $8.9 million, compared to $2.2 million in 9M FY2008.<br /><br />On a group level, gross profit for the quarter declined 41% to $13.5 million, compared to $22.8 million in Q3 FY2008. Gross profit margin for the quarter also came in lower at 33.4%, compared to 38.6% for Q3 FY2008, largely due to the Group’s decision to clear older inventory items at a lower margin in order to achieve a stronger cash and bank balance.<br /><br />Net loss after tax for Q3 FY2009 was $9.5 million, compared to a loss of $4.5 million in Q3 FY2008.<br /><br />The Group’s cost cutting measures announced previously have yielded results, with selling expenses for Q3 FY2009 declining 35% to $15.4 million, compared to $23.8 million in Q3 FY2008. In the US, a negotiated reduction in fees paid to airtime providers and headcount reductions lowered selling expenses for the quarter by 40% to $9.5 million, compared to $15.9 million for Q3 FY2008. In the UK, selling expenses fell 34% to $4.2 million, brought about by a reduction in shipping expenses, lower wage costs and the depreciation of the British Pound against the US Dollar. Selling expenses for the Japanese market increased 31% from $1.2 million in Q3 FY2008 to $1.6 million in Q3 FY2009, due to increased shipping expenses and carriage costs, both of which were in line with the increased sales in the Japanese market and the appreciation of the Japanese Yen against the US Dollar.<br /><br />Administrative expenses fell by 27%, from $7.9 million in Q3 FY2008 to $5.8 million in Q3 FY2009. This was due to general cost reductions and a $0.5 million write back of inventory provisions during the quarter, as the Group had managed to sell products for which a provision had previously been made at a value higher than their net realizable values.<br /><br />Gems TV expects the challenging trading conditions in all its markets to persist, given the general economic downturn. The priorities for the Company are to remain leaders with a strong focus on its product offerings to customers, while reducing inventory levels to improve cash resources and further strengthen its balance sheet. Gems TV has also modified its manufacturing strategy to suit demand by reducing mid-range product capacity and focusing on higher-end products.<br /><br />Mr Hillyer added, “In anticipation of a sustained downturn, we had embarked on a number of structural cost reductions at the beginning of the financial year. We are progressively seeing our cost cutting measures bear fruit, helping to preserve our cash position. We believe that we have sound business fundamentals which will help shelter us through these difficult times.”
