Jan 4, 2013 -
MARC has affirmed its ratings of
MARC-2ID/AID on Symphony House Berhad's (Symphony) RM100.0 million Islamic
Commercial Papers/Medium Term Notes (CP/MTN) Programme. The rating outlook is
revised to stable from negative. The rating action affects the last two
outstanding tranches of RM10 million Islamic MTNs which will mature on May 24,
2013 and July 19, 2013.
The outlook revision reflects
MARC’s expectations that Symphony would have adequate liquidity and financial
flexibility to meet its remaining debt obligations based on its current cash
position and borrowing availability under existing credit facilities. The
outlook revision also factors in the turnaround in Symphony’s business albeit
with the group’s overall performance remaining below expected levels.
The affirmed ratings incorporate
Symphony’s competitive position in the business process outsourcing (BPO)
industry, satisfactory track record and fairly diverse customer base which
offers some stability in its contract base earnings and cash flow generation.
Moderating the ratings are margin pressure in its BPO business, the group’s
significant exposure to foreign exchange risks and the execution risk
associated with the group’s expansion of its human resource solutions business
into Europe.
For nine month financial year
2012 (9M2012), Symphony registered a higher operating profit of RM13.1 million
(9M2011: RM3.8 million) and recorded a pre-tax profit of RM2.9 million against
RM1.8 million in the previous year’s corresponding period. The group’s improved
financial performance was largely due to the turnaround of its loss-making
subsidiary, Symphony BPO Solutions Sdn Bhd (SBPO). SBPO recorded an operating
profit of RM2.2 million on a revenue of RM109.7 million in 9M2012; its
operating profit margin improved to 2.0% from negative 3.2% in 9M2011. SBPO,
which accounted for 73% of the group’s consolidated revenue in 2011,
successfully secured two new contracts in Europe totaling €4.0 million during
2011 which has contributed to the group’s higher revenue of RM109.7 million in
9M2012 (9M2011: RM100.3 million) despite closure of the loss-making contact
management solution business in Japan. The group’s other operating subsidiaries
have also shown improvements in profitability due to higher revenue from
corporate services and reduction in their respective administrative expenses.
The group reported higher cash
flow from operations (CFO) of RM13.5 million in 9M2012 (9M2011: RM2.2 million)
and free cash flow of RM5.3 million (9M2011: RM0.1 million). Cash and bank
balances in 9M2012 stood at RM29.3 million relative to its total borrowings of
RM29.7 million. Following the group office relocation and expansion of its
human resource solution business to Europe, Symphony has scaled back its
dividend payout and capital expenditure (2011: RM1.9 million; 2010: RM26.1
million) to conserve liquidity. Given its current level of cash flow
generation, cash and bank balances and its unutilised banking lines excluding
the Islamic CP/MTN of approximately RM16.0 million, MARC expects Symphony to
have sufficient liquidity to address its upcoming debt maturities in 2013.
Contacts:
Ng Chun Kean, +603-2082 2230/ chunkean@marc.com.my
Jason Kok, +6032082 2258/ jason@marc.com.my
David Lee, +603-2082 2255/ david@marc.com.my.
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