Operations Review

(Extracted from Annual Report 2019)

Financial Performance

Revenue for the financial year ended 31 December 2019 ("FY2019") was US$288.6 million, a year-on year ("yoy") increase of 1.5% compared with the US$284.3 million revenue recorded in FY2018. In FY2019, sales in the Group's largest market, Russia, increased in local currency terms but translated USD sales decreased by 0.6% to US$112.6 million as compared to US$113.3 million in FY2018 due to sustained devaluation of the Russian Ruble against the US dollar. In the Group's Ukraine, Kazakhstan and CIS markets, sales increased by 10.5% from US$62.8 million in FY2018 to US$69.4 million in FY2019. Sales in the Group's Ukraine market increased due to higher sales volume and appreciation of the Hryvnia against the US dollar. Sales in the Group's CIS markets increased due to higher sales volume. In the Group's SouthEast Asia market, sales decreased by 1.8% from US$79.7 million in FY2018 to US$78.3 million in FY2019 largely due to the rationalisation of underperforming markets such as the Group's Myanmar market partly offset by growth in the Group's Vietnam market.

For FY2019, selling and marketing expenses decreased by US$6.3 million from US$47.8 million in FY2018 to US$41.5 million. The decrease was caused by the rationalisation of underperforming markets partly offset by higher manpower cost.

General and administrative expenses decreased by US$1.5 million from US$41.4 million in FY2018 to US$39.9 million in FY2019. The decrease was mainly attributed to lower provision for doubtful debts partly offset by higher manpower cost.

For FY2019, the Group's net profit after tax increased by 44.9% to US$25.7 million mainly due to rationalisation of underperforming markets and the absence of foreign exchange loss in FY2019 as compared to FY2018.

Financial Position

Property, plant and equipment increased US$30.4 million to US$99.3 million as at 31 December 2019 mainly due to the expansion of the Group's subsidiary, Indus Coffee's manufacturing facility in India.

Interest-bearing loans and borrowings, both current and non-current, increased cumulatively from US$33.5 million as at 31 December 2018 to US$50.0 million as at 31 December 2019 due to drawdown of loan for Indus Coffee partly offset by repayment of existing loans.

Lease liabilities, both current and non-current, increased cumulatively from US$0.6 million as at 31 December 2018 to US$6.8 million as at 31 December 2019 due to the impact of adopting SFRS(I) 16 Leases.

Other payables increased US$3.5 million to US$6.1 million as at 31 December 2019 mainly due to ongoing capital expenditure at Indus Coffee.

Inventories increased US$5.3 million to US$55.9 million as at 31 December 2019 largely due to stock up of inventories in anticipation of higher sales.

The Group's net operating cash inflow increased from US$15.1 million in FY2018 to US$39.3 million in FY2019 mainly due to better performance and better working capital management. The Group's cash and cash equivalents were US$54.7 million as at 31 December 2019, compared to US$42.2 million as at 31 December 2018.

The Group's net assets as at 31 December 2019 were US$205.7 million. The net asset value per ordinary share (excluding non-controlling interest) as at 31 December 2019 was 38.57 US cents as compared to 33.00 US cents as at 31 December 2018.