Dear Valued Shareholders,
On behalf of the Board of Directors, I am pleased to present to you the annual report for Polaris Ltd (the “Company”, and together with its subsidiaries, the “Group”) for the financial year ended 31 December 2022 (“FY2022”).
DEVELOPMENTS IN FY2022
The Singapore economy expanded by 3.6 per cent in 2022 as compared to the bounce-back rate of 7.6% in 20211 The Group saw another year of strong top line growth, primarily as a result of rapid expansion in the pre-loved luxury goods re-commerce
sector. Our customer service and consumer electronics segments, on the other hand, experienced moderate growth.
Following the expansion of the Group’s pre-loved business into the United States of America in the first half of 2021, the performance and potential of that business exceeded the Group’s expectations and grew beyond the Group’s capacity to sustain its trajectory of growth and expansion. As a result, the Group pursued a capital injection and financing for the US business under Marque Luxury America, LLC (“MLA”) in the second half of 2021 from Englory Media Holdings Pte. Ltd. (the “Investor”), with a view to diluting the Group’s shareholding in MLA and, correspondingly, its stake in the US business. With the injection received in early 2022, MLA proceeded to expand
operations rapidly. Although MLA’s sales grew more than 50% year-on-year, it did not deliver the intended results in terms of bottom-line profitability. In this regard, the Group understands from the Investor that it has been unable to procure the requisite
financing (i.e. a credit facility of US$10 million) from financial institutions to finance the operations of MLA as MLA’s financial and business performance were not considered to be sufficient to meet the financial institutional credit analysis requirements. As such, the dilution of the Group’s shareholding in MLA has not
been completed.
Additionally, in late February 2023, our joint venture partner and President of MLA unexpectedly resigned for unknown reasons.The Company swiftly appointed Kroll Inc., an independent third party restructuring expert, and installed a chief restructuring
officer (“CRO”) in MLA to safeguard the business and assets of MLA. At the time of writing, the CRO is in the process of conducting an investigative audit on MLA, and the Company is in ongoing negotiations with the Investor to ascertain a way forward.
In Asia, we grew our pre-loved luxury goods business through Mastro Luxe Pte. Ltd. and its operations in Indonesia, Korea, the Philippines and Singapore, with the strongest performance seen in our “ALLU” partnership with Valuence International
Singapore Pte Ltd.
Although the customer services business segment showed sustained growth in demand and performed strongly in the first half of 2022, it experienced a significant decline in the latter half of the year due to alterations in the business plans of a critical
partner.
The consumer electronics segment achieved single-digit growth of 4% year-on-year and was reinforced by obtaining improved terms with a leading manufacturer and by shutting down our underperforming retail store. In addition, we discontinued our educational robotics business to focus our efforts towards corporate sales and government tenders.
FINANCIAL REVIEW
For FY2022, the Group recorded revenue of S$70.07 million, representing an increase of 31% over the revenue of the previous financial year ended 31 December 2021 (“FY2021”) of S$53.44 million.
This increase was mainly due to increased turnover from prelovedluxury goods sales. The pre-loved luxury goods segment saw an increase in turnover by 51% from S$33.12 million in FY2021 to S$50.06 million in FY2022. The turnover from the customer services segment increased by 5% from S$2.49 million in FY2021 to S$2.76 million in FY2022. The second half of FY2022, however, saw a significant drop as explained above. The turnover from consumer electronics sales increased by 4% from S$16.62 million in FY2021 to S$17.33 million in FY2022. The Group did not record any turnover from the distribution sales of mobile handsets and accessories in FY2022 (as compared to a turnover of S$1.21 million in FY2021 for the same segment) owing to the disposal of the Company’s shareholding interest in Polaristitans Philippines Inc. (as announced on 4 June 2021).
The Group posted a net loss for the year of S$6.22 million for FY2022 as compared to a net loss for the year of S$0.38 million in FY2021. This increase was mainly due to losses incurred by our US pre-loved luxury goods subsidiary held for sale, MLA, which
expanded operations rapidly while not attaining its ambitious sales targets. In addition, the customer services segment saw decreased profitability, while the consumer electronics segment reduced its losses.
The Group did not take out any new loans in FY2022. However, cash and bank balances increased from S$2.10 million as at 31 December 2021 to S$6.26 million as at 31 December 2022 due to collections of account receivables and a reduction in inventories held.
CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY
The MINDS manual car wash facility located at the SPC Telok Blangah service station is a remarkable operation, and is staffed and managed by approximately 20 members of the Movement for the Intellectually Disabled of Singapore (MINDS). This car wash has been providing gainful employment opportunities to the MINDS crew since 2004, enabling them to contribute to the community while developing independence and self-sufficiency. In support of this meaningful cause, Polaris has donated funds to assist with the Christmas 2022 and Chinese New Year 2023 festivities for the car wash staff.
As a responsible corporate citizen, we have reviewed the environmental, social, and governance topics relevant to our Group to ensure that our businesses are aligned with our sustainability goals and have a positive impact on both the planet and our communities.
Moving forward, we are committed to further strengthening our sustainability goals and integrating the principles set out in the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”) into our business operations and
reporting. We seek the support of our employees, shareholders and business partners as we work towards a more sustainable future.
LOOKING AHEAD
The Group remains committed to its previously communicated course of action, which involves cultivating and pursuing businesses that are related to sustainability and the circular economy. Additionally, the Group aims to facilitate the transition of existing industries towards sustainability. Presently, our preloved luxury goods re-commerce business and our customer services repair and refurbishment business form the cornerstone of these endeavours. In 2022, we unveiled our plans to expand into businesses that align with the aforementioned objectives in Indonesia.
The global pre-loved luxury goods space, in which the Company’s pre-loved luxury goods re-commerce business operates, is expected to stay robust. However, due to the developments in the Company’s US operations as disclosed above and in previous
announcements, a contraction of this business segment is expected for 2023.
As mentioned above, although the market conditions remain stable, the customer services business is entering 2023 at a reduced operating level due to the alterations in the business plans of a key partner.
After discontinuing our underperforming retail store and our educational robotics business in 2022, the Group has redirected its attention solely to corporate sales and government tenders within the consumer electronics segment. By streamlining our
operations in this manner, we are striving for enhanced year-on-year performance. Our brand partners and their inspiring product portfolios remain a valuable asset to us.
Although we faced difficulties and challenges as we approached the end of 2022 and in early 2023, and despite the unpredictable global economic climate for 2023, our outlook remains cautiously positive. We are actively searching for prospects in developing sectors, such as the circular economy and Indonesia, and striving to improve operational efficiency whenever possible. This includes consolidating our office operations in Singapore, which not only provides financial benefits in terms of cost savings but also contributes to our sustainability objectives by reducing our environmental impact. We aim to strike a balance between our established ventures and promising, high-growth opportunities to optimize shareholder value.
WORDS OF APPRECIATION
We express our gratitude to our fellow directors for their valuable contributions and wise guidance. The dedication and hard work of the management and employees throughout the year are deeply appreciated. We also extend our sincere thanks to our shareholders, business partners, and customers for their continued support and confidence in our endeavours. Collaboratively, we are eager to forge ahead and construct a sustainable future for the Group.
Sugiono Wiyono Sugialam
Executive Director and Chairman
Soennerstedt Carl Johan Pontus
Executive Director and Chief Executive Officer