This article first appeared in The Edge Financial Daily on April 10, 2020

KUALA LUMPUR: AEON Credit Service (M) Bhd’s net profit for the fourth quarter ended Feb 29, 2020 (4QFY20) was flat at RM88.39 million versus RM87.61 million a year earlier, despite posting higher revenue, as it recorded higher interest and tax expenses, while other income declined.

Quarterly revenue grew 15% year-on-year (y-o-y) to RM413.28 million from RM359.54 million, its stock exchange filing showed. In particular, its interest expense jumped 27.2% y-o-y to RM87.38 million from RM68.67 million, while taxation rose 7.8% y-o-y to RM29.64 million from RM27.51 million. Other income, meanwhile, sank 13.5% to RM41.64 million from RM48.13 million.

The group declared a final dividend of 14 sen per share — versus 22.35 sen in 4QFY19 — payable on July 16, bringing its full FY20 payout to 36.25 sen, down from 44.6 sen in FY19.

For its full FY20 ended Feb 29, the group’s net profit fell 17.7% y-o-y to RM292.05 million from RM354.62 million, though revenue rose 17% y-o-y to RM1.6 billion from RM1.37 billion.

The lower profit was mainly due to higher impairment losses on financing receivables of RM450.31 million under Malaysian Financial Reporting Standard 9 requirements, as compared  with RM308.37 million a year ago, it said, as there was a growth of receivables in FY20.

On prospects, AEON Credit said the Covid-19 pandemic will negatively impact the global business environment, including the essential services industry. With that and the movement control order (MCO) imposed by the government, it expects businesses and operations to be significantly affected for the most part of this year.

“With the implementation of additional measures directed by Bank Negara Malaysia to assist borrowers and customers experiencing financial constraints due to [the] Covid-19 outbreak, the company has taken actions to put the necessary measures in place to face the imminent challenges,” it said, adding it will remain prudent and cautious as it focuses on growing quality assets and enhance efficiency.

AEON Credit shares closed 32 sen or 3.63% higher at RM9.14 yesterday, bringing it a market capitalisation of RM2.32 billion. Year to date, the counter has fallen over 35% from RM14.14.