This article first appeared in The Edge Financial Daily on January 11, 2019

KUALA LUMPUR: Multi-level marketing company Hai-O Enterprise Bhd has revised downwards its revenue and profit estimates for the current financial year after its sluggish performance in the first half (1H) amid the weaker consumer sentiment in the country.

Group managing director Tan Keng Kang said the 1H earnings were affected by several factors such as the change in government, FIFA World Cup and the re-introduction of the sales and service tax (SST).

“We expect a lower revenue and profit after tax projections for FY19 (ending April 30, 2019), with revenue projection of RM400 million, and about RM54 million to RM55 million in profit after tax, after originally hoping for further increase of 5% to 10% based on the profit recorded for financial year 2018 (FY18),” he told reporters after the official launch of Menara Hai-O yesterday.

In FY18, Hai-O’s net profit rose 25.8% to RM74.83 million from RM59.48 million, while revenue rose 14.2% to RM461.78 million from RM404.24 million.

The group had reported a net profit of RM24.6 million for 1H of FY19, down 37.43% compared with RM39.3 million a year earlier. Revenue plunged 30.56% to RM 172.26 million from RM248.06 million.

Tan, however, expects the situation to improve going forward as a result of new promotion campaigns and new product launches to mitigate the impact of the weak consumer sentiment.

“We have seen our operation has started to stabilise since October last year, going forward we expect the second half of FY19 to be better than the first half,” Tan said.

Tan said the implementation of the SST has pushed Hai-O’s costs higher by 3%-5% compared to the goods and services tax (GST) era.

“The GST is a cost for end-consumers, rather than businesses. This was because companies can claim back the input tax paid under the GST and pass the tax burden to the consumers,” he noted.

Imported products are subjected to SST as such goods are not exempted under the indirect tax regime, he added.

  Shares of Hai-O closed higher by three sen or 1% at RM3.03 yesterday, giving the group a market capitalisation of RM909.9 million.