Interview: Channel Changes Behind TEMPUS HY

DESPITE TOUGH MARKET CONDITIONS, health&wellness play Tempus Holdings Limited (06880) remains "cautiously optimistic" that sales will improve going forward, with a top executive telling Asia Fund Space that first-half results were within expectations.

Another reason management is sanguine these days was due to the recent acquisition of 36% of Tempus Jinyuan - a developer and maker of small massagers in China -boosting its total stake to 57.3% for a total consideration is 17.2 million yuan, thus allowing Tempus Holdings to generate synergy through vertical integration with its OTO business of massage chairs.

Asia Fund Space:  Your January-June results appear a bit puzzling at first glance, with the top line up by over a fifth, while net profit also slipped by double digits.

Was management surprised either way by this half-year performance, and how so?

Mr. Jacky Huang, Tempus Holdings CEO & Executive Director:  As for our first half results, revenue rose 22.1% year-on-year and gross profit was 14.3% higher while the bottom line fell 12.4%. The main reason for the lower interim net profit was the ongoing transformation of our sales channel structure, as in the first half higher-profit major clientele and overseas sales both saw a reduction, and lower-profit retail sales channels registered a commensurate growth. At the same time, another factor in the slightly deteriorated interim bottom line was the fact that we faced higher operating costs and cost of sales during the period. We have already put in place measures and strategies in our newly-revamped sales channels to tap new resources, trim expenses, enlarge our dynamic sales growth and enhance our operating efficiency.

Asia Fund Space:  For the first half of this year, your Board has resolved not to declare an interim dividend (1H2015: nil).

Are you confident your shareholders -and analysts who cover your firm -your decision to once again not declare an interim dividend?

Mr. Jacky Huang, Tempus Holdings CEO & Executive Director:  We don't plan to make any changes to our long-standing dividend policy anytime soon. Our practice has been to provide no more than a 30% dividend payout on an annual basis, and it is not unusual to not declare half-year dividends.
Asia Fund Space:  Not to dwell on dividends, but is the main reason for only declaring them on an annual basis due to the need to be ready for attractive M&A targets? To be able at any time to upgrade capacity or technology? Or perhaps to expand your product line quickly and efficiently?

Mr. Jacky Huang, Tempus Holdings CEO & Executive Director:  We are currently a bit short of cash on hand on our balance sheet, and us having more available for new and expanded projects meets with widespread support from our shareholders.

Asia Fund Space: Now that your first half is behind you, do you have any updated financial guidance to provide at this time for full-year 2016?

Mr. Jacky Huang, Tempus Holdings CEO & Executive Director:  Our July-December sales performance will depend heavily on the popularity and volume of the new products we launch to market, as well as the vibrancy of overseas sales and our success on the M&A front with any new partners of projects. Therefore, it is still too early to give anything resembling an accurate full-year sales forecast. Overall, we remain cautiously optimistic that we'll have an even better sales performance in the second half.

Tempus Holdings Limited is a health and wellness products developers and retailers. The operating retail outlets in China, Hong Kong and Macao, and has corporate customers and overseas market sales channels. The company's products are divided into four categories: recreational, fitness, health and diagnostic products. 

(Note: This story is contributed by Andrew Vanburen. Mr. Vanburen has served as a
government official focused on international trade at the American Institute of Taiwan in
Taipei, and worked in financial journalism for nearly a decade in both Beijing and
Shenzhen. He holds a Master's Degree from New York University. He is currently Director at
Hong Kong-based Asia Fund Space. For more information, please visit:
www.asiafundspace.com)