Buildersmart : Annual Report 2009

ANNUAL REPORT 2009 Buildersmart Public Company Limited 1

Audit Committee Report

Dear Shareholders,

The board of director appointed the Audit Committee, consisting entirely of three qualified independent directors of the

Board. Mr. YANG SHIUN MOH was appointed as Chairperson with Dr. THEERATHON THARACHAI and Mr. MARK

DAVID REMIJAN as members to the Committee. Its main duties and responsiblilities are to review financial reports,

internal audit and control systems, risk management systems, and the compliace with laws and to consider potential

conflict of interest transaction.

In year 2009, the Audit Committee held a total of six meetings, all of which were attended by all members, to perform

its duties and responsibilites, including the following major issues:

1. Reviewed the Company and its subsidiaries7 financial statement prior to submission to the Board of Directors.

Based on due consideration, after discussions with the executives, a non-management meeting with the

Company7s independent auditor, and consideration of the auditors7s recommendations in the Management

Letter, the Committee has the opinion that that above financial statements are prepared accurately,

completely, and creditably.

2. Hired an internal auditor to reviewd and assessed the internal control systems. The Committee has reviewed

and approved an internal audit plan, which was prepared by assessing the Company7s total risk factors. The

Committee has the opinion that the Company has appropriate, effective, and adequate systems, sufficient to

mitigate its risks to the acceptable level, and help the Company achieve its operation goals. Nevertheless,

effective internal control will continuously be monitored.

3. Considered connected transactions or potential conflict of interest transactions. The Committee has the

opinion that the Company entered into all such transactions under reasonable conditions and for its own

hightest benefits.

4. .Reviewed the compliance with laws and regulations relating to the Company7s business operations. The

Committee has the opinion that the Company has no legal violation that may significantly affect the

Company7s reputation and financial status

5. Considered, selected, and nominated the Company7s independent auditor, which is Mr. Pradit Rodloytuk,

Certified Public Accountant Registration No.218 and Ms. Nongram Laohaareedilok, Certified Public

Accountant Registration No. 4334 from AST Master Company LImited, as the auditor of the company for the

2010 financial year, with the audit fee not exceeding Baht 400,000 for the year.

Mr. YANG SHIUN MOH

Chairman of the Audit Committee and Independent Director

BuilderSmart Public Company Limited


Organization Chart

Directors

The Company7s 3 sets of Directors consist of the Board of Directors, the Audit Committee, and the

Executive Directors. Name lists of each set of Directors and their scope of duties can be summarized as follows:

Board of Directors

The Board of Directors as of December 31, 2009 consisted of 7 members:

Name-Last name Position

1. Mr. Suresh Subramaniam Chairman of The Board

2. Mr. Sunchai Nuengsit Vice Chairman

3. Mr. Mongkhol Phiboonsri Director

4. Mr. Yang Shiun Moh Chairman of The Audit Committee/ Independent

Director

5. Mr. Mark David Remijan Audit Committee / Independent Director

6. Dr. Theerathon Tharachai Audit Committee / Independent Director

7. Mr. Anek Pichetpongsa Independent Director

Remark Mr. Mongkhol Phiboonsri had resigned from the position of Director of the Company on January 11,

2010 with Miss Yosawadee Pongprapas as Secretary of the Board of Director


Business overview

Background and Past Development

The Company started its business in year 2001 as manufacturer and distributor of high quality building

product for office and residence by focusing on providing all types of designer and contractor services. The products

under the Company7s brands consist of ALLOY Frame, ALLOY Door Hardware, and BSM. The Company was

appointed as the only distributor of quality products such as Fletcher, Tandus, and Lignia and the products which the

company is a distributor are Gyproc, Weber, and 3M.

Overview of Business Operation

The Company is not only the sole distributor but also a manufacturer of complete high quality interior building

products for office and residence under the concept of CBUILD FOR LIFED with the three guidelines of business

operation as follows:

1. Fast Track E Focusing on product designing for easy utilization and quick and convenient

installation

2. Real Value E Quality of the product suitable with the price with product examination prior to

marketing

3. Environmental Friendly E Products with no harm to environment

In terms of customers, the Company focuses on 3 main groups of customers:

1. Designer, Architect, Interior Designer

2. General contractors and interior design

3. Project owner

The Company7s products are well accepted and used in many leading local and international projects


Types of Products

Products of the Company can be categorized into 7 groups of products:

1. Commercial Partitioning Systems such as ALLOY Partitioning Systems, Clestra Partitioning Systems, BSM

Partitioning

2. Architectural Door Hardware such as ALLOY Hardware to serve every need of different styles of architectural

door system suitable for modern and unique design

3. Fast Track Wall & Ceiling Systems such as interior design products, ceiling, and internal gypsum wall such as

ceiling service, insulation, BSM7s C-Steel TISI, and other materials under the brand BSM such as gypsum

cement

4. Floor carpet with special quality of moist protection and environmental friendly such as C&A carpet

5. Sustainable Timber Solutions such as Pine products, MDF, Lingia, etc.

6. Architectural Window & Door Systems such as Fletcher7s aluminum door and window system of which

features are of easy to blend with designs, strong, endurable, and other door system equipments

7. General Building Products such as Ceiling system and light wall system under the CGyprocD, Fiber cement product of

CSHERA, Roof tiles of CHa HuangD, utensils, protection equipment, repair material, and sealants of Ameron, Fuller, and

A-Seals, etc.

Summary Table of financial statement and operating results (Amount : Thousand Baht)


Audited

Balance sheet 31 Dec 07 31 Dec 08 31 Dec 09

Amount % Amount % Amount %

Cash and cash equivalents 4,436.82 2.97% 53,620.82 24.67% 27,459.47 11.80%

Trade accounts receivable, net 56,520.39 37.87% 46,280.55 21.29% 60,759.62 26.10%

Inventories, net 49,241.37 32.99% 72,061.49 33.15% 88,501.47 38.02%

Other current assets 4,134.76 2.77% 1,589.52 0.73% 4,361.75 1.87%

Total current assets 114,333.34 76.61% 173,552.38 79.84% 181,082.31 77.78%

Fixed deposits pledged as collateral 17,970.84 12.04% 25,284.91 11.63% 25,752.77 11.06%

Equipment, net 15,215.64 10.20% 16,458.84 7.57% 22,628.38 9.72%

Intangible asset, net 1,246.72 0.84% 961.41 0.44% 1,550.20 0.67%

Other non-current assets 478.54 0.32% 1,126.23 0.52% 1,790.27 0.77%

Total non-current assets 34,911.73 23.39% 43,831.40 20.16% 51,721.62 22.22%

Total assets 149,245.07 100.00% 217,383.78 100.00% 232,803.93 100.00%

Bank overdrafts and short-term

loans from financial institutions 12,056.57 8.08% 41,568.59 19.12% 44,637.90 19.17%

Trade accounts payable 62,832.98 42.10% 57,603.31 26.50% 51,771.54 22.24%

Payable under factoring agreements 4,412.01 2.96% 0.00 0.00% 0.00 0.00%

Other payable 1,103.60 0.74% 2,050.24 0.94% 0.00 0.00%

Loan from related parties 0.00 0.00% 0.00 0.00% 0.00 0.00%

Current portion of long-term loans

from financial institutions 267.78 0.18% 0.00 0.00% 0.00 0.00%

Current portion of liabilities under

hire purchase agreements 390.89 0.26% 365.89 0.17% 244.19 0.10%

Other current liabilities 8,872.93 5.95% 7,344.45 3.38% 13,753.28 5.91%

Total current liabilities 89,936.76 60.26% 108,932.46 50.11% 110,406.91 47.42%

long-term loans from financial

institutions, net 0.00 0.00% 0.00 0.00% 0.00 0.00%

Liabilities under hire purchase

agreements, net 609.81 0.41% 244.19 0.11% 0.00 0.00%

Total non-current liabilities 609.81 0.41% 244.19 0.11% 0.00 0.00%

Total Liabilities 90,546.57 60.67% 109,176.66 50.22% 110,406.91 47.42%

Share capital 50,000.00 33.50% 75,000.00 34.50% 75,000.00 32.22%

Paid up share capital 50,000.00 33.50% 75,000.00 34.50% 75,000.00 32.22%

Premium 2,500.00 1.68% 26,990.70 12.42% 26,990.70 11.59%

Reserve 590.00 0.40% 790.00 0.36% 1,500.00 0.64%

Retained earnings 5,608.50 3.76% 5,426.42 2.50% 18,906.32 8.12%

Total Shareholder1s Equity 58,698.50 39.33% 108,207.12 49.78% 122,397.02 52.58%

Summary Table of financial statement and operating results

(Amount : Thousand Baht)


Audited

Statement of income 31 Dec 07 31 Dec 08 31 Dec 09

Amount % Amount % Amount %

Sales 334,989.24 99.65% 404,474.51 99.21% 373,006.69 98.94%

Other income 1,189.06 0.35% 3,233.57 0.79% 3,987.13 1.06%

Total revenues 336,178.30 100.00% 407,708.08 100.00% 376,993.81 100.00%

Cost of sales 267,737.97 79.64% 310,624.82 76.19% 271,745.55 72.08%

Selling, administrative and

general expense 59,360.53 17.66% 87,663.77 21.50% 86,253.51 22.88%

Total expense 327,098.50 97.30% 398,288.59 97.69% 357,999.06 94.96%

Earnings before interest and tax 9,079.81 2.70% 9,419.48 2.31% 18,994.75 5.04%

Interest expense 1,485.14 0.44% 2,621.37 0.64% 2,240.29 0.59%

Income tax 1,942.26 0.58% 4,380.19 1.07% 2,564.57 0.68%

Net profit (loss)

5,652.40 1.68% 2,417.92 0.59% 14,189.90 3.76%

EPS (Baht/share) 0.17 0.02 0.09

Book value (Baht/share) 0.50 0.50 0.50

Weighted average number of

shares (share) 33,322,404 143,989,071 150,000,000

EPS (Fully Dilute) 0.04 0.02 0.09

Book value (Baht/share) 0.50 0.50 0.50

Total number of shares (share) 150,000,000 150,000,000 150,000,000

Summary Table of financial statement and operating results

(Amount : Thousand Baht)


Statement of cash flow Audited

2007 2008 2009

Net profit 7,594.66 6,798.11 16,754.47

Adjustments to reconcile net profit to net cash from operating activities

Bad debts and doubtful accounts (reverse) 815.27 8,203.17 (623.06)

Reversal of provision from inventory obsolescence (239.89) 0.00 0.00

Depreciation and amortization 4,617.51 5,224.86 7,034.41

Gain on disposal of equipment 0.00 0.00 (343.11)

Loss (gain) on intangible asset write-off 0.00 218.73 0.00

Unrealized gain (loss) on foreign exchange rate 19.68 171.36 55.46

Interest expenses 1,937.23 2,060.73 1,843.33

Profit from operating activities before change in operational assets and

liabilities 14,744.46 22,676.97 24,721.49

Decrease (Increase) in operational assets

Trade accounts receivable (24,630.96) 2,034.00 (13,856.01)

Inventories (3,987.57) (22,820.12) (16,439.98)

Other current assets (2,359.04) 2,545.24 (2,772.23)

Other non-current assets (359.45) (647.69) (664.04)

Increase (Decrease) in operational liabilities

Trade accounts payable 16,895.17 (5,229.67) (5,831.77)

Other current liabilities 5,657.58 (3,627.62) 7,969.50

Cash receive (paid) from operation activities 5,960.21 (5,068.89) (6,873.03)

Interest paid (1,894.17) (1,975.13) (1,882.38)

Income tax paid (4,652.85) (2,366.65) (4,086.19)

Net cash used in operating activities (586.82) (9,410.68) (12,841.60)

Decrease (Increase) in fixed deposits pledged as collateral (8,494.21) (7,314.07) (467.85)

Cash received from disposal of equipment 0.00 0.00 934.58

Cash paid for purchase of equipment (5,898.71) (5,645.16) (15,914.22)

Cash paid for purchase of intangible asset (544.89) (200.32) (886.11)

Net cash used in investing activities (14,937.81) (13,159.55) (16,333.61)

Increase (Decrease) in overdrafts and short-term loans from financial

institutions 4,778.36 29,343.32 3,013.86

Increase (Decrease) in payable under factoring agreements 4,412.01 (4,412.01) 0.00

Proceeds of short-term loans from related person 140.00 0.00 0.00

Payments of short-term loans from related person (6,610.06) 0.00 0.00

Proceeds from long-term loans from financial institutions 3,000.00 0.00 0.00

Payments of long-term loans from financial institutions (5,006.86) (267.78) 0.00

Proceeds from issue of ordinary shares 49,500.00 49,490.70 0.00

Dividend paid (35,000.00) (2,400.00) 0.00

Net cash provided by (used in) financing activities 15,213.46 71,754.23 3,013.86

Net increase in cash and cash equivalent (311.17) 49,184.00 (26,161.35)


Cash and cash equivalent, beginning of the periods 4,747.98 4,436.82 53,620.82

Cash and cash equivalent, end of the periods 4,436.82 53,620.82 27,459.47

Manaement Discussion and Analysis


The company conducts business as an integrated center for building materials distribution. In year 2009,

sales of designer7s specific products, which are high margin company7s registered brand products, accounted for

34% of total revenues. The company sells designer7s specific products to the interior work contractors through

consulting service on product applications. For general building products which are sold directly to the interial work

contractors together with the designer7s specific products, sales accounted for 66% of total revenues in year 2009.

The year 2009, total sale was at Baht 373 million, decreased by 7.78%, in comparison with the year 2008

with total sale of Baht 404.47 million. Net Profit registered Baht 14.19 million, an increase of 486.4% in comparison with

year 2008 net profit of Baht 2.42 million. Net Profit margin accounted for 3.80% of total revenues, an increase from year

2008 net profit margin of 0.6% while total revenues were down from previous year due to economic downturn and

political unrest. Change in proportion of revunues from designer7s specific products, which increase from 30% in 2008

to 34% in 2009 had caused an increase in gross profit Margin. This also due to a decrease in selling and

administrative expense and a tax incentive received from listing in the Market for Alternative Investment (MAI) which

permits the company to pay income tax at 20% for 3 years from 2009 to 2011.

Revunue

In year 2009, the Company generated reveue from sales of Baht 373 million, decreased from year 2008

Baht 31.47 million or 7.78%. Sales decrease was affected by the delay of mega project constructions caused by the

economic and politic factors, nevertheless, the Company attempted to stimulate sales in oversea markets to make up

for proportion loss in domestic markets. Thus, it is noticable that oversea markets sales in year 2009 rose to Baht 33

million from Baht 14.35 million in year 2008 or an increase by 129.97%.

Other revenues of Baht 3.99 million consisted of transportation fee, packaging fee for export goods and

interest revenues.

Finanacial Summary


Cost of Sales and Expenses

The proportion of cost of sales to total sales was 72.08%, decreased from the previous year amount of

76.19% due to more sales generated from Company7s branded product especially when sales generated from oversea

markets could sustain much higher profit margin than domestic sales.

In year 2009, the Company had selling and administrative expenses amounted to Baht 86.25 million,

decreased from the previous year by Baht 1.41 million or 1.6%.

In year 2009, the Company had interest expenses of Baht 2.24 million, decreased from the previous year

by Baht 0.38 million or 14.5%

Income tax expenses for year 2009 were at Baht 2.56 million, in which the Company enjoyed tax incetive

from listing in The Market for Alternative Investments (MAI) which reduced company tax rate from 30% to 20% for 3

year from year 2009 to 2011.

Gross profit margin and Net profit margin

In year 2009, the Company had gross profit margin of 27.2%, an increase in comparison with 23.2%

grosss profit margin in year 2008. The increase was resulted by higher sales generated from high margin design

products, together with sales growth from oversea markets, which can sustain much higher margin than domestic

sales. In year 2009, gross profit margin from oversea markets sales and domestic markets sales were 55.3% and

24.4% consecutively.

The company had net profit in year 2009 equal to Baht 14.19 million or 3.8% of total revenues, an increase

of 0.6% in comparison with previous year.

Financial Status

Net Asset

December 31, 2009, the company had total asset of Baht 232.9 million, increased from year 2008 by

Baht 15.42 million or 7.09%. The growth of asset value was from the change of significant transactions as follows:

• Cash and cash equivalents decreased by Baht 368.71 million due to the invesment in machine, equipment

and warehouse as well as new products which will be launched in year 2010.

• Net trade accounts receivable as of December 31, 2009 was at Baht 60.76 million, increased from Baht 46.8

million in year 2008, primarily from higher sales in the 4th quarter. The details on due period of trade accounts

receivable can be summarized according to the schedule as follows:

(Amount : million baht) Financial statement


31 Dec 2008 31 Dec 2009

Trade accounts receivable

Net yet due 27.87 37.81

Overdue up to 3 months 16.51 22.35

Overdue up to 3 E 6 months 1.90 0.60

Overdue up to 6 E 12 months 5.76 0.02

Overdue over 12 months 3.41 4.85

Total 55.45 65.63

Less : Allowance for doubtful

account

(9.17) (4.87)

Trade accounts receivable - net 46.28 60.76

Trade accounts receivable are carried at anticipated realizable value. In general, the Company provides a full

allowance for doubtful account for overdue outstanding debts exceeding 180 days. Other than general

allowance, the individual allowance for specific debtors is also estimated by considering the customer7s past

collection experiences and its financial positions. Bad debts are written off during the year in which they are

identified.

• Inventories at the end of year 2009 were Baht 88.5 million, increased by 22.8% from previous year amount of

Baht 72.06 million. This was due to the stocking of new products such as New Design Alloy, C&A Carpet,

Brand Fletcher Window&Door Systems, Pine decking structure, and etc. Moreover, inventories increase will

support target sales growth set by the management. The details of inventories balance outstanding on

December 31, 2008 and 2009 are as follows :

(Amount : million baht) Financial statement

31 Dec 2008 31 Dec 2008

Inventories 72.06 88.50

Less : obsolete allowance -- --

Inventories - Net 72.06 88.50

• December 31, 2009, the Company held fix deposits pledged as collateral amounting of Baht 25.75 million,

increased from previous year balance of Baht 25.28 million due to interest received on the pledged amount.

• Net Equipment, as of December 31, 2008 and 2009, stood at Baht 16.46 million and Bath 22.63 million as the

company had invested in warehouse improvement, office equipment, and business expansion.

• Net intangible asset as of December 31, 2009 was Baht 1.55 million, increased from Baht 0.96 million,

previous year amount. Net intangible asset consisted of patent and trademark amount of Baht 0.46 million

and software program amount of Baht 1.09 million.

Liquidity


December 31, 2009, the Company had total current asset of Baht 181.08 million, and total current

liabilities of Baht 110.41 million. The liquidity ratio of the Company was at 1.64 times while the quick ratio was at 0.8

times which indicate good liquidity level, which attributed to achieving sales target and high profit margin as well as

good management of cash cycle.

Source of Fund

Liabilities

December 31, 2009, the Company total liabilities were Baht 110.41 million, an increase of Baht 1.23

million from previous year. This was due to an increase in bank overdraft and short-term loans of Baht 3.07 million and

pre paid deposit from oversea orders such as C&A carpets, Fletcher brand door and window sytem, and etc.

Meanwhile, trade account payable had decreased due to cash payment of goods or reduction in credit terms in order

to take advantage of trade discount as well as factoring payable and other current liabilities.

Shareholders1 equity

December 31, 2009, shareholders7 equity increased to Baht 122.4 million, an increased of Baht 14.19

million from year 2008, as a result of profit generation. Legal reserves were at Baht 1.5 million and unappropriated

retain earnings were at Baht 18.91 million.

Debt to Equity ratio at December 31, 2009 decreased to 0.9 times from 1.01 times as the Company was

able to generate more profit, thus, increase shareholders7 equity while having less portion of liabilities increase. These

were all contributed to the decrease in Debt to Equity ratio, which reflected the strong company7s capital structure.

Capital Expenditure

The Company had no major capital expenditure in year 2009, excepted for warehouse improvement and

office equipment purchase of Baht 15.91 million, and additional intangible asset purchase of Baht 0.89 million.

Business Objective


The Company aims to become the leader in integrated building material distributor for offices and home. Through

advisory and consulting services, beatuiful product design with high quality and product development, the Company

strieves to continuously satisfy its customer such as architectures, building contractors, and etc. To achieve a 20%

increase in sales target and enhance business strength in the future, the Company had set strategic plans as follows:

1. For products aspect, the Company aims to promote its products under its own registered brand to

become well known, which will eventually increase sales for the following catagories :

• Fletcher brand door and window system

• ALLOY wall system

• Fast track wall and ceiling BSM TIS

2. For organization structure aspect, the company had implement several internal changes, especially to

sales teams, which considered to be very important to allow sufficient customer care and able to

effectively respond to customer request. As a result, sales teams are organized into 3 units :

• Product sales team

• Core customer sales team

• Call Center

3. For marketing aspect, the company only focus on two issues which are

4. The four Domestic and oversea subsidiaries set up, in which oversea subsidiaries will be a joint venture

with distributing company to allow flexible operations.

5. Products structure will be re-arranged into 7 catagories, accompanying by general sales teams

overlooking general pictures and specialist team overlooking each product catagories. In addition, direct

sales model strategy will be used.

6. Open new warehouses to facilitate inventories storage and add additional vehical to ensure quality fleet

management. Meanwhile, product design must be continuously improve to increase margin.

• Corporate branding which build customer awareness through various media and public relations.

• Product Branding ,which targets an increase in market share, will be done through marketing

activities, advertisement , event organization, and develop new product to cater for market7s need.

Documents

Buildersmart : Annual Report 2009