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Backdated CPF payments of $8m pull down Tan Chong's gains
Christopher Tan Fri, Mar 07, 2008 The Straits Times
A HK$42.5 MILLION (S$7.6 million) provision for backdated Central Provident Fund (CPF) contributions has weighed on the earnings of Tan Chong International. The motor group yesterday reported a 7.1 per cent drop in net profit to HK$532.95 million for the year ended Dec 31. The issue of backdated contributions hit the motor trade last year after the CPF Board conducted an industrywide audit. It had received complaints from car salesmen who said they had not been paid CPF for car loan commissions. The Straits Times understands the industry might have to cough up more than $100 million in dues, backdated for about seven years.

The other reason was that commercial vehicle sales fell, as Nissan could not supply Euro IV models - mandatory in Singapore since October 2006 - until recently. Euro IV refers to a standard for vehicle emissions.

Group revenue slid 4.3 per cent to HK$5.6 billion, while costs such as distribution and administration - which includes the CPF provision - rose.

Tan Chong's income tax bill also climbed, as the group had underprovided the year before.

Earnings per share after tax fell from 28.5 HK cents to 26.5 HK cents. Net tangible asset backing per share rose from HK$2.57 to HK$2.95.

The sharp drop in Tan Chong's motor earnings - on the back of a 43 per cent drop in Nissan sales - was offset by much better takings from its property rental and development businesses. The group revalued its investment properties during the period.

Its net cash for the year shrank to HK$535 million, from HK$848 million, largely because of new projects and expansion plans in the region. For instance, the group is building a full-service Subaru hub in Taipei, which will be completed by the end of this year.

Tan Chong directors are upbeat about the outlook, even with a smaller supply of certificates of entitlement.

'With its sound financial standing, the group is confident it can ride the waves of challenges from geopolitical risk, global financial turmoil, recessionary threats and reduced car quota certificates in Singapore,'' they said in a statement.

They are recommending a final dividend of 4.5 HK cents per share, which will be paid on May 28.

Dividend payouts amount to HK$130.97 million, unchanged from previously.

christan@sph.com.sg

INDUSTRY TAKES A HIT

The CPF Board conducted an industrywide audit last year after receiving complaints from car salesmen who said they had not been paid CPF for car loan commissions.

It is understood the industry might have to cough up more than $100 million in dues.