What went wrong with Courts Asia in the past

It shockingly got delisted in 2007.

According to UOB Kay Hian, Courts Asia is on its way to opening around 21 new stores in FY13-15F, along with sustainable operating margins on better scale, repeat patronage and additional income stream from its credit business, and stronger product sales on favourable economic and consumption trends.

Apparently though, Courts Asia had its share of tough times before getting to where it is now.

Here's more from UOB Kay Hian:

CSL (Courts Singapore) and CMB (Courts Malaysia) were listed on the Singapore Stock Exchange in 1992 and on the Kuala Lumpur Stock Exchange in 2000 respectively. Their controlling shareholder was Courts plc, a UK-based company which went into administration in 2004 due to falling UK sales and an unsuccessful debt restructuring exercise.

The substantial costs incurred by the UK business ate into the profits of its overseas operations, which were eventually sold off individually. CSL and CMB were delisted in 2007, taken over by private equity groups Baring Private Equity Asia and Topaz Investment Worldwide for about S$84m, and were consolidated under CAL in 2010.

Poor credit infrastructure. In our view, the main underlying issue behind the losses in CSL and CMB was the insufficient credit infrastructure that was in place.

Inadequate credit controls and processes led to the piling up of bad debts especially in the Malaysian and Indonesian operations.

Operational inefficiency. Under Courts plc, CSL and CMB also failed to take advantage of potential operational synergies as they were headed by two independent management teams.

Benefits from economies of scale were overlooked with logistics operations that were not well-conceptualised.

Flawed incentive scheme. Furthermore, compensation for management was largely profit-based, which we think put a short-term focus on strategies and execution. The business grew too fast without foundations in credit control and operations.