Transforming our busni ess. · Annual Report 2018 Transforming our busni ess. Redefining our...

Annual Report 2018

Transforming our business. Redefining our future.

COURTS ASIA LIMITED 50 Tampines North Drive 2Singapore 528766Tel: (65) 6309 7777 Fax: (65) 6784 8076www.courts.com.sgCompany Registration No. 201001347K

COU

RTS Asia Lim

ited Annual Report 2018

BOARD OF DIRECTORSMr Jack Hennessy (Chairman) (Non-Independent and Non-Executive Director) Dr Terence Donald O’Connor (Executive Director) (Group CEO)Ms Kee Kim Eng (Executive Director) (Group CFO)Mr Adnan Abdulaziz Ahmed AlBahar(Non-Independent and Non-Executive Director)Mr Chey Chor Wai (Independent Non-Executive Director) Mr Kho Kewee (Independent Non-Executive Director)

EXECUTIVE COMMITTEEDr Terence Donald O’Connor (Group CEO)

Ms Kee Kim Eng(Group CFO)

COMPANY SECRETARYMs Ang Siew Koon Tricor Evatthouse Corporate Services (A division of Tricor Singapore Pte Ltd)80 Robinson Road #02-00 Singapore 068898

AUDIT COMMITTEEMr Chey Chor Wai (Chairman) Mr Jack Hennessy Mr Kho Kewee

REMUNERATION COMMITTEEMr Jack Hennessy (Chairman) Mr Chey Chor Wai Mr Kho Kewee

NOMINATING COMMITTEEMr Kho Kewee (Chairman) Mr Chey Chor Wai Mr Jack Hennessy

REGISTERED OFFICE50 Tampines North Drive 2 Singapore 528766 Tel: 6309 7777 Fax: 6784 8076

REGISTRARS AND SHARE TRANSFER OFFICETricor Barbinder Share Registration Services (A division of Tricor Singapore Pte Ltd) 80 Robinson Road #02-00Singapore 068898

AUDITORSPricewaterhouseCoopers LLPPublic Accountants and Chartered Accountants, Singapore 7 Straits View Marina One East Tower Level 12 Singapore 018936Partner in-charge: Mr Peter Low (since the financial year ended 31 March 2015)

PRINCIPAL BANKERSHSBC SingaporeCollyer Quay 21 Collyer Quay #01-01 HSBC Building Singapore 049320

Oversea-Chinese Banking Corporation Limited65 Chulia Street#01-00 OCBC CentreSingapore 049513

DBS Bank Ltd12 Marina BoulevardDBS Asia CentralMarina Bay Financial Centre Tower 3Singapore 018982

Standard Chartered Bank Malaysia BerhadLevel 13 Menara Standard Chartered30 Jalan Sultan Ismail50250 Kuala LumpurMalaysia

INVESTOR RELATIONS CONTACTE-mail: [email protected]

Corporate InformationCorporate ProfileListed on the Mainboard of the Singapore Exchange in October 2012, COURTS Asia Limited (“COURTS” and together with its subsidiaries, “the Group”) is a leading electrical, IT and furniture retailer in Southeast Asia that offers superior value and experience to its customers. As a retail group, COURTS works closely with supplier partners to retail and distribute electrical, IT and furniture products to customers in the Singapore, Indonesia and Malaysia markets. These include established brands procured locally for the electrical and IT product categories, as well as overseas manufacturers for the furniture category.

With its roots as a furniture retailer from the United Kingdom, COURTS was established in Singapore and Malaysia in 1974 and 1987 respectively, and entered Indonesia in 2014. Today, COURTS operates over 85 stores in multiple store formats spanning over 1.5 million square feet of retail space. This includes the first Megastore that was pioneered in Tampines, Singapore in 2006 as part of the Economic Development Board’s ‘Warehouse Retail Scheme’ to convert industrial land for commercial use.

In Malaysia, the Group opened its first Megastore in Sri Damansara, Selangor in July 2013. The Group’s expansion into Indonesia was spearheaded by the opening of a Megastore in Kota Harapan Indah, Bekasi, located in East of Jakarta, that opened in October 2014. A second Megastore in Indonesia opened in Bumi Serpong Damai City, Southwest of Jakarta, in January 2016.

Recognised as a retailer who offers affordable and competitive prices across its product range, COURTS also offers in-house credit facilities, which allow customers the flexibility of paying for their own purchases through affordable instalments. With this unique business model, the Group is able to derive additional income streams and maintain a competitive edge.

COURTS has also pioneered innovative retail concepts, which include Market Hall, Design Studio and GURU by COURTS. Constantly innovating to improve the shopping experience, COURTS continuously refreshes its stores to optimise the format, layout and merchandise mix.

In 2012, COURTS started its e-store and is amongst Singapore’s top multi-channel retailers, growing from 7,000 stock keeping units (SKUs) to 14,000 SKUs. Its e-store was launched in 2015 and 2017 in Malaysia and Indonesia respectively as part of its multi-channel strategy.

In addition, COURTS manages a customer base with more than 1.3 million members through its HomeClub loyalty programme across Singapore, Malaysia and Indonesia.

Known for being an active corporate citizen, COURTS initiates meaningful and impactful ways to give back to the community, which mainly includes helping children, youths and families in need.

More information can be found on www.courts.com.sg.

01 Mission, Vision and Core Values02 Key Facts at a Glance03 Store Portfolio04 Company Highlights06 Chairman’s Message09 CEO’s Statement13 Operations Review17 Sustainability Report34 Financial Highlights

36 Performance Review42 Board of Directors46 Senior Management49 Corporate Governance Report67 Financial Contents148 Analysis of Shareholdings150 Notice of Annual General Meeting Proxy Form

Contents

1COURTS ASIA LIMITED | Annual Report 2018

MissionWe make aspirational home products easily affordable.

Core Values • Employees First• Customer Focus

• Innovate to Grow

To be a market leading retailer offering customers superior value and experience by providing affordable home and technology solutions.

Vision

2 COURTS ASIA LIMITED | Annual Report 2018

Breakdown of sale of goods and other services in FY17/18 compared to FY16/17

Overview of Revenue for FY17/18

Electrical Products• Major white goods• Vision• Small appliances• Audio

IT Products• Computers• Accessories• Photography• Mobile

Services & Others• Warranty sales• Other services

– Product replacement services

• Cleaning• Repair and

installation• Smart home setup• Interior design

services

11.9%Earned Service

Charges

FY17/18

28.1%Furniture• Mattresses• Bedroom furniture• Dining room furniture• Living room furniture• Home office products

88.1% Sale of Goods and Other Services

FY17/18

49.2%

FY17/18

17.0%

FY17/18

5.7%

Small-Format StoreRetail area: Up to 12,000 sq. ft.,Singapore (1), Malaysia (35), Indonesia (5)

MegastoreRetail area: >60,000 sq. ft.,Singapore (1), Malaysia (1), Indonesia (2)

SuperstoreRetail area: 12,000 – 60,000 sq. ft.,Singapore (12), Malaysia (26), Indonesia (2)

Three different store formats to cater to different customer needs and locations*

FY16/17

45.8%

FY16/17

5.7 %

FY16/17

31.2%FY16/17

17.3%

Key Facts at a Glance

*As at May 2018


*As at May 2018

85Stores

> 1.5Million Sq. Ft.

of Retail Space*

SingaporeNumber of stores: 14

Retail space: 458,041 sq. ft.

MalaysiaNumber of stores: 62

Retail space: 860,368 sq. ft.Central East (7), East Malaysia (11),

Northern (13), Southern (11), Central (20)

IndonesiaNumber of stores: 9

Retail space: 262,124 sq. ft.

Store Portfolio


Company Highlights

● SG: Appointed bizSAFE partner status by the Workplace Safety and Health Council

● MY: Introduced mobile e-waste disposal points in over 10 stores in partnership with Malaysian Communications and Multimedia Commission

● ID: Launched COURTS Indonesia online store

● MY: Donated over RM8,300 worth of household items to four homes in Sabah and Sarawak through Rumah Amal COURTS

● ID: Welcomed Ramayana Departmental Store into COURTS Megastore Kota Harapan Indah (KHI), Bekasi

● ID: Opened four ‘pop-up’ stores to date

● SG: Contributed over S$20,000 worth of household items to needy families as part of the COURTS Home Delivery CSR 2017 Programme

● SG: Refurbished COURTS Tiong Bahru● MY: In celebration of COURTS Malaysia’s

30th anniversary, donated RM125,000 worth of furniture and home essentials to 30 selected homes in Kuala Lumpur and Selangor

● MY: Distributed free Ramadan meals at 16 selected stores

● MY: Opened COURTS Keningau and COURTS Semporna in Sabah● ID: Welcomed Rezeki Fresh Market into COURTS Bumi Serpong

Damai (BSD) City Megastore

APRIL 2017 MAY 2017

JUNE 2017

JULY 2017 SEPTEMBER 2017● SG: Refurbished COURTS Jurong Point● SG: Raised S$156,888 for Bizlink Centre Singapore through the

COURTS Annual Charity Golf Tournament SG: Achieved a record high of over 70% Smile Score for the first

time


Company Highlights

● ID: Opened 12 ‘pop-up’ stores to date

OCTOBER 2017

● SG: Launched redesigned COURTS Megastore in Tampines, concurrently launching GURU, transforming furniture range and expanding Design Studio

● SG: Relaunched COURTS Online with over 17,000 SKUs● SG: Raised milestone amount of S$404,538 for Autism

Association and Cerebral Palsy Alliance Singapore through the annual COURTS and O’Connors & Friends’ Charity Party

NOVEMBER 2017

● SG: Raised S$5,200 for Habitat for Humanity through the Green Christmas campaign at COURTS Orchard

● MY: Opened COURTS Papar in Sabah, bringing the total in East Malaysia to 12 stores

● ID: Welcomed Ramayana Departmental Store into COURTS Megastore BSD City

DECEMBER 2017● MY: Ensured store compliance to regulatory changes for credit

sales (Jan) ID: Opened 20 ‘pop-up’ stores to date (Feb)

JANUARY / FEBRUARY 2018

SEPTEMBER 2017 (cont.)

MARCH 2018● MY: In celebration of Chinese

New Year, donated over RM8,300 worth of furniture and household necessities to House of Love in Klang

● ID: Opened one ‘pop-up’ store, landing at a total of 23 ‘pop-up’ stores as at March 2018

Announcement of Q1 FY17/18

results11 August 2017

Analysts’ briefing for Q1 FY17/18



results9 November 2017




results13 February 2018



Investor Relations Calendar

Announcement of full year results for

FY17/1830 May 2018

Analysts’ briefing for full year results for

FY17/1831 May 2018

Notice of Annual General Meeting

(“AGM”) 201811 July 2018

AGM 201826 July 2018

● MY: In celebration of Malaysia Day, partnered Autism Café Project to serve local delights to customers

● ID: Opened COURTS Tamini Square Mall in Jakarta, landing

at a total of nine stores for the FY

● ID: Opened eight ‘pop-up’ stores

OCTOBER 2017

● SG: Launched redesigned COURTS Megastore in Tampines, concurrently launching GURU, transforming furniture range and expanding Design Studio

● SG: Relaunched COURTS Online with over 17,000 SKUs

● SG: Raised milestone amount of S$404,538 for Autism Association and Cerebral Palsy Alliance Singapore through the annual COURTS and O’Connors & Friends’ Charity Party

NOVEMBER 2017

● SG: Raised S$5,200 for Habitat for Humanity through the Green Christmas campaign at COURTS Orchard

● MY: Opened COURTS Papar in Sabah, bringing the total in East Malaysia to 12 stores

● ID: Welcomed Ramayana Departmental Store into COURTS Megastore BSD

DECEMBER 2017● ID: Opened eight ‘pop-up’ stores

JANUARY / FEBRUARY 2018

SEPTEMBER 2017 (cont.)

MARCH 2018● MY: In celebration of Chinese

New Year, donated over RM8,300 worth of furniture and household necessities to House of Love in Klang

● ID: Opened one ‘pop-up’ store, landing at a total of 23 ‘pop-up’ stores as at March 2018







Analysts’ briefing of Q2 FY17/18




Analysts’ briefing of Q3 FY17/18


Investor Relations Calendar

Announcement of full year results for

FY17/1830 May 2018

Analysts’ briefing of full year results for

FY17/1831 May 2018

Notice of Annual General Meeting

(“AGM”) 201811 July 2018

AGM 201826 July 2018

● MY: In celebration of Malaysia Day, partnered Autism Café Project to serve local delights to customers

● ID: Opened COURTS Tamini Square Mall in Jakarta, landing

at a total of nine stores for the FY

●


Dear Shareholders,

The last financial year has seen better than expected growth in the countries that we operate in the region. Nonetheless, the growth has not flowed through to the retail sector, which continues to face challenges due to a variety of factors, including subdued consumer sentiment and fierce competition, amongst others.

Singapore’s economy grew 3.6% in 2017, higher than the 2.4% in 2016. With a robust growth of 4.4% in the first quarter of 2018, the Ministry of Trade and Industry now expects full year growth to be between 2.5% and 3.5%, which would be at the higher end of the 1.5% to 3.5% range it previously projected. At the same time, experts believe there is positive sentiment in the residential market and predict a greater demand for HDB resale properties which, in turn, should translate into demand for furniture and household appliances over the medium term.

In Malaysia, GDP growth accelerated to 5.9% in 2017 from 4.2% in the previous year. While economic expansion slowed to 5.4% in the first quarter of 2018, the country is expected to remain on a favourable growth path for the year with domestic demand continuing to be the key driver. While the Malaysian retail environment remains challenging, the abolishment of the Goods and Services Tax in the country after its recent general election, and its replacement by the Sales and Services Tax at a later time, is expected to lift consumer sentiment and overall consumption in the medium term.

Indonesia reported GDP growth of 5.1% in 2017, the fastest growth in the last four years. This is expected to accelerate to between 5.1% and 5.5% in 2018. However, disappointing growth in the first quarter of 2018 and the weakness in its currency present downside risk to the growth forecast.

Whilst there are silver linings, the sector will only continue to face more pressures in the coming years, as consumers are presented with a slew of shopping options. It is imperative that COURTS Asia differentiates ourselves by moving towards solutions-selling and accelerating our journey as an omni-channel retailer.

In this regard, our Singapore operations are leading the way in terms of best practice. The market has delivered a strong set of performance despite the highly saturated and competitive market and executed the strategic initiatives outlined in the year under review. Moving into the new financial year, Singapore will once again pave the way forward, in the area of Customer Relationship Management (“CRM”).

We have also made progress in Indonesia. Whilst the business has yet to make a profit, it has delivered an improving Earnings Before Interest & Tax (“EBIT”) year-on-year (“YOY”). The Malaysian market, however, continues to face a challenging operating environment partially due to regulatory changes, which impacted our credit revenue, as well as a challenging collections environment.

With our recognition of the challenges as well as the opportunities facing our business, we have evaluated the various aspects of our operations and identified varying degrees of transformation for our three markets.

In Singapore, we are continuing the momentum for innovative retail transformation in order to maintain our lead in solutions-selling and enhancing the omni-channel experience. In Malaysia, we will take a two-pronged approach to transformation, fine-tuning the operational aspects in the face of regulatory changes whilst having dedicated resources to look at the longer-term structural business transformation.

In Indonesia, we will depart from our usual strategies as an industry incumbent, where we are positioned in the Singapore and Malaysia markets, and increase our market presence by deploying new, transformational ways to reach more consumers such as through ‘pop-up’ stores and field sales team.

Challenges & Opportunities Amidst Transformation

For the year under review, COURTS Asia sees continued resilience in our Singapore operations, and improving performance in our Indonesian business. Unfortunately, this was weighed down by weakness in Malaysia. The Group reported a 3.7% dip in revenue to S$713.1 million for the full year ended 31 March 2018 (“FY17/18”) from S$740.5 million for the full year ended 31 March 2017 (“FY16/17”).

Besides the challenging retail landscape in Malaysia, the introduction of the Consumer Protection (Amendment) Act 2017 and Consumer Protection (Credit Sales) Regulations 2017 on 1 January 2018 led to interest rates being capped at 15% per annum along with new compliance processes, which in turn resulted in lower credit sales and earned service income.

The situation was exacerbated by a continued difficult credit collections environment and a more prudent credit sanctioning approach in Malaysia, which led to a jump in impairment allowances for trade receivables. The increase in impairment allowances for trade receivables in Malaysia by S$9.7 million over the previous year is the main cause for the Group’s impairment allowance for FY17/18, which landed at S$39.2 million, up from S$26.3 million from the previous year. This resulted in the decline in the Group’s net profit after tax to S$8.1 million in FY17/18 from S$23.7 million in FY16/17.

Chairman’s Message


COURTS Asia is on the path of transforming ourselves to provide a new growth impetus to propel us into the next decade and beyond.

However, the Group’s cash position remains strong, with net cash generated from operating activities at S$59.3 million for FY17/18, and strong cash and bank balances at S$108.6 million as at 31 March 2018, from S$98.7 million as at 31 March 2017, providing good liquidity and headroom for growth.

Investing in Business Transformation; Business Sustainability

To ensure COURTS Asia secures a more sustainable future, we are redefining it on our own terms. We are prioritising longer-term business transformation, which may not necessarily deliver results within the quarterly reporting cycles.

Singapore, which accounts for approximately 70% of our revenue, will need to continue delivering performance at a steady pace as Indonesia scales up over time and Malaysia undergoes structural changes.

Our intention is to have Singapore lead the way in terms of innovative retail transformation. Top of the agenda will be driving our omni-channel initiative and solutions leadership, with the objective of developing best-in-class operational models that we could roll out to the region.

In Malaysia, the structural changes required need urgent addressing. We have formed a dedicated transformational taskforce

to look into the business processes and operations, with the objective of executing transformational initiatives and driving productivity improvements. The business transformation process will be ongoing, and we will keep fine-tuning to meet the changing dynamics of the environment.

We continue to make progress in our Indonesian operations with a 13.7% jump in revenue (in Rupiah currency) and improving EBIT YOY. However, after the growth spurt, we are mindful of the need to slow down and consolidate our position to ensure a firm footing for our next phase of development.

Sustainability Reporting

As we strategise about a sustainable future, it is apt to make reference to our Sustainability Report. Since our maiden annual report in FY12/13, we had included a section on our Corporate Social Responsibility (“CSR”) as well as other sustainability initiatives. However, this is the inaugural report that has been written in line with Singapore Exchange’s guidelines, as well as in accordance with the Global Reporting Initiative Standards: Core option.

This report aims to provide a balanced account of COURTS Asia’s policies, initiatives and ambitions towards social, economic and environmental areas

that are important to our stakeholders. These factors are identified on the basis that they have a material impact on the sustainability of stakeholders and, consequentially, our business.

We consider sustainability as a core part of our business strategy and philosophy, and the Board has been involved in determining material sustainability factors for the Group, and oversees the management and governance of these factors. The key pillars of our sustainability strategy include People and Community Investment, Market Responsibility and Environmental Protection.

Indeed, we see human capital as a key asset to a people-centric business like ours and we continue to focus on nurturing the development of our staff. At the same time, we know that without the local community’s support, COURTS will not be the established household name it is today. Therefore, giving back and making our communities a recipient of our economic performance is important to us.

As a retailer, it is integral to evolve with changing customers’ needs, and keep our customers satisfied and informed. We recognise that customers have placed a tremendous amount of trust by giving us access to their information and it is our responsibility to manage this information


well and to ensure that they are able to shop responsibly with us and with peace of mind.

Last but not least, every corporate organisation has a part to play when it comes to protecting our environment. Today, environmental responsibility and climate change are key national and global priorities. As a consumer-facing business, we can play our part in raising awareness about the subject, educating consumers and encouraging adoption.

I invite you to read more in the Sustainability Report on page 17. Looking forward, the Board intends to ensure that sustainability remains a core focus of the Group and would like to thank the management team and employees for their help in the preparation of this report.

Portfolio Changes Within Management

During the year under review, Mr Stan Kim, our Group Chief Innovation Officer, has taken on additional responsibilities as Group Chief Operating Officer, taking over from Mr Tim Luce, who has left the Group as he has relocated to Australia to be with his family. Stan will focus on business reinvention in Malaysia and accelerate our transformational initiatives. With Stan’s background in change management, an intimate knowledge of the business and track record, we are confident that he is well-placed for a smooth execution.

The Board and I would like to take this opportunity to express our appreciation to Tim for his dedication and contribution to the Group during his tenure. We wish him all the best in his future endeavours.

Word of Appreciation

Amidst a challenging retail environment, we continue to see vast opportunities to differentiate ourselves through solutions leadership and transformation initiatives. I would like to express my heartfelt appreciation to my fellow Board members for their counsel and guidance in steering COURTS Asia’s strategic direction, through a focused strategy tailored for each core market.

To our management team and staff, I would like to thank you for your hard work and dedication to COURTS Asia. I would also like to express my gratitude to our business associates, partners, suppliers and loyal customers, all of whom have lent us strong support.

Finally, I would also like to thank all our shareholders for their unwavering faith in COURTS Asia. As we step up our business transformation with urgency, we seek the understanding from all our shareholders that we will not be proposing a dividend for FY17/18 as our priority will be to preserve liquidity and drive operational excellence to build a sustainable business.

In Closing

COURTS Asia is on the path of transforming ourselves to provide a new growth impetus to propel us into the next decade and beyond. The industry landscape is changing and we need to adapt to the shifting environment.

I believe that we have a capable team in the right place to execute our transformation plans. However, we need the understanding and patience of our various stakeholders to see the fruits of our efforts. We will provide updates of our progress as we navigate the winds of change in Malaysia and continue to tap opportunities in Singapore and Indonesia.

COURTS Asia has navigated through various cycles in its long history, and has seen the industry and its players undergo ups and downs. I believe that with our tenacity, determination and teamwork, and the support of you, our investors, we will do it again, and emerge a stronger organisation.

Jack HennessyChairman


Dear Shareholders, While the countries that we operate in have continued on their roads to recovery over the past financial year, we are cognisant of the diversity of the retail environments in each market, which present their own unique sets of opportunities and challenges.

The strong performance of the Singapore market, which accounted for 69.9% of the Group’s top line in FY17/18, was a bright spot for us. Despite a highly saturated and competitive operating environment, turnover from Singapore increased 1.5% in FY17/18 with EBIT remaining strong at S$25.2 million. We recorded improving revenue and EBIT in Indonesia during the year, while our Malaysian market faced strong headwinds, which dampened the Group’s performance considerably for the year under review. Overall, the Group delivered a net profit of S$8.1 million, with a steady revenue of S$713.1 million for this financial year, a slight dip of 3.7% from S$740.5 million in the previous corresponding year.

Against the backdrop of a challenging and ever-evolving retail landscape, the management team remains steadfast in enforcing prudence in our cost management, whilst being nimble in ensuring our business remains future-ready, as we continue to drive profitability and differentiate retailing through our omni-channel strategy.

New accounting standards, FRS 115 Revenue from Contracts with Customers (“FRS 115”) and FRS 109 Financial Instruments (“FRS 109”) have become mandatorily effective from the financial year beginning on or after 1 January 2018.

As a significant portion of our revenue is attributable to services as well as credit bundle sales, which are impacted under the new FRS 115 rule, we decided to be an early adopter of this rule in FY16/17 as we believe it is in the best interest of our shareholders to do so.

The Group will be adopting FRS 109 in FY18/19 and is still in the midst of finalising the transitional adjustments arising from the new expected credit losses impairment model. Based on the assessments undertaken to date, the Group expects a one-time significant increase in allowance for impairment of trade receivables as well

as a corresponding decrease in opening retained earnings as a result of an earlier recognition of credit losses under the new expected credit losses impairment model.

However, I would like to stress that there is no cashflow impact from the adoption of these accounting standards. As highlighted by our Chairman, our cash position remains healthy, mainly as a result of strong operating cash flows.

Financial Performance for the YearOn the back of higher sales transactions from the relaunch of our online platform and the reopening of COURTS Megastore at Tampines, turnover from Singapore rose 1.5% to S$499.0 million. Indonesia grew significantly by 13.7% in Rupiah currency to IDR289 billion, mainly due to contribution from newly opened stores. Revenue from Malaysia registered a 15.4% decline in Ringgit currency to RM576 million, mainly as a result of lower sales of goods and earned service charge income.

While revenue contribution from credit sales dipped slightly to 31.8% of overall sales as compared to 34.9% in FY16/17, credit sales in Indonesia surged from 35.0% to almost half of the overall local sales, at 49.1%, for FY17/18. This is a strong testament to the Group’s efforts in creating greater awareness of our credit offerings in the market. Having said that, we now need to balance our increased credit yield with the higher impairment allowance.

Our gross profit for FY17/18 slid by 4.6% to S$256.2 million, due to lower gross profit margin and revenue as compared to the previous corresponding year. Gross profit margin decreased marginally by 0.4 percentage points to 35.9% for FY17/18, mainly due to lower earned service charge in Singapore and Malaysia, offset by higher earned service charge in Indonesia.

Earned service charge income, derived from our in-house credit facility, fell to approximately S$25.6 million in Singapore and S$55.2 million in Malaysia in FY17/18, down from S$29.5 million and S$62.4 million respectively the year before, whilst Indonesia saw a jump from S$1.7 million to S$4.0 million for the year in review.

Consequently, the Group registered a net profit of S$8.1 million, and earnings per share fell to 1.56 Singapore cents for FY17/18.

Driving Transformation through Solutions Leadership in SingaporeAs our core market, Singapore continues to leverage our growth levers to further drive leadership in category solutions-selling and enhance its omni-channel strategy for an improved online as well as an immersive in-store experience, and to build greater brand loyalty with our customers. We successfully transformed our flagship Megastore in Tampines as well as our Tiong Bahru and Jurong Point stores as part of our investment in a series of store refurbishments planned for the financial year.

At COURTS Asia, we focused on developing our services proposition, and recognised that customers desire seamless end-to-end solutions. With their needs in mind, we refreshed our flagship Tampines Megastore and the Jurong Point outlet and launched GURU by COURTS – a one-stop solutions provider offering repair, maintenance and warranty services for over 20 home product categories. We now also offer delivery as well as click-and-collect options for online customers. We aim to provide customers with peace of mind that we will continue to be there for them post purchase.

With the rise in technology, the retail industry is undergoing a major transformation with disruptors such as e-commerce and smart technologies affecting both the traditional brick-and-mortar stores, as well as the range of product offerings in the market. At COURTS Asia, we are excited about the change, and are determined to ride this wave and stay ahead of the competition. As part of our efforts to enhance our omni-channel strategy, we have relaunched our web store in Singapore, with a refreshed intuitive navigation to integrate the offline and online shopping experience for our customers. The web store is our largest in the Group’s store network to date, offering over 17,000 SKUs. With a more seamless click-and-collect option, we enable shoppers to skip the queues by placing online orders and picking up from the store, offering them the ultimate bricks-and-clicks experience.

Over the year under review, COURTS Asia has launched a series of initiatives to achieve seamless online-to-offline (“O2O”) consumer experience whilst providing multiple

CEO’s Statement


In order to support our omni-channel efforts, we will also focus on strengthening our supply chain capabilities to ensure a seamless integration between our offline and online channels.

touch-points to fit our customers’ varying lifestyles. For example, we have expanded our Design Studio by COURTS experience by adding a new interior design partner to provide one-stop home renovation and furnishing solutions in Singapore. We also recently featured smart home products such as the Google Home and Google Home Mini - alongside compatible products in a home setting in the area.

By allowing our customers to visualise their dreams of turning their house into a home, we seek to provide them with an experience that can only be found in store, something that cannot be replicated or experienced through digital platforms, and to inspire, educate and entertain them.

To tap on increasing demand by customers for bespoke furniture options, we also focused on providing a tailor-made end-to-end shopping experience for our customers. Through our flagship Megastore in Tampines, customers will be given the opportunity to customise a range of curated living, dining and bedding options across more categories, and with reduced premiums and waiting times, as we seek to deliver on our ‘Better Living, Better Prices’ experience for our customers.

In 2013, we had instituted a roll out of our Smile Score, which tracks our relationship with customers by asking them how likely they are to recommend shopping at COURTS to their friends and families. During the year under review, we made a breakthrough - obtaining the highest annual Smile Score of 68% for the first time in history in Singapore. Whilst this assures us that we are progressing in the

right direction, we are mindful not to rest on our laurels but instead work harder to build brand loyalty with our customers.

Continuing Business Transformation in Malaysia and IndonesiaIn Malaysia, our business went through a difficult year. Consumers’ subdued sentiments and a challenging collection environment weighed on COURTS Malaysia, exacerbated by the introduction of the Consumer Protection (Credit Sale) Regulations 2017, which capped interest rates at 15% per annum along with new compliance processes. We also shuttered nine under-performing stores in Malaysia during the year.

As headlined by our Chairman, future-proofing the business is a key focus as we look ahead, even as Malaysia heralds its own changes with a new government at its helm. Part of this includes the formation of a dedicated transformation taskforce to look into business processes and operations and execute transformation initiatives.

No business transformation can be successful with purely a top-down approach, and we believe that with the supporting efforts from the team on the ground in Malaysia, we will be able to successfully roll out the various business transformation initiatives.

While growth for the Indonesian economy slowed in the first quarter of 2018, which has affected consumers’ confidence and demand, we are heartened to see an improvement in the country’s performance. Led by our newly appointed Country Chief Executive Officer, Joe Greenway, our

prudent expansion strategy of opening ‘pop-up’ stores on short-term leases to supplement existing stores as a means to win market share have borne fruit. We expanded by opening 21 such ‘pop-up’ stores during FY17/18, adding to the four stores in the previous year, whilst closing two under-performing ‘pop-up’ stores. We currently operate 23 ‘pop-up’ stores to date. Coupled with the opening of our ninth physical outlet in Indonesia, COURTS Tamini Square, we are now present in 32 locations across the Greater Jakarta Region.

Moreover, with over 70% and 80% of the lettable space in Megastores in Kota Harapan Indah and Bumi Serpong Damai being occupied by blue chip tenants respectively, we have leveraged the opportunity in positioning these Megastores as one-stop retail destinations for our Indonesian customers. These tenants include established local brands such as Ramayana department store, Alfamart and Rezeki Supermarket amongst others.

Through the year, the credit collections cost escalated as credit sales ramped up. Whilst this is not unexpected given that the accounts are new, the management team is taking necessary steps to manage further increase in costs. With the introduction of the newly launched credit scorecard as well as control measures, we believe that credit costs will be managed to our expected level. In the meantime, we have slowed down store expansion.

The Year AheadIn Singapore, we will also continue to expand our solutions leadership through the five key areas of delivering a better


user experience through an expansion of category solutions-selling, driving omni-channel with urgency, making offline stores experience centres, centering furniture around home needs and continuing to leverage our unique selling proposition in credit.

With the uptick in Singapore’s economy and positive sentiment in the residential market, we are encouraged by the country’s outlook for the rest of the year, and expect potential demand for furniture and household appliances over the medium-term. The furniture category is the least affected by online disruption given consumers’ need for a tactile feel. It is also the category where domain expertise on interior design and product care is still valued. We will continue to introduce new lines of furniture, made to suit modern apartment living to Singaporeans.

We will continue driving our omni-channel strategy by building the best online and offline experiences for our customers. With the rising trends in online shopping, COURTS Asia is acutely aware that we need to harness this opportunity and grow our online solutions platform to cater to changing consumption behaviours of our customers, and to compete with pure-play online retailers. In this regard, we will also focus on and invest in developing our capabilities through strengthening our talent bench strength.

However, we recognise that while online is on the rise, consumers still place emphasis on the touch-and-feel elements with regard to certain product categories, and the comfort of physical, face-to-face customer interaction is still important

in building customer relations. With smartphone penetration in Singapore on the rise and as we progress to becoming a Smart Nation, the demand for connectivity between our homes and us will become greater, and we believe that 2018 could be the year that we see smart homes taking off. More recently, we unveiled the new COURTS Smart Home Experiential Hub in April, featuring the newly launched Google Home and Google Home Mini – alongside compatible products in a home setting. This is in line with our desire to create an innovative customer experience within our store environment and allow them to interact with the products.

In order to support our omni-channel efforts, we will also focus on strengthening our supply chain capabilities, one of our cornerstones of our front-end and back-end operations, which are even more crucial in ensuring a seamless integration between our offline and online channels.

Singapore will lead the Group’s omni-channel efforts, with best-practice implementation rolled out across Malaysia and Indonesia over time.

Aside from ongoing business transformation efforts in Malaysia, driving productivity and maintaining a lean structure for our existing store network in Malaysia remains a priority.

The zero-rating of the GST was a highly-anticipated move by the new government, and COURTS Asia welcomes any pro-consumer initiatives. Even as consumer sentiment has lifted with the changes sweeping through Malaysia, we recognise that it will take some time for it to filter through to discretionary spending.

In the meantime, we have readied ourselves by ensuring internal processes and communication guidelines are in place to handle the change.

While we’ve made good progress in creating inroads and establishing a growing foothold in the Indonesian market, we believe this is the moment to turn our focus on bringing credit collections costs to our expected levels before resuming our expansion plans. We remain committed to the market, and we believe that our efforts in developing strong business fundamentals will bear fruit as we ready ourselves for a more sustainable growth momentum that will put us in good stead for the long haul.

Looking Towards the FutureAt this point, I would like to thank the management team and staff who have shown resilience and dedication in working alongside me during these challenging times, as we seek to transform COURTS Asia for the future.

Looking forward, with our strong and sound business fundamentals, established track record and experience in the consumer space, I am optimistic about our long-term prospects, and we will stay focused on creating sustainable value for our shareholders, as we bring ‘Better Living, Better Prices’ to our customers.

Dr Terence Donald O’Connor Group Chief Executive Officer


Sustainability at COURTS


Bringing HomesTo Life


In line with its strategic focus areas outlined in the previous year’s annual report, the Group intended to drive leadership and differentiation in omni-channel retailing, in-store experiences, furniture, solutions selling as well as credit. However, amid continuing headwinds in Malaysia, FY17/18 turned out to be a challenging year, and as a result, the Group had to adopt a market-specific and localised approach for every operating market.

Singapore, the core market, led the way for the other markets in terms of omni-channel and solutions-selling best practices, continuing its momentum for innovative retail transformation. Malaysia, impacted by weak consumer spending and new regulations, is refining operations while planning resources for longer-term structural business transformation. At the start of the year, Indonesia took a cautious approach to store expansion with ‘pop-up’ stores to explore site feasibility before committing to a long-term lease. The Group opened a total of 21 ‘pop-up’ locations within the year, whilst closing some unsuitable sites and is now slowing down its expansion to consolidate its position and review credit collections cost to prepare for the next stage of development.

Singapore: Being Customer-Led in Omni-Channel, Solutions and Furniture TransformationWhile navigating a competitive and saturated retail environment, COURTS Singapore continued to drive leadership in category solutions-selling and enhancing its omni-channel strategy for an improved online as well as an immersive in-store experience. Business in FY17/18 was characterised by a marginal improvement in revenue performance, as a result of a 4%

increase in like-for-like store performance against the previous year and improving year-on-year online sales.

Store UpdateAs part of its continual productivity review of its stores, COURTS Singapore closed its Westgate Mall store and ended the year in review with 14 stores. The Group conducted a major refurbishment for three of its stores – Tiong Bahru, Jurong Point and the flagship Tampines Megastore.

Stores as Experience CentresThe redesign of the flagship Tampines Megastore in November 2017 was the highlight of FY17/18 store refurbishments. The result of a year of planning and two months of ongoing renovation work, 136,000 square feet of retail space was transformed to showcase experiential retail concepts, end-to-end solutions and extensive range. The launch was unveiled in tandem with a transformation of the furniture category and range, offering international styles for local apartment

living that incorporate multi-functional and space-saving functionalities. Brand new retail concept spaces are now an integral part of the Megastore experience, including spaces designed to inspire home living, self-browsing and customisation, interactive cooking and product demonstrations, multi-player gaming with augmented reality experience, and home automation with smart technology. As its flagship store in the region, the Group views the Tampines Megastore in Singapore as a hub for experiential retail concepts.

In conjunction with the Megastore makeover, COURTS Singapore also relaunched its online store (www.courts.com.sg), seamlessly unifying the offline and online shopping experience for an omni-channel reach. The webstore is the largest in COURTS’ store network to date, offering over 17,000 SKUs. The relaunch featured a refreshed, intuitive and faster navigation, search and check-out experience complementing

COURTS Megastore transformed – 136,000 square feet of experiential retail space

Operations Review


the click-and-collect experience in store, and drove an over 60% like-for-like increase in online sales. The relaunched COURTS store augments the transformed retail experience in the physical stores, delivering the ultimate in ‘bricks and clicks’ shopping.

One-Stop Home SolutionsAs part of its commitment to category solutions-selling, the Group launched GURU by COURTS, its one-stop solutions provider offering repair, maintenance and warranty services for over 20 home product categories, with GURU services available for sale throughout all COURTS stores and dedicated service counters in five stores island wide. The Group also expanded its Design Studio by COURTS experience by adding a new interior design partner to provide one-stop home renovation and furnishing solutions, as well as growing its presence to one additional store during the FY, bringing the total to six.

The Group intends to expand further on this initiative in FY18/19, driving its market positioning as a trusted, quality provider of end-to-end home solutions.

Transforming Smiles into SalesInto its fifth year of measuring Smile Score (known in the industry as Net Promoter Score), the Group had rolled out feedback collection via in-store tablets in the previous FY, and has built on this in the year in review by extending this to its click-and-collect service in select stores, allowing customers to rate the service experience during omni-channel shopping.

For three months in a row in FY17/18, COURTS Singapore attained a record high achievement of over 70% Smile Score. We ended FY17/18 Smile Score with a record score of 68%. This achievement brings COURTS’ customer service and recommendation rating on par with leading industry players and ahead of its competition, signifying that seven out of 10 customers would recommend COURTS to their friends and family.

The Group continues to view customer satisfaction as a key commercial metric, and continually improve its feedback tools and reach. The Group is also planning to enhance its Customer Relationship Management (CRM) with the implementation of a new CRM and marketing automation platform, and strengthen its marketing and customer relationship engagement in the coming FY and beyond.

Malaysia: Business Transformation Amid New Regulatory EnvironmentThe Malaysian retail environment remains challenging and, against the backdrop of weak consumer sentiment and spending, the implementation of the Consumer Protection (Amendment) Act (“CPAA”) 2017 and Consumer Protection (Credit Sales) Regulations 2017 on 1 January 2018 was another contributing factor to continued headwinds in the country faced by the business. The regulations introduced a 15% per annum cap on interest rates along with new compliance processes, leading to a fall in revenue.

Even as Malaysia faces impending changes under new leadership, the Group has made

it a key focus to future-proof its business. Part of this includes the appointment of a task force to spearhead a transformation of the business, including a review of business and store productivity.

With store footprint optimisation being a consistent focus, the Group undertook the closure of nine under-performing stores during the year in review. Expansion plans were put on hold, and only targeted expansion in under-represented areas such as East Malaysia continued. The Group ended with a footprint of 62 stores, as at May 2018.

New stores opened in East Malaysia include:• COURTS Keningau, Sabah (July 2017)• COURTS Semporna, Sabah (July 2017)• COURTS Papar, Sabah (December

2017)

The Group also necessitated the downsizing of the Malaysia workforce by 10% and temporarily deprioritised building an omni-channel approach, instead focusing efforts and resources on steadying its brick-and-mortar business in the short term.

GURU by COURTS launches at Megastore, providing services spanning over 20 home product categories and including warranties, maintenance and repair


Operations Review

Extensive resource was deployed to ensure the compliance leading up to the CPAA changes. This included piloting a trial project at selected stores and conducting training for the 1000-man strong sales team nationwide.

On the credit front, the Group facilitated the setting up of a regional credit task force comprising executives with specialised credit collections and marketing skillsets across the three markets. The team will look into enhancing risk-based credit offers and strengthening credit collections focus in light of the continued challenges in credit collections.

Despite the challenges faced in Malaysia, the Group recognises that business cycles are part and parcel of operating in every market, and it is important to continue to invest in building the brand. To commemorate its 30th year of doing business in the market, COURTS Malaysia continued to underscore its commitment to the market by growing partnerships and ties with the local community, including driving CSR, giving and outreach initiatives (Refer to Sustainability Report).

One of these partnerships include the launch of “Check Your Label” in April

2017 with the Malaysian Communications and Multimedia Commission (MCMC), a campaign led by MCMC since 2014 to educate the public on the importance of buying safe and certified electronic devices, as well as the introduction of mobile e-waste boxes in over 10 stores nationwide to reduce environmental pollution caused by electronic waste. Both initiatives complement COURTS’ services, rounding off the end-to-end electronic purchase journey for the customer from product selection, to maintenance as well as disposal.

Indonesia: Committed to Market Expansion with Focus on Managing Credit CostCOURTS Indonesia continues to focus on offering unique and differentiated customer experiences through optimising its footprint. The Group prudently expanded Indonesia’s footprint, growing its presence to 32 locations across the Greater Jakarta Region as of May 2018, including nine stores and 23 ‘pop-up’ stores. During the year in review, the Group opened a new 1,200 square feet store in Tamini Square Mall in Jakarta City to reach more Indonesian customers. 21 ‘pop-up’ stores were also opened in strategic locations within the financial year to grow COURTS’ presence and gauge

market reception without committing to long-term leases.

The Group continued to position its Megastores as one-stop retail entertainment destinations, with the opening of several tenant stores in both its Megastores. One of the highlights included the opening of a Ramayana store, one of Indonesia’s largest departmental store chains, in COURTS Kota Harapan Indah (KHI) Megastore as well as in COURTS Bumi Serpong Damai (BSD) City Megastore. During the year in review, several tenants were added including supermarkets, restaurants as well as a car wash. The entry of Ramayana as well as other tenant brands serves to increase footfall into stores through complementary retail tenants as part of COURTS’ Megastore mix. As of 31 March 2018, COURTS KHI Megastore stands at 83% occupancy, while COURTS BSD City Megastore stands at 70% occupancy.

As COURTS Indonesia remains committed to the market, the business plans to slow down its expansion to deploy new, innovative ways to reach more consumers such as ‘pop-up’ stores or credit field sales team. This is envisioned to pave the way for the next phase of development for the business.

COURTS Papar opened in Sabah, bringing total in East Malaysia to 12 stores

COURTS opens at Tamini Square in September 2017


DeliveringSustainable Value


Table of Contents

About the Report 17

Our Sustainability Philosophy 18

People and Community Investment 22

Market Responsibility 28

Environmental Protection 31

Memberships, External Initiatives & Charters 32

GRI Content Index 33

About the Report

This is the first Sustainability Report published by COURTS Asia Limited in adherence to external standards. We are a leading omni-channel retailer providing IT, electrical and furniture products, and have been listed on the Singapore Exchange (SGX) Mainboard since 2012. The COURTS brand is established in Singapore, Malaysia and Indonesia.

Beyond retailing products in physical stores and online, COURTS also offers services complementary to its product suite including warranties, cleaning, repair and installation, interior design solutions, and flexible payment solutions. Please refer to our annual report for more information pertaining to our business.

Reporting Scope and Period

This report covers the sustainability performance of our operations for the financial year ended 31 March 2018 (“FY17/18”). The report includes data for our Singapore stores and where available, for Malaysia and Indonesia. With Singapore being the Group’s biggest market and headquarters, contributing to approximately 70% of revenue in FY17/18, we view it as a good starting point for our first report and will supplement with Malaysia and Indonesia market data where relevant. We plan to enhance our data coverage in future reports.

Reporting Standard and Assurance

This report has been prepared in accordance with the Global Reporting Initiative (GRI) Standards: Core option and is in line with the SGX Sustainability Reporting Guide. The report covers the company’s policies, practices, initiatives, performance and goals in relation to material Environmental, Social and Governance (ESG) factors and will be updated on an annual basis.

We have not sought external assurance for this reporting period, but may consider doing so in future.

Feedback

Stakeholder inputs are key to defining our sustainability approach and we value and welcome any feedback with regards to this report or any aspect of our sustainability performance. A soft copy of this report is available on ir.courts.com.sg and you may email [email protected] should you wish to contact us.

Sustainability Report


Our Sustainability Philosophy

Our Values

In line with our core values of Employees First, Customer Focus and Innovate to Grow, COURTS considers sustainability a core part of our business strategy and philosophy. It is worth noting that we have been providing an annual account of our Corporate Social Responsibility (CSR) as well as other sustainability initiatives since our maiden annual report for the financial year ended 31 March 2013.

Governing Sustainability at COURTS

Sustainability has always been a priority for the Group, with the SGX sustainability reporting guidelines lending an added dimension in formalising the execution, monitoring and governance of our reporting as well as helping us focus on key areas where we are well-placed to make a greater impact. The Board is engaged in the identification and monitoring of our material risks and opportunities, actively overseeing a Sustainability Committee comprising COURTS senior management. Our material risks and opportunities are managed by different business functions which report to the Committee. Sustainability progress and performance are regularly assessed, with regular updates provided to the Board. The below diagram outlines the sustainability management and reporting structure at COURTS.

Board of Directors

Sustainability Committee comprising senior management

Functional ChampionsBuying, Customer Service, Facilities Management, Finance, Human Resources, Information Technology and Marketing



Stakeholder Engagement

Understanding our stakeholders’ priorities and concerns is key to COURTS’ business strategy and vision of building a sustainable business. Our stakeholders are identified and prioritised based on their dependence and influence on our business. How we engage with various stakeholder groups, including how we respond to the expectations and concerns raised by them, is presented below.

How We Engage & Frequency of Engagement Expectations & Our ResponseEmployees

We view employees as a critical asset to the business and, being guided by our core value Employees First, seek to deliver a people-centric approach to our engagement. Regular opportunities for employees are provided as touchpoints with management and their peers, including weekly visits to stores, regular coffee talks between individuals and supervisors, quarterly townhalls and annual staff conference, as well as multiple orientation sessions for newcomers to induct them into the business and meet management. Staff are further engaged through monthly internal newsletters, the staff intranet and monthly lunch days, among other regular social and bonding opportunities. We also have in place a whistleblowing policy by which staff may in confidence raise concerns.

Concerns raised include remuneration, training and development opportunities, wellbeing and wellness as well as the prospect of retirement. In response, we employ a matrix-based approach to compensation (Refer to ‘People & Community Investment’), organise educational lunch talks on retirement planning, as well as implement our COURTS@ctive Programme, through activities such as weekly fruit distribution and mass exercise and sporting sessions. We are also committed to maintaining a conducive environment for our staff – to enjoy leisure time in between duties, and have responded to feedback, ensuring the upkeep of our pantry area with new furniture and kitchenette facilities.

Customers

Customer engagement is top of mind for COURTS, with Customer Focus being one of our core values. There are various available touchpoints for customers to interact with COURTS and for us to gather feedback from and engage with our customers. These include in stores, on our e-commerce platform, through social media, as well as during home deliveries which are followed up with SMSes to collect customer feedback. COURTS has also rolled out a tablet feedback collection system to all our stores in Singapore in a bid to get more customer feedback, to supplement existing feedback mechanisms of SMS and email.

Customers raise pricing competitiveness, ease and speed of credit application, delivery timeliness and customer service among their concerns. We conduct regular staff trainings to improve service and solutions-selling as well as credit application sales and handling, and ensure our customer service and social media response teams are equipped to provide accurate information in a timely manner. For more information on response timing, please refer to ‘Customer Satisfaction’. We believe our efforts to engage our customers are paying off, resulting in us achieving a record Smile Score of 68% in FY17/18 (Refer to ‘Operations Review’).

Government & Regulators

COURTS is an established brand and corporate presence in the Singapore community, with a 44-year history and strong local roots. We remain welcoming of more public sector engagement and are open to dialogues and collaboration with the government and its agencies. COURTS has been a member of government-affiliated or endorsed associations, with the majority of our sales force represented by The Singapore Manual & Mercantile Workers’ Union. Our first Megastore in Tampines was set up as part of the Economic Development Board’s (EDB) “Warehouse Retail Scheme”, encouraging major retail players to co-locate within a retail park for the benefit of the local community. We participate in industry dialogues and public forums and events on at least a quarterly basis and have supported CSR and charity initiatives supported by the government. For a full list of our memberships, please refer to ‘Memberships and Associations’.

Regulator concerns include employee welfare and fair remuneration practices, environmental impact as well as compliance to occupational safety and product labelling regulations. In response, COURTS continues to remain vigilant of public regulations and work closely with regulators on an ad-hoc basis to ensure compliance and collaboration.


How We Engage & Frequency of Engagement Expectations & Our ResponseSuppliers

As a retailer, COURTS is committed to nurturing positive and long-term relationships with our suppliers and business partners. Beyond day-to-day operations, our commercial team engages with our partners on a monthly to quarterly basis. COURTS organises an annual event to provide an update to our partners of our business plans and performance, as well as to gather feedback.

Suppliers generally raise store display and retail space use, product training and marketing among their issues of interest. In response, COURTS continues to work closely with its suppliers and partners to ensure open lines of communication for mutually beneficial and commercially sustainable partnerships.

Shareholders

COURTS Asia has been listed on the Mainboard of SGX since 2012 and, in compliance with regulations, issues an annual report and holds an Annual General Meeting every year. On a quarterly basis, the Group’s financial results are reported publicly and briefings are held with the investment and media community through teleconference or in person. Retail investors are able to reach the dedicated Investor Relations team with questions at any time.

Shareholder concerns include financial and business performance and plans as well as good corporate governance. To this end, the Group reports its performance and corporate governance annually and continues to maintain open lines of communication with its shareholders and investors.

Community

As a locally established company with its headquarters situated in Singapore, COURTS is very much committed to the local community and markets in which we operate. As a result, engaging with and supporting the community has been the driving force behind our CSR efforts over the years. COURTS holds biannual corporate giving activities which encourage employee volunteerism and outreach to the underprivileged or communities in need, charity fundraising events for local beneficiaries, as well as regularly supports grassroots and community efforts wherever aligned with our core CSR strategy on an ad hoc basis.

Issues raised by the public include providing need-based financial and in-kind support to lower-income groups as well as the need for greater corporate engagement and outreach. We continue to refine our CSR strategy and activities in line with our core values and sustainability approach, to better serve the needs of local communities. For full details of our CSR efforts, refer to ‘People and Community Investment’.



Materiality Assessment

We have conducted our Materiality Assessment in accordance with the GRI Standards’ Principles for defining report content and topic boundaries. A peer and industry review exercise was conducted to identify and shortlist potential material factors where our business has significant impact. Following that, we engaged with our Board and senior management to weigh the factors, bearing in mind our six key stakeholder groups. The final list of material topics are listed below, as organised under three key pillars of People and Community Investment, Market Responsibility and Environmental Protection.

COURTS’ Material Topics GRI Standard Reported

Geographical Boundary Reported for FY17/18

Impacted Stakeholder Groups

People and Community Investment

Human Capital Development • Training and Education

• Employment

Singapore• Employees

Economic Performance • Economic Performance

Singapore

Malaysia

Indonesia

• Employees

• Regulators

• Suppliers

• Shareholders

• Community

Market Responsibility

Customer Satisfaction • N/A

Singapore

• Customers

Customer Data Privacy • Customer Privacy

Singapore

• Customers

• Regulators

Environmental Protection

Resource Efficiency and Management • Energy

• Effluents and Waste

Singapore

• Customers

• Regulators

• Community


Full time: 429Part time: N/APermanent: 85Temporary: 344

Non-COURTS Workforce: 585

Full time: 359Part time: 3Permanent: 362Temporary: N/A


Full time: 492Part time: 3Permanent: 462Temporary: 33


Full time: 170Part time: N/APermanent: 48Temporary: 122

People and Community Investment

With two of our three core values being people-centric, Employees First and Customer Focus, COURTS views people as a core asset to our business. As the retail industry continues to evolve at an accelerated pace, investment in our people and the community we work with is fundamental to delivering value. As a mass retailer with established roots in the region, we employ fair labour practices, with 16% of our employees being covered by collective bargaining agreements. With 2,410 employees across three countries as of 31 March 2018, nurturing and retaining talent sits at the heart of our sustainability strategy.

Additionally, investing and giving back to the community is important. In a challenging business environment, strong economic performance is crucial to deliver stakeholder value. We believe in distributing the economic value we create, and giving back to communities is an important priority in the distribution of our economic value.

Singapore: 654

Indonesia: 599

429

362

495

170

292

662Malaysia: 1,157

COURTS’ Workforce: 2,410 employees across the region

Full time: 283Part time: 9Permanent: 292Temporary: N/A

Full time: 642Part time: 20Permanent: 617Temporary: 45



Human Capital Development

Reporting Boundary

As retail continues to evolve at a fast pace, human capital development and retention is integral to driving COURTS’ people and business forward. Acquiring and retaining quality talent can be challenging as people seek multi-faceted and flexible employers that offer continuous learning opportunities. Given the velocity of change in the industry, retaining talent and equipping our people with the necessary skillsets become all the more critical to maintaining a conducive work environment.

In recognition of the importance of developing our people, COURTS Singapore follows the Enterprise Singapore framework to govern human resource management. COURTS also obtained and has been renewing our three-year accreditation for the People Developer (PD) Programme awarded by Enterprise Singapore last renewed in 2015, and joined the Tripartite Alliance for Fair and Progressive Employment Practices (TAFEP) Human Capital Partnership Programme.

For external training, COURTS Singapore works with multiple government and industry agencies such as SkillsFuture Singapore and the Singapore Institute of Retail Studies. Training programmes are initiated at suitable intervals to equip employees with relevant skill sets to keep pace with the dynamic retail industry. Annually, COURTS Singapore conducts a leadership development programme targeting identified leaders consisting of department managers and assistant managers. For the year under review, a digital competency programme for 100 staff was organised by Singapore Institute of Retail Studies (SIRS) to upgrade their skills and prepare for a digital future. Routine and regular trainings on credit and products are also conducted for sales staff to ensure all are prepared to provide seamless customer service.

Across the board, COURTS has a structured framework in place to deliver relevant and topical learning and development opportunities to our employees, making use of the 70:20:10 learning framework model for training.

• Team leadership• Meeting attendance• Senior leadership exposure • Taking the lead on negotiation • Opportunities for presentation • Departmental briefing• On-the-job training• Suppliers training

• Classroom training (internal/external)• Online modules• Workshops• Seminars• Self study

• Rotational assignments• External assignments & involvement• Industry insights• Action-based learning• Mentoring• Coaching

Training and development

On-the-JobLearning

TrainingOpportunities

DevelopmentAssignments

70%

10%

20%

COURTS places strong emphasis on training our sales force to be future ready

In Singapore, we invested over 50% more in its FY17/18 training budget compared with FY16/17. We provided 51,591 hours of training to our 654 employees in Singapore, averaging 79 training hours per employee. COURTS actively seeks relevant training and development opportunities both within the organisation as well as through external partners to keep our workforce future-ready.

Amid a sector that is facing constant innovation, home and range expertise become all the more relevant when customers seek a differentiated physical store experience. Customers seek expert counsel beyond basic product knowledge as they have typically conducted prior research online. As such, we have placed importance on driving training that equip staff with the relevant skills to sell end-to-end home solutions.

To prepare for the ageing population in Singapore, COURTS has also started training and lunch talks targeted at the silver workforce in the previous FY that included retirement planning and Central Provident Fund (CPF) education. The programme was continued this FY, together with Individual Retirement Plan conversations to provide transitional assistance to those planning to leave the workforce.


Talent Management

Our human resource policies are aimed at promoting a merit-based approach to talent management to develop an organisational culture of excellence and high performance. We have in place a quality talent identification framework and talent pipeline, including utilising the Lominger nine-box tool to identify high-potential talent within the organisation and across countries, conducting a multi-level talent audit process, workshops to review and recognise employees with high potential and personalised development plans tailored at grooming them for future roles with COURTS.

High potential staff are offered opportunities for further development, such as training geared at cultivating leadership skills, regional postings and overseas study assignments and cross-department training. Management trainee programmes are also in place to tag young talent to leaders for mentorship opportunities.

Employee Welfare and Wellbeing

COURTS is committed to facilitating a healthy work-life balance as well as providing a safe and healthy workplace for its employees. Dynamic scheduling for flexible work arrangements such as flexible office start times and work-from-home arrangements are available. Numerous initiatives are in place to encourage a fit and healthy workforce, such as complimentary health screenings and activities in health, wealth and mental wellness spearheaded by the COURTS@ctive Programme. These range from seminars, classes and lunchtime talks to monthly futsal sessions and weekly healthy fruit and nuts distribution. COURTS Singapore was awarded a Certification of Recognition in 2017 as part of the Singapore HEALTH Award by the Health Promotion Board in acknowledgement of its efforts to make COURTS a healthier workplace.

Safety for customers and employees alike is paramount for COURTS, and we enforce established occupational health and safety practices as a responsible employer. COURTS stores and offices place safety and security as their utmost priority, regularly conducting checks and open dialogues with authorities. Staff are sent for regular emergency preparedness training, including first aid and fire extinguishing courses.

For example, COURTS Megastore in Tampines conducted the In-Place Protection Drill in 2016, during which the Company Emergency Response Team (CERT) simulated an emergency scenario to ensure the store is prepared for fire emergencies and accidental release of hazardous gases. Fire drills are conducted on an annual basis. COURTS is also the first retailer in the Tampines Retail Park to set up Automated External Defibrillator (AED) lifesaving equipment within its premises, and the first to register it with the Singapore Civil Defence Force (SCDF) first responder mobile application. In a company-wide exercise, employees are encouraged to download and use the SGSecure mobile application, to be able to stay alert to national emergencies.

In 2017, COURTS Singapore was awarded the Safety & Security Watch Group (SSWG) Award, in recognition of our collaborative efforts with public authorities to preserve a safe and secure community and environment.

COURTS completed our OHSAS 19001 surveillance audit in January 2017 and continues to hold the OHSAS 18001 certification, certifying that we provide a safe and healthy work environment for our employees. COURTS Singapore also holds the bizSAFE STAR status, the highest level of bizSAFE Certification under the Workplace Safety & Health Council. We were also awarded the bizSAFE Partner Award status in 2017, which recognises bizSAFE partners who are committed to incorporating safety as part and parcel of business processes.

COURTS implements programmes to ensure staff physical wellness and wellbeing

COURTS conducts regular fire drill exercises to enforce emergency preparedness



Annual number of new hires in Singapore

Annual rate of employee turnover in Singapore1

Rate of employee turnover below 30 yearsRate of employee turnover between 30 and 50 yearsRate of employee turnover above 50 years

We recognise the importance of continuing to benchmark our human capital initiatives against best-in-class industry practices. To that end, COURTS Singapore has attained numerous awards and certifications in the past – apart from the previously mentioned, being certified by the People Developer Awards since 2003 and attaining People Developer Award S Class in 2008. COURTS will continue to strive towards achieving similar accolades and industry recognition as part of our continuous improvement of policies to achieve excellence.

Annually, we assess the effectiveness of our human capital initiatives through an employee engagement survey to measure employee satisfaction, and evaluate trends and areas for improvement. The FY17/18 survey indicated a 62% engagement rate which measures how engaged employees feel by the company, up from 58% in FY16/17, among employees.

COURTS Singapore is pleased to report that its holistic human capital and talent management initiatives have resulted in a low monthly employee attrition rate of 1.5% for the year in review, significantly lower than the retail industry monthly benchmark of 3.5% according to 2017 data by the Ministry of Manpower.

1 Expressed as a percentage of the average number of employees within the stated gender or age group in FY17/18.2 Reference ‘Table: Labour Turnover, 2017’ (http://stats.mom.gov.sg/Pages/Labour-Turnover-Tables2017.aspx)

Performance

COURTS believes that training and development is integral to its human capital development strategy.

Average training hours per Singapore employee for FY17/18 by gender

Average training hours per Singapore employee for FY17/18 by employee category

Targets

Looking ahead, COURTS will target to maintain staff attrition rate below the industry 2017 monthly benchmark of 3.5%2, increase employee engagement rate to 65% for the coming FY, and ensure a minimum of 48 hours of training per employee annually.

Annual number of employee turnover in Singapore

Number of turnover below 30 yearsNumber of turnover between 30 and 50 yearsNumber of turnover above 50 years

Annual rate of new hires in Singapore1

38.1 hrs94.4 hrs56.8 hrsEmployees in

support centre

97.0 hrsEmployees in

sales

Gender

Age

17% 19%

23% 18% 9%

Gender

Age

61 54

37 67 11

New hires below 30 yearsNew hires between 30 and 50 yearsNew hires above 50 years

Gender

Age

72

68 59 5

60

Rate of new hires below 30 yearsRate of new hires between 30 and 50 yearsRate of new hires above 50 years

Gender

Age

20% 21%

43% 16% 4%

Male Female


Economic Performance

Reporting Boundary

As a leading retailer in the region, COURTS is committed to the creation of value for our stakeholders, and is focused on sustainable business strategies for long-term growth. We prioritise and drive strategies that maximise shareholder returns while creating environmental, social and economic value for our stakeholders.

*No dividends were declared for FY17/18 as our priority is to preserve liquidity.

Corporate Social Responsibility (CSR)

COURTS recognises that we have an important role to play in distributing economic value back to the communities who have supported us, generating further value for those in need. As one of the leading retailers in Southeast Asia, COURTS is committed to being a socially responsible corporate citizen that leverages its core competencies, network and resources to leave a positive and profound impact on the community. Some of the causes we steadfastly support include helping the underprivileged and special needs communities, as well as the elderly and children who need support.

Our management approach to CSR is holistic and includes various avenues and platforms – including participating in in-kind sponsorships and giving, corporate dollar-for-dollar matching of employee donations, organising our own biannual fundraising activities and employee volunteerism and giving efforts to engage and reach out to the grassroots and those in need. Quarterly opportunities for employees to give back financially or by volunteering their time and skills are highly encouraged and scheduled as regular activities. Giving is also highlighted and celebrated in monthly internal communications.

Performance

Funds raised for local charities to date since 2002

Number of local charities supported since 2002

Total number of volunteer hours contributed by staff in FY17/18

Over S$5 million 24 232

GovernmentTaxes

S$3.0m

Operating Costs

S$612.7m

Payment to Providers of Capital S$20.8m*

Employees Wages and

Benefits S$68.3m

Community Investment

S$0.2m

Economic Value Generated S$713.1m

Econom

ic Value Retained S$8.1m



Country CEO of COURTS Singapore donating household needs to low-income families

As part of COURTS Malaysia’s 30th anniversary, we donated to 30 underprivileged homes

COURTS and O’Connors and Friends raised over S$561,000 for three charities in Singapore

In Singapore for the year in review, COURTS collectively contributed more than S$190,000 on various CSR initiatives through furniture and appliances donations to low-income families and a fundraising campaign. Notably, as part of the COURTS Home Delivery CSR 2017 programme, staff volunteers personally hand-delivered over S$20,000 worth of household needs to low-income families and hosted them to iftar over dinner in the Ramadan spirit of giving and fostering togetherness.

COURTS Singapore also launched a week-long Green Christmas campaign in December 2017 to promote awareness of clean and green homes for the underprivileged, and channelled a percentage of sales from selected energy- and water-saving home appliances to Habitat for Humanity Singapore to support the provision of safe and decent homes for vulnerable elderly and families in Singapore and the region. S$5,200 was raised for this cause. In conjunction with the Green Christmas campaign, 14 volunteers rolled up their sleeves and helped clean two homes of needy elderly in the Chinatown area, doing paint works and sealing crevices to prevent bug infestations.

Similarly, in Malaysia, through its Rumah Amal COURTS (COURTS Charity House) programme and to celebrate COURTS Malaysia’s 30th anniversary, donations totalling RM141,600 worth of home furnishings and appliances were made in FY17/18, benefitting young and old in Central and East Malaysia.

Two anchor fundraising events are held annually as part of COURTS’ corporate giving efforts – the COURTS Charity Golf Tournament and the COURTS and O’Connors & Friends Charity Party. To date, both events have raised over S$5 million for local charities since 2002 by engaging business partners to contribute to our corporate giving causes. In FY17/18, over S$561,000 was raised for three local charities – Bizlink Centre Singapore, Cerebral Palsy Alliance Singapore and Autism Association, the largest yearly contribution so far.

COURTS’ commitment to giving back to society has been recognised over the years through the multiple awards presented to us, including ‘Best Efforts in Corporate Social Responsibility’ at the Singapore Retailers Association (SRA) Retail Awards and The President’s Volunteerism & Philanthropy Award by the National Volunteer & Philanthropy Centre. COURTS is also a Founding Member of the National Volunteer & Philanthropy Centre and Singapore Business Federation’s ‘Company of Good’ programme, participating in dialogue sessions to help businesses in their giving initiatives

Indonesia, given its relatively small business size, continues to focus efforts on creating a sustainable business while contributing in small ways where possible towards canvassing employee donations or donating home necessities during festive giving periods such as Ramadan.

Targets

COURTS will target to maintain our contributions to the community, whether through staff volunteerism, donations or contributions of furniture and appliances to homes in need, to contribute to a more inclusive society.


Market Responsibility

COURTS is a mass-market family brand and cherishes our relationship with public stakeholders and the wider community as integral to our success. With a mission to make aspirational home products easily affordable, we are focused on building a trusted and customer-centric brand within all the markets we operate.

Customer Satisfaction

Reporting Boundary We have decided to include Customer Satisfaction as part of our Sustainability Report to convey the importance we ascribe to this aspect of our business and commitment to our customers. With growing disruption from e-commerce as well as the proliferation of social media amplifying the reach and immediacy of the customer experience, the retail industry is continually challenged to differentiate itself by improving the customer service experience.

The management approach to customer satisfaction is to build a robust and as close to real-time customer feedback collection system that enables us to respond swiftly in the event of issues resolution. We have set up customer service hotline and email as well as social media teams to respond promptly. We analyse comments and feedback on a regular basis, identifying trends and working with different departments to finetune our processes and mitigate future concerns.

Additionally, COURTS continually welcomes customer feedback, rolling out initiatives to meet changing customer demands. Examples include the launch of our in-house solutions brand, GURU, to meet the growing demand of end-to-end home solutions that meet customer needs before and after the purchase in the way of maintenance, repair and warranties, as well as continue to grow Design

COURTS practises a Customer First and service-driven approach, prizing customer service in all that we do

COURTS’ FlexiCredit remains a unique differentiator for the customer experience

Studio by COURTS, our in-house renovation and interior design services provider. We are also continually refining and improving our loyalty programme, HomeClub, to offer more targeted offers to our loyal customers.

COURTS has been using Smile Score (also known in the industry as Net Promoter Score) as a commercial metric of success and gathering customer feedback in this regard since 2013. Over the years, we have grown and developed our efforts at collecting effective and more customer feedback, beginning with surveys in FY12/13. In FY16/17, we rolled out tablets to replace traditional feedback systems at all our physical stores and, in FY17/18, extended this to our Click and Collect counters. Today, we gather customer feedback from multiple touchpoints, including in-store, after delivery via SMS, online and via email. We believe that a robust customer satisfaction system enables us to gather real-time feedback and respond swiftly to resolve any issues, and close any existing gaps.

In line with our mission to provide aspirational home products at affordable prices, COURTS is a responsible credit provider that provides the option for consumers to pay for relatively big-ticket purchases in instalments through our flexible financing plans. We believe it is our responsibility to customers to ensure their financial commitment is at a level that is affordable to them.

Since incidents of credit delinquency are unfavourable for both our economic performance and customers’ interests, we ensure that all credit customers undergo

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