FEDERAL FURNITURE HOLDINGS (M) BHD

Explanatory notes on Quarterly Report on consolidated results for the first financial quarter ended 31 March 2000.

Notes :

1.	Accounting Policies
The quarterly financial statements have been prepared based on accounting policies and methods of computation consistent with those adopted in the most recent annual financial statements.

2.	Exceptional Items
There was no exceptional item during the financial period under review

3.	Extraordinary Items
There was no extraordinary item during the financial period under review. 

4.	Taxation
The write-back for taxation in the quarter represents a net overprovision of tax in respect of prior years. 

5.	Pre-acquisition Profits
There were no pre-acquisition profits for the current financial year to date.

6.	Sale of Investment and/or Properties
There was no sale of investment or property for the current financial year to date. 

7.	Quoted Securities
There were no purchases or disposals of quoted securities for the current financial year to date.

8.	Changes in the Composition of the Group
There were no changes in the composition of the Group for the current financial year to-date

9.	Status of Corporate Proposal
There was no corporate proposal announced but not completed at the date of this report. 

10.	Comment about seasonal or cyclical aspects of operations.
The furniture trading operation which carry out a substantial portion of its business activities for the United States of America’s market is subject to the seasonal nature of retail sales of furniture in that country. Turnover for the quarter under review was lower reflecting the low season for furniture retail sales in the USA.
Turnover for the interior fit-out operation was low in the first financial quarter due to the long breaks during the Chinese New Year and Hari Raya festivities. 

11.	Changes in Share Capital and/or debt securities
There were no issuance and repayment of debt security nor changes in the share capital for the current financial year to date.

12.	Group Borrowings as at end of Reporting Period

•	Short Term Borrowings :

Secured :			   RM
					   ‘000

	Bank overdrafts			    999
	Term loans			 1,363

Unsecured :			

	Bank overdrafts			  5,997
	Short term advances		       22 	
Bankers’ acceptances		29,103
Export credit refinancing	     117
Revolving credit		  7,299
Supplier credit financing	     291
Factoring			     417
Trust receipts			     631

Total				46,239

•	Long Term Borrowings :

Secured :			    RM

	Term loans			  6,485

13.	Contingent Liabilities
(a)	A subsidiary company involved in the trading of furniture has been requested by its local banker to repay the sum of RM 695,350 which was paid by the bank’s overseas correspondent bank to some suppliers against Letters of Credit issued on behalf of the subsidiary. The subsidiary is objecting to the demand for repayment as written instructions had been given to the local bank to reject the Letters of Credit due to unacceptable discrepancies. The local bank and the subsidiary have mutually agreed to jointly pursue the matter with the overseas bank to ask them to recover the full amount wrongly paid to the suppliers.

(b)	Corporate guarantees given to financial institutions for credit facilities granted to subsidiaries amounted to RM 55,170,462

14.	Off Balance Sheet Financial Instruments
There were no off balance sheet financial instruments at the date of this report.

15.	Material Litigation
None.

16.	Segmental Reporting

By activity :	Turnover

RM ‘000	Profit /(Loss)
Before Taxation
RM ‘000	Total Assets
Employed
RM ‘000	
				
Manufacture and export of furniture	1,242	 (497)	  57,703	
Trading	1,561	(322)	8,366	
Renovation and interior fit-out	2,366	    (1,269)	  38,833	
Investment holding	      48	   (166)	  27,860	
Others	   -	   (22)	    981	
	5,217	(2,276)	133,743	

17.	Comment on material Changes in profit before tax for the quarter compared to the preceding quarterly.
Group loss before tax reduced from RM3.7 million in the preceding quarter to RM2.3 million in the current quarter. This improvement is principally attributable to the non-occurrence of exceptional items amounting to RM2.2 million in the preceding quarter arising from provisions made for doubtful debts, obsolete stocks, and agreed compensation for settlement of a legal claim. At operating level however, the Group registered a loss before interest, depreciation and amortisation of RM0.7 million for the quarter compared to an operating profit of RM0.2 million in the preceding quarter. The operating results of the Group were affected by the low seasonal turnover of the Trading and Renovation and Interior Fit-out divisions during the first financial quarter.

18.	Review of Performance
The manufacturing and export division reported an 11% increase in sales over the preceding quarter while operating loss reduced by 58% over the same period. Sales for the Trading division fell by 70% during the first quarter in tandem with the low seasonal retail sales of furniture in the USA which follows the peak season in the fourth quarter of the last financial year. In consequence thereof, the division reported an operating loss of RM0.3 million for the current quarter. The performance of the Renovation and Interior Fit-out division has been adversely affected by the downturn in the property and construction industry in particular the construction of new hotels on which it has historically been dependent on. Turnover for the quarter was 69% lower than the preceding quarter as most of the projects have been completed. Traditionally, this is also a low season for the division due to the Chinese New Year festivities. 

19.	Current Year Prospects
Underpinned by the continued improvements in economies in Asia and Europe the Manufacturing and Export division is expected to better its export sales and operating results for the current financial year. The Trading division is expanding its channel of distribution in the USA and is confident that its growth momentum will be sustained in the current year. The Renovation and Interior Fit-out Division is continuing its efforts to break into the corporate fit-out segment of the market and the prospect for the year will hinge on the outcome of these efforts. Interest costs will continue to bear heavily on the Group financial results and in this regard, the Board is considering various options including disposal of non-core assets to reduce the Group’s borrowings.

20.	Variance From Profit Forecast
Not applicable.

21.	Dividend
No interim dividend has been declared during the period under review.