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Q2 sales were $183 million +10%. The increase in sales was driven by higher consumer demand for OSIM products like uInfinity, uDivine App, uDiva, uPhoria Warm, uHug, uCozy 3D, uCaress 3D, uAlpine, uTrek, uShape, nutritional supplements and luxury tea like Imperial Oolong & Ti Kuan Yin and Iced Teabags. TWG Tea became a subsidiary in October 2013 and has also contributed to the sales.
Q2 profit before tax reached a high of $39 million +12%. The better performance was due mainly to an increase in sales and better productivity. The increase in operating expenses was mainly due to increases in wages, rental and startup costs at TWG Tea but our better productivity in sales per outlet resulted in better profits.
We are pleased that the core business of OSIM and nutritional supplements subsidiary ONI Global continued to grow during the quarter.
Interest expenses have reduced due to conversion of convertible bonds. Share of results of associates is less mainly due to TWG Tea becoming a subsidiary.
Q2 profit after tax was a record $30 million +13%.
Revenue by Region
Today OSIM operates in 30 countries around the world.
All regions contributed to better sales growth for the quarter and year.
For the 3 months ended 30 June 2014, we had sales growth with a better product mix of massage chairs, massage sofas, foot massagers, head massagers, neck and should er massagers, nutritional supplements and luxury tea.
During the quarter, operating EBITDA grew 21% to $43 million due to a better product mix and higher productivity per man per outlet.
3 months net cash flow from operating activities was $35 million +14%. This was due to better working capital management.
During the quarter, we invested $5.2 million to open new outlets, upgrade existing outlets and start development of TWG Tea outlets in North Asia (Q2 2013: $2.5 million).
Financing cash outflow increased mainly due to the repayment of bills payable.
As at 30 June 2014, the cash and cash equivalents of the Group stood at $272 million. Including fixed income investments of $32 million, total cash & cash equivalents and fixed income investments was $304 million.
Global Network of Outlets
During the year, we increased profitability within existing outlets. We regularly review performance of our outlets and there were selected closures of non-performing outlets.
Total capital expenditure for the quarter was $5.2 million.
As at 30 June 2014, we were in a net cash position of $239 million. Including fixed income investments of $32 million, the total net cash and fixed income investments was $ 271 million.
Net assets as at 30 June 2014 were $486 million.
As a result of the record performance, the Board is pleased to propose an interim dividend of 2 cents per share.
We are pleased with the record performance. We launched uDiva massage sofa during the quarter which has created lots of awareness and good response. We expect uDiva to continue to do well for the current year. We expect to continue to create higher consumer demand for OSIM products like uInfinity, uDivine App, uDiva, uPhoria Warm, uHug, uCozy 3D, uCaress 3D, uAlpine, uTrek and uShape .
We have 578 OSIM outlets. We continue to have profitable growth in China and are in 44 cities with 265 OSIM outlets. For this year, we are targeting to open 20 to 30 OSIM outlets while we close under performing outlets . OSIM's sales per outlet have increased.
Our 223 GNC outlets are doing well. GNC Taiwan is progressing well. There is a total of 238 GNC/RichLife outlets in ONI Global and we are growing our sales through new products.
TWG Tea has 33 outlets . In Q3, we are opening new outlets at Taipei 101, Shanghai Grand Gateway & IAPM and Guangzhou Tai Koo Hui. We are targeting to have about 45 outlets by end of the year. We are creating new lines of luxury tea like Imperial Oolong & Ti Kuan Yin and Iced Teabags.
We expect our businesses to remain strong in 2014.
The directors are pleased to recommend an interim dividend of 2 cents per share.