MARC has affirmed its ratings of MARC-2ID / AID on Symphony House Berhad’s (Symphony) RM100.0 million Islamic Commercial Papers/Medium-Term Notes (Islamic CP/MTN) Programme. The ratings carry a stable outlook. The affirmed ratings reflect Symphony’s dominance in the domestic market position in providing outsourced business process, the positive growth prospects of its business process outsourcing (BPO) operations, its moderate financial flexibility and improved financial performance. The continued weak equity market conditions and uncertain economic outlook is expected to challenge Symphony’s share issuance and registration business. The stable ratings outlook assumes that Symphony will maintain its competitiveness against its domestic and non-domestic rivals in the BPO market, while preserving its low debt leverage and satisfactory liquidity. Symphony’s BPO business is expected to provide the company with stable contract based earnings and cashflows to counter the variability of its equity market-related share issuance and registration business.

Symphony’s core business is its BPO services covering contact management, human resource, financial, corporate secretarial, share issuance and registration, and cheque processing. The BPO division accounted for 97.4% of total revenues in financial year ended December 31, 2007 (FY2006: 96.5%). Symphony’s outstanding contracts of RM110.0 million as at September 30, 2008 provide near-term revenue visibility. The contracts cover business process in areas such as financial, contact management, human resource (average contract tenure of approximately 22 months) and cheque processing (5-year tenure).

For the financial year ended December 31, 2007 (FY2007), Symphony posted a significant jump in net profit after tax to RM15.6 million (FY2006: RM2.8 million) on the back of RM160.0 million (FY2006: RM118.1 million) in revenue attributable to higher BPO activity and one-off project revenue of RM22.4 million from Bank Negara. Even after stripping off the extraordinary revenue, Symphony’s annual revenue growth remained strong at 16.5% year-on-year. Its operating profit margin improved to 11.7% (FY2006: 7.5%) during FY2007, strengthened by initiatives to streamline its operations through the disposals of its loss-making information technology division and other non-core businesses. Debt-to-equity improved significantly to 0.18x in FY2007 (FY2006: 0.36x) following the redemption of a term loan of RM40.5 million. Symphony retains moderate financial flexibility on the basis of its cash and bank balances of RM35.9 million and unutilized banking lines excluding the Islamic CP/MTN of approximately RM31.3 million as at September 30, 2008.

Contacts:
Azlina Mohamed Noor Beg, 03-2090 2254/ azlina@marc.com.my;
Anthony Eng, 03-2090 2255/ anthony@marc.com.my