"We mentioned for the first half what we consider one-time charges, and the second half is normally better seasonally... our expectation is that the second half will be better than the first half," Elie Baroudi, deputy chief executive officer, told a news conference.

But, he said that the group would not perform as profitably as 1997, as the first half had come in significantly lower due to continuing poor consumer demand in the region.

For the six months ended September 30, 1998, Thakral reported group net profit fell 22 per cent to Singapore $24.50 million.

Turnover for the period also fell to S$428.45 from S$512.93.

The drop in turnover was due to slowdown in consumer demand, especially in flood-striken China where disruption over two months in July and August resulted in extensive losses.

"Period-to-period, we estimate that sales of audio-visual products were negatively impacted to the extent of S$53 million as a result of the floods," Baroudi said.

Profits were also hit by slow retail sales in other Asian economies, with unit sales suffering from competitive pressures and weakeness in the yen.

Baroudi said Thakral decided to exit unprofitable activities such as manufacturing video compact disc (VCD) players.

This was partly also because the group had decided to move into higher-end digital video disc (DVD) players.

An extraordinary charge of S$9.8 million was booked as a result, to cover potential write-offs of inventories and other assets, he said.

A provision of S$7.7 million for the loss in value of investments in equities of Singapore, Hong Kong and Thailand was also made, but these investments have made up ground since they were accounted for at the end of September, he said.

The group also incurred a loss of S$3.7 million in hedging foreign exchange costs and S$5.8 million in provisions for managing receivables, he said.

On the brighter side, Baroudi said Thakral would build its distribution of multi-media products, especially IBM computers, which have enjoyed increased turnover of S$61 million compared with S$14 million in the previous period.

New brands from Hewlett Packard, Fujit and Xerox had been added to Thakral's stable of new products, he said.

The group also expected manufacturing of DVD players in China and production and distribution of entertainment discs to contribute to future profits despite slower than expected take off in some investments due to bureaucratic hurdles.

"This is a business we believe will have a very significant contribution to our profitability in the future and revenue generation," Baroudi said.