9 Quick Things That Investors Should Know About Old Chang Kee Ltd’s Latest Earnings
Food & beverage retailer Old Chang Kee Ltd (SGX: 5ML) has been around since 1956, growing from a single stall outside Rex Cinema to 89 outlets in Singapore as of 31 March 2017. Old Chang Kee may be best known for its signature Curry’O puff, a popular Singapore snack.
In mid-November, Old Chang Kee reported its second quarter earnings for its fiscal year ending 31 March 2018 ( FY2018). Here are nine things investors should know about the company’s latest results:
1. Revenue for the reporting quarter improved 5.9% year-on-year to S$21.4 million.
2. But, net profit declined by 52.6% to S$0.75 million, driven mainly by higher raw material costs, higher selling expenses, and one-off factory test-runs for the commissioning of Old Chang Kee’s new factory equipment.
3. Similarly, earnings per share (EPS) dropped 52.3% year-on-year to 0.62 cents.
4. The net profit margin declined from 7.8% in the second quarter of FY2017 to 3.5%. The lower margin was due to the higher costs mentioned above.
5. In the second quarter of FY2018, Old Chang Kee generated operating cash flow of S$2.33 million, used S$2.18 million on capital investments, and spent S$2.20 million in total on dividends and the repayment and servicing of loans.
6. As of 30 September 2017, Old Chang Kee had S$13.12 million in cash and equivalents on its balance sheet. With total borrowings of S$11.7 million, the company had a net cash position of S$1.42 million.
7. Old Chang Kee’s net working capital (current assets minus current liabilities) increased from S$4.31 million as of 31 March 2017 to S$4.77 million in the reporting quarter.
8. The company reported a S$22k loss in the share of results of a joint venture; this is from start-up losses from a new joint venture in the United Kingdom.
9. Old Chang Kee gave the following comments on its future in the earnings release:
“The Group’s first flagship outlet in London, United Kingdom is targeted to open in 2018, generating new revenue streams for the Group and uplifting Old Chang Kee’s brand positioning.
On the current operations, the Group expects operating lease expenses (rental), labour and raw material costs to remain high in the next reporting period and the next 12 months, and believes that the labour market will continue to remain tight.
Following completion of the new factory facilities and the commissioning of new factory equipment in 2Q2018, the Group will be focusing its efforts on improving its gross margins and revenue”