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(Extracted from Annual Report 2017)

Dear Shareholders,

It is my pleasure to present to you Old Chang Kee's (the "Company" or "Old Chang Kee" and together with its subsidiaries, the "Group") Annual Report and the Group's financial results for the financial year ended 31 March 2017.


The Group's revenue increased from approximately S$73.9 million for the financial year from 1 April 2015 to 31 March 2016 ("FY2016") to approximately S$78.3 million for the financial year from 1 April 2016 to 31 March 2017 ("FY2017"), an increase of approximately S$4.4 million or 6.1%.

Revenue from retail outlets increased by approximately S$4.3 million or 5.9%. The increase in revenue was mainly due to revenue contribution from new outlets, partially offset by lower revenue from existing outlets, and absence of revenue from temporary closure of outlets due to mall revamps.

Revenue from other services, such as delivery and catering services increased by approximately S$170,000 or 15.9%, mainly due to higher sales generated from food delivery services.

As at 31 March 2017, the Group operated a total of 89 outlets in Singapore as compared to 83 outlets as at 31 March 2016.

The Group's signature puff products remained the major contributor to its revenue and accounted for approximately 31.8% of the Group's revenue in FY2017, as compared to approximately 31.6% in FY2016.

Cost of sales and gross profit

Cost of sales increased by approximately S$1.5 million or 5.5%. The increase was mainly due to the higher revenue generated by the Group.

The Group's gross profit increased by approximately S$3.0 million or 6.4%. The Group's gross profit margin increased from approximately 63.1% in FY2016 to 63.3% in FY2017, mainly due to improved factory efficiency, such as lower production-related depreciation and production staff cost as a percentage of revenue, offset by an increase in cost of purchase in FY2017.

Other income

Other income decreased by approximately S$527,000. The decrease was mainly attributable to the following:-

  1. absence of insurance proceeds of approximately S$228,000 received in FY2016 for damaged equipment;
  2. lower wage credit schemes income of approximately S$311,000 offset by an increase in special employment credit, temporary employment credit income of approximately S$100,000; and
  3. lower government grant of approximately S$78,000 to support the Group's productivity initiatives.

Operating Expenses

Selling and distribution expenses

Selling and distribution ("S & D") expenses increased by approximately S$2.1 million or 6.9%. S & D expenses in FY2017 amounted to approximately 41.3% of revenue as compared to approximately 40.9% of revenue in FY2016.

The increase in S & D expenses as a percentage of revenue was largely attributable to an increase in staff costs of approximately S$908,000, higher outlet rental expenses of approximately $937,000 and higher delivery subcontract expenses of approximately S$135,000.

Administrative expenses

Administrative expenses increased by approximately S$819,000 or 7.6%. The increase in administrative expenses was mainly due to:-

  1. an increase in head office staff costs of approximately S$462,000 arising from wage adjustment;
  2. an increase in travelling and entertainment expenses of approximately S$129,000; and
  3. an increase in insurance, upkeep of computer expenses, and legal and professional expenses.

Other expenses

The increase in other expenses of approximately S$3.3 million in FY2017 was mainly due to the following:-

  1. revaluation deficit for the Group's Singapore and Malaysia factory buildings by approximately S$3.0 million;
  2. higher foreign exchange losses of approximately S$384,000 primarily on Malaysian Ringgit denominated loans to associated and subsidiary companies; and
  3. allowance for doubtful debts for amount due from an associated company, amounting to approximately S$117,000.

Depreciation and amortisation

The increase in depreciation expenses of approximately S$0.4 million in FY2017 was mainly due to additions of plant and equipment and renovation costs for the Group's new retail outlets, and completion of the Group's new factory facility in Singapore.

As a result of the above, total operating expenses increased by approximately S$6.2 million or 14.5%. Total operating expenses amounted to approximately 62.1% of revenue in FY2017 and 57.5% in FY2016 respectively.

Finance costs

Finance costs decreased by approximately S$24,000 mainly due to partial repayment of loans taken to finance the construction and renovation of factory facilities.

Profit before tax

The Group's profit before tax decreased from approximately S$6.1 million in FY2016 to approximately S$2.4 million in FY2017, a decrease of approximately S$3.7 million or 60.1%. Excluding revaluation deficit of approximately S$3.0 million for the Group's Singapore and Malaysia factory facilities, the Group's profit before tax decreased by approximately S$668,000 or 11.0%.


The Group's taxation expenses decreased by approximately S$437,000 or 38.9%. The decrease was mainly due to write back of deferred tax provided, offset by higher non tax-deductible expenses for the current financial year.

Other comprehensive income

The decrease in other comprehensive income was mainly due to net revaluation deficit of approximately S$2.1 million, on revaluation of the Group's Singapore and Malaysia factory facilities.

Balance Sheet

Non-current assets

The Group's non-current assets decreased by approximately S$1.1 million or 3.6% mainly due to the decrease in property, plant and equipment as a result of:-

  1. net revaluation deficit for the Group's freehold land and buildings of approximately S$5.0 million; and
  2. depreciation expenses for the Group and fixed assets written off for closed retail outlets,

offset by additions of plant and equipment and renovation costs for the Group's new retail outlets, and construction of the Group's new factory facility in Singapore.

The decrease in non-current assets was also offset by an increase in long term deposits mainly due to additional lease deposits paid to secure new outlets, and reclassification of short term lease deposits to long term upon lease renewals, in accordance with the respective lease tenures.

Current assets

The Group's current assets decreased by approximately S$2.6 million or 11.4% mainly due to:-

  1. a decrease in short term deposits mainly due to reclassification of lease deposits from short term to long term in accordance with the lease tenures and refund of deposits for closed outlets; and
  2. a decrease of S$3.9 million in cash and bank balances mainly due to purchase of property, plant and equipment, repayment of bank loans and finance leases, and dividends of approximately S$8.3 million paid during FY2017, partially offset by cash inflow from operating activities and proceeds from bank loan of approximately S$3.3 million for the construction and renovation of the Singapore factory.

The decrease in current assets was partially offset by:-

  1. an increase in trade and other receivables due to slower debtor repayments for sale of waste oil and non-retail credit sales during March 2017; and
  2. an increase in prepayment due to advance payments for equipment purchase and renewal of insurance policies.

Current liabilities

The Group's current liabilities increased by approximately S$5.2 million or 47.9% mainly due to the following:-

  1. an increase in trade and other payables mainly due to increase in periodend billings by trade suppliers and contractors;
  2. an increase in provisions, due to provision for reinstatement cost for new outlets;
  3. an increase in bank loans due to the construction and renovation of the Singapore factory; and
  4. an increase in provision for taxation mainly due to tax expenses provided of approximately S$1.1 million, offset by tax paid of approximately S$0.5 million during the financial year.

Non-current liabilities

The Group's non-current liabilities decreased by approximately S$1.8 million or 19.8% mainly due to repayment of bank loans and finance lease, and decrease in deferred tax liabilities during FY2017.

Net working capital

As at 31 March 2017, the Group had a positive net working capital of approximately S$4.3 million as compared to approximately S$12.2 million as at 31 March 2016.

Cash flow

For FY2017, the Group generated an operating profit before working capital changes of approximately S$10.5 million. Net cash generated from operating activities, inclusive of working capital changes, amounted to approximately S$9.6 million in FY2017.

In FY2017, net cash used in investing activities amounted to approximately S$8.2 million. This was mainly attributable to additions of plant and equipment and renovation costs for the Group's new retail outlets, and construction of the Group's new factory facility in Singapore.

Net cash used in financing activities amounted to approximately S$5.2 million in FY2017. This was mainly due to dividends paid during the period and repayments of bank loan and finance lease liabilities, including interest paid, offset by proceeds from bank loan of approximately S$3.3 million for the construction and renovation of the Singapore factory.

Significant Developments

I am glad to inform shareholders that both the new factory facilities at 4 Woodlands Terrace and Iskandar Malaysia became fully operational in FY2017.

Currently, the Group is undergoing the final phase of its renovation works for its new factory facility at 2 Woodlands Terrace. After the reconstruction and renovation works at 2 Woodlands Terrace are completed, which we expect to be completed soon, it will be fully integrated with the adjacent new factory at 4 Woodlands Terrace.

The integrated factory facilities at 2 Woodlands Terrace and 4 Woodlands Terrace will feature modern technology and machinery that will further improve our food consistency, labour efficiencies and space productivity. The enlarged food facilities both in Singapore and Iskandar Malaysia will provide a strong platform to organically grow our local and overseas businesses.

Going Forward

As the labour shortage situation in the Food & Beverage sector shows no signs of abatement, labour costs are expected to continue trending upwards, while the general consumer sentiments remain cautious. The Group will continue to explore ways to improve the efficiency and profit margins of our various business units, including our overseas operations. These include strengthening our brand positioning, product offerings and process flow, and tapping on the strong support from government agencies whenever possible.

While the Group expects rental and raw materials costs to remain elevated, we will continue to manage these costs through various strategies. These include improving raw materials management, closer integration of our various factory facilities, increasing productivity at our production facilities using state-of-the-art machinery, and introducing further enhancements to our popular product range.


The Directors have proposed an ordinary final dividend of 1.5 Singapore cents per ordinary share for FY2017.


I would like to express my heartfelt appreciation to our customers for their continued patronage and our shareholders, Directors, bankers, strategic business partners and our staff for their continued support.

Han Keen Juan
Executive Chairman