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(Extracted from Annual Report 2018)

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 2018.


The Group's revenue increased from approximately S$78.3 million for the financial year from 1 April 2016 to 31 March 2017 ("FY2017") to approximately S$85.5 million for the financial year from 1 April 2017 to 31 March 2018 ("FY2018"), an increase of approximately S$7.1 million or 9.1%.

Revenue from retail outlets increased by approximately S$7.1 million mainly due to revenue contribution from new outlets and increase in revenue from existing outlets, partially offset by the absence of revenue from closed outlets.

Revenue from other services, such as delivery and catering services, increased by approximately S$65,000 or 5.3% from approximately S$1.2 million to S$1.3 million, mainly due to higher events and catering sales.

As at 31 March 2018, the Group operated a total of 90 outlets in Singapore as compared to 89 outlets as at 31 March 2017.

The Group's signature puff products remained the major contributor to its revenue and accounted for approximately 30.1% of the Group's revenue in FY2018, as compared to approximately 31.8% in FY2017.

Cost of sales and gross profit

Cost of sales increased by 15.8% in line with the higher revenue generated by the Group.

Consequently, the Group's gross profit increased by approximately S$2.6 million or 5.3%. The Group's gross profit margin decreased from approximately 63.3% in FY2017 to 61.1% in FY2018, mainly due to higher food cost during FY2018.

Other income

Other income increased by approximately S$580,000 mainly attributable to the following:

  1. revaluation gain of approximately S$251,000 from the Group's Singapore and Malaysia factory facilities, due to the reversal of the prior year's revaluation deficit;
  2. an increase in government grant income of approximately S$300,000 to support the Group's productivity initiatives;
  3. an increase in gain on disposal of motor vehicles amounting to approximately S$160,000; and
  4. an increase in income from wage credit schemes of approximately S$78,000.

The increase in other income was partially offset by lower special employment credit and temporary employment credit scheme income of approximately S$233,000.

Operating Expenses

Selling and distribution expenses

Selling and distribution ("S & D") expenses increased by 9.1% in line with the increase in revenue. S & D expenses as a percentage of revenue for both FY2018 and FY2017 remained relatively constant at 41.3% of revenue.

Administrative expenses

Administrative expenses increased by approximately S$168,000 or 1.4%. The increase in administrative expenses was mainly due to:

  1. an increase in general repair and maintenance expenses of approximately S$112,000; and
  2. an increase in medical and insurance expenses of approximately S$135,000; offset by
  3. a decrease in bank charges, legal and professional expenses of approximately S$89,000.

Other expenses

The decrease in other expenses of approximately S$2.7 million in FY2018 was mainly due to impairment for unquoted shares of approximately S$209,000 and the absence of revaluation deficit in FY2018 for the Group's Singapore and Malaysia factory facilities as compared to approximately S$3.0 million in FY2017.

As a result of the above, while total operating expenses increased by 0.9%, the proportion of total operating expenses compared to revenue decreased from 61.8% in FY2017 to 57.2% in FY2018.

Depreciation and amortisation

The increase in depreciation and amortisation expenses of approximately S$533,000 in FY2018 was mainly due to additions of plant and equipment and renovation costs for the Group's new retail outlets, as well as the completion of the Group's new factory facility in Singapore.

Finance costs

Finance costs increased by approximately S$116,000 mainly due to loans taken, including loans drawn down in the first quarter of FY2018, to finance the construction and renovation of factory facilities.

Share of results of joint venture

The amount was due to start-up costs of approximately S$76,000 in FY2018 for a new joint venture in the United Kingdom.

Profit before tax

The Group's profit before tax increased from approximately S$2.4 million in FY2017 to approximately S$5.0 million in FY2018, an increase of approximately S$2.6 million. Excluding revaluation gain on the Group's factory facilities of approximately S$251,000 in FY2018 and revaluation loss of approximately S$3.0 million recognised in FY2017, the Group's profit before tax decreased by approximately S$691,000 or 12.7%.


The Group's taxation expenses increased by S$267,000 or 39.0% mainly due to lower non taxdeductible expenses for FY2018.

Other comprehensive income

The increase in other comprehensive income by approximately S$2.3 million was mainly due to net revaluation gain of approximately S$775,000 on revaluation of the Group's Singapore and Malaysia factory facilities in FY2018, as compared to net revaluation loss of approximately S$2.1 million in FY2017.

Balance Sheet

Non-current assets

The Group's non-current assets increased by approximately S$5.6 million or 18.6% mainly due to:

  1. net revaluation gain for the Group's freehold land and buildings of approximately S$1.0 million;
  2. the purchase of fixed assets mainly for additions of plant and equipment and renovation costs for the Group's new rental outlets and factory facility in Singapore of approximately S$8.5 million, partially offset by depreciation expenses and assets written off for FY2018;
  3. an investment in a United Kingdom joint venture of approximately S$537,000, partially offset by the Group's share of start-up costs for the joint venture of approximately S$76,000 for FY2018; and
  4. 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.

The increase in non-current assets was partially offset by a decrease in investment in unquoted shares of approximately S$209,000 mainly due to provision of impairment in FY2018.

Current assets

The Group's current assets decreased by approximately S$4.0 million or 19.7% mainly due to:

  1. a decrease in prepayments mainly due to reclassification of equipment to property, plant and equipment upon full payment and receipt of the equipment; and
  2. a decrease of approximately S$2.8 million in cash and bank balances mainly due to purchase of property, plant and equipment, repayment of bank loans and finance leases, investment in a United Kingdom joint venture of approximately S$537,000 and dividends of approximately S$3.6 million paid during FY2018, partially offset by cash generated from operations and proceeds from bank loans.

The decrease in current assets was partially offset by an increase in inventories largely attributable to higher purchases of finished goods.

Current liabilities

The Group's current liabilities decreased by approximately S$3.4 million or 21.2% mainly due to the following:

  1. a decrease in trade and other payables mainly due to a decrease in period-end billings by trade suppliers and contractors;
  2. a decrease in the current portion of bank loans amounting to approximately S$2.8 million mainly due to reclassification of bank loans from short term to long term in accordance with the loan repayment periods; and
  3. a decrease in provision for taxation of approximately S$432,000 mainly due to tax paid of approximately S$1.0 million offset by tax expenses provided for FY2018.

The decrease in current liabilities was offset by an increase in finance lease taken for the purchase of new motor vehicles and an increase in provision for reinstatement cost for new outlets.

Non-current liabilities

The Group's non-current liabilities increased by approximately S$4.0 million or 55.7% mainly due to the following:

  1. an increase in the non-current portion of bank loans largely attributable to loans secured from construction and renovation of the Singapore factory and reclassification of bank loans from short term to long term in accordance with the loan repayment periods;
  2. an increase in finance lease mainly for the purchase of new motor vehicles; and
  3. an increase in deferred tax provision of approximately S$495,000 for FY2018.

Net working capital

As at 31 March 2018, the Group had a positive net working capital of approximately S$3.7 million as compared to approximately S$4.3 million as at 31 March 2017.

Cash flow

For FY2018, 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 FY2018.

In FY2018, net cash used in investing activities amounted to approximately S$8.6 million. This was mainly attributable to additions of plant and equipment and renovation costs for the Group's new retail outlets and factory facility in Singapore.

Net cash used in financing activities amounted to approximately S$3.8 million in FY2018. This was mainly due to dividends of approximately S$3.6 million paid during FY2018, and repayments of bank loan and finance lease liabilities, including interest paid during the period, partially offset by proceeds from bank loans of approximately S$6.4 million.

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 FY2018.

The integrated factory facilities at 2 Woodlands Terrace and 4 Woodlands Terrace house state of the art equipment that will further improve our food consistency and production efficiencies. The enlarged food facilities both in Singapore and Iskandar Malaysia will provide a strong platform to organically grow our local and overseas businesses in the years ahead.

The Group's first flagship outlet in Covent Garden - London, United Kingdom has officially opened in June 2018, receiving positive media reviews from both United Kingdom and Singapore. It has generated new revenue streams for the Group and uplifted Old Chang Kee's brand positioning. The Group is encouraged by the London outlet's initial success and will continue to work hard to maintain the positive momentum.

Going Forward

On the current operations, the Group expects 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 the completion of the new factory facilities and the commissioning of new factory equipment, the Group will focus on improving its gross margins and revenues. These efforts include continued investment in brand positioning, bulk purchases at more favourable prices with the expanded factory space, further expanding its product range including seasonal product launches, and increasing the production efficiency of its factories.


The Directors have proposed a final dividend of 1.5 Singapore cents per ordinary share for FY2018.


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