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(Extracted from Annual Report 2023)

Dear Shareholders,

It is my pleasure to present to you Old Chang Kee Ltd.'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 2023 ("FY2023").

(A) STATEMENT OF COMPREHENSIVE INCOME

FY2023 vs FY2022

The Group's revenue increased by approximately S$12.3 million or 15.9% for FY2023, mainly due to an increase in revenue from retail outlets, catering and non-retail revenue, partially offset by lower delivery revenue.

Revenue from retail outlets increased by approximately S$10.5 million or 14.8% mainly due to incremental revenue from new outlets and temporarily closed outlets in the prior period as a result of Coronavirus Disease 2019 ("Covid-19") and increase in revenue from existing outlets, partially offset by a decrease in revenue from closed outlets.

Revenue from other services, such as delivery and catering services, increased by approximately S$1.8 million or 26.1% mainly due to higher catering, nonretail and events revenue during the current period, partially offset by a decrease in delivery revenue.

The Group's gross profit margin increased by 0.6% to 64.9% in FY2023, mainly due to lower production staff salaries as a percentage of revenue due to higher revenue, and product pricing management, offset by higher utility expenses during FY2023.

Other income decreased by approximately S$4.4 million due to the absence of Jobs Support Scheme ("JSS") grants, and lower government grants mainly due to the absence of property tax and rental rebates, offset by higher gain from disposal of assets and interest income during the financial year.

The increase in selling and distribution ("S & D") expenses was largely due to higher staff costs, outlets' utility expenses, packing materials and rental expenses, and the absence of rental rebates received from landlords, partially offset by lower delivery, cleaning, and outlets depreciation expenses, during FY2023. As a percentage of revenue, total S & D expenses decreased from 44.5% to 39.0%, mainly due to the above increase in retail sales during the financial year.

The increase in administrative expenses was mainly due to higher staff costs including higher bonus provision arising from the increase in profit for FY2023, and higher bank charges, medical and other maintenance expenses for the current year.

Finance costs increased by approximately S$108,000, mainly due to higher interest rates on finance leases and bank loans.

Other expenses increased by S$432,000 mainly due to recognition of impairment for amount due from our joint venture in United Kingdom ("UK") and the Company's Malaysian associate, and higher foreign exchange loss pursuant to foreign exchange revaluation of inter-company loans to Australia and Malaysia for the current year.

The decrease in depreciation expenses was mainly due to an increase in fully depreciated assets attributed to the right-of-use assets and property, plant and equipment, partially due to recognition of impairment for loss-making outlets in the prior year.

The Group's taxation expenses increased by S$924,000 mainly due to the higher profit for FY2023, and lower non-taxable grant income and lower non-tax deductible items for the current financial year.

(B) STATEMENT OF FINANCIAL POSITION

Non-current assets

The Group's non-current assets decreased by approximately S$1.8 million, mainly due to

  1. a decrease in property, plant and equipment due to depreciation expenses, disposal of motor vehicles, partially offset by additions during FY2023;
  2. a decrease in right-of-use assets mainly due to right-of-use assets depreciation expenses and impairment of right-of-use assets for retail outlets, offset by lease renewal and new lease committed during FY2023; and
  3. a decrease in long term deposits mainly due to reclassification of lease deposits in accordance with the respective lease tenures during FY2023; offset by deposits paid for new outlets and lease renewal.

Current assets

The Group's current assets increased by approximately S$6.7 million mainly due to:

  1. an increase in cash and bank balances of approximately S$6.3 million as explained under the statement of cash flows in paragraph (C) below;
  2. an increase in prepayments, mainly due to deposit paid for purchase of assets, increase in annual insurance premium and prepaid software maintenance contract during the financial year; and
  3. an increase in trade and other receivables mainly due to increase in credit sales to corporate customers, partially offset by
  4. a decrease in inventories of approximately S$173,000 mainly due lower bulk purchase of finished goods as supply chain pressures gradually eased; and
  5. a decrease in short term deposits of approximately S$71,000, mainly due to reclassification of lease deposits in accordance with the respective lease tenures and refund of deposits from closed outlets.

Current and non-current liabilities

The net increase in the Group's current and noncurrent liabilities of S$0.9 million was mainly due to

  1. an increase in trade and other payables of approximately S$1.3 million mainly due to increase in accrued bonus provision of approximately S$0.4 million due to the higher profit before tax for the current period and increase in trade creditors arising from the higher sales during the period; and
  2. an increase in tax provision due to lower taxdeductible items partially offset by tax paid during the period; partially offset by
  3. a decrease in lease liabilities mainly due to lease repayment, offset by new lease commitments entered into during the period; and
  4. a decrease in bank loan and finance lease mainly due to repayment during the period; offset by new finance lease for the purchase of motor vehicles.
Net working capital

As at 31 March 2023, the Group had a positive net working capital of approximately S$16.8 million, compared to approximately S$11.6 million as at 31 March 2022.

(C) STATEMENT OF CASH FLOWS

FY2023 vs FY2022

For FY2023, the Group generated an operating profit before working capital changes of approximately S$22.3 million. Net cash generated from operating activities, inclusive of working capital changes and tax paid, amounted to approximately S$22.4 million in FY2023.

In FY2023, net cash used in investing activities amounted to approximately S$1.0 million. This was mainly due to additions of plant and equipment, and renovation work for the Group's new retail outlets, offset by proceeds from disposal of the Group's motor vehicles.

Net cash used in financing activities amounted to approximately S$15.0 million in FY2023. This was mainly due to dividends of approximately S$2.4 million paid during FY2023, repayment of lease obligations inclusive of lease interest of approximately S$10.8 million, and repayments of bank loans and finance lease during the year.

GOING FORWARD

With the stabilising Covid-19 situation in general and the rebound of tourism, consumer traffic and sentiment has remained resilient. However, with the re-opening of the economies, the Group noted that inflationary pressures have been persistent, in particular, raw material, utility and labour costs, while rental costs remain elevated. Singapore's extremely low unemployment rate and foreign manpower policies have also exacerbated the current manpower shortage in the retail sector.

The Group's number of outlets has reduced partly due to infrastructural developments at various locations, necessitating the closure of these outlets. Nevertheless, the Group has and will continue with our efforts to drive revenue growth, improve gross margins and rationalise our operations to overcome manpower shortages, and seek more non-retail revenue streams during this inflationary period. The Group continues to look for opportunities to increase the number of outlets at key transport nodes.

DIVIDENDS

The Directors have proposed a final dividend of 1.0 Singapore cent per ordinary share for FY2023. Due to continuing uncertainty on the general economic environment as well as increased inflationary pressures, the Board has continued to take a prudent approach in recommending a 1.0 cent ordinary (final) dividend for FY2023.

ACKNOWLEDGEMENT

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, especially during these challenging times.


Han Keen Juan
Executive Chairman