(Extracted from Annual Report 2016)
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 results for the financial year ended 31 March 2016.
The Group's revenue increased from approximately S$71.6 million for the
financial year from 1 April 2014 to 31 March 2015 ("FY2015") to approximately
S$73.9 million for the financial year from 1 April 2015 to 31 March 2016
("FY2016"), an increase of approximately S$2.2 million or 3.1%.
Revenue from retail outlets increased by approximately S$2.4 million or 3.4%.
The increase in revenue was mainly due to incremental revenue from new
outlets and higher revenue from existing outlets, offset by the absence of
revenue from outlets that were temporarily closed due to mall revamps.
Revenue from other services, such as delivery and catering services, decreased
by approximately S$180,000 or 14.6%.
As at 31 March 2016, the Group operated a total of 83 outlets in Singapore as
compared with 82 outlets as at 31 March 2015.
The Group's signature puff products remained the major contributor to its
revenue and accounted for approximately 31.6% of the Group's revenue in
FY2016, as compared with approximately 31.8% in FY2015.
Cost of sales and gross profit
The Group's gross profit increased by approximately S$2.0 million or 4.4%.
The Group's gross profit margin increased slightly from approximately 62.4% in
FY2015 to 63.1% in FY2016 due to tighter cost control over raw material costs
and an improvement in product mix.
The increase in other income of approximately S$360,000 was mainly due
- higher special employment credit, temporary employment credit
and wage credit schemes income of approximately S$230,000 and
an increase in government grant income of approximately S$35,000
to support the Group's productivity and expansion initiatives; and
- insurance compensation income of approximately S$229,000 in
relation to damaged equipment; offset by
- an absence in FY2016 of gain from disposal of motor vehicle income
of approximately S$117,000 which was recognised in FY2015.
Selling and distribution expenses
Selling and distribution ("S & D") expenses increased by approximately
S$2.4 million or 8.5%. S & D expenses in FY2016 amounted to
approximately 40.9% of revenue as compared with approximately 38.9%
of revenue in FY2015.
The increase in S & D expenses as a percentage of revenue was largely
attributable to staff cost adjustments of approximately S$1.1 million in
response to the competitive labour market, higher outlet rental expenses
of approximately S$800,000, and higher cleaning and depreciation
expenses of approximately S$522,000.
Administrative expenses increased by approximately S$521,000 or 5.1%.
The increase in administrative expenses was mainly due to higher
staff cost of approximately S$547,000, offset by decreases in legal and
professional fees, and computer related expenses.
The decrease in other expenses of approximately S$39,000 in FY2016 was
mainly due to the absence of impairment for doubtful receivables and
lower fixed assets written off, offset by higher foreign exchange losses.
As a result of the above, total operating expenses increased by
approximately S$2.9 million or 7.4%. Total operating expenses amounted
to approximately 57.5% of revenue in FY2016 and 55.2% in FY2015
Depreciation and amortisation
Depreciation increased by approximately S$288,000 or 7.6% in FY2016
as compared with FY2015, mainly due to an increase in depreciation
for outlets and the renovation of and equipment for the Group's new
factory at 4 Woodlands Terrace ("New Factory"). Amortisation expenses
increased by approximately S$30,000 mainly due to the purchase of new
enterprise resource planning software in FY2016.
The increase in finance costs of approximately S$83,000 was mainly due
to interest expenses on loans taken to finance the construction and
renovation of the Group's New Factory.
Profit before tax
The Group's profit before tax decreased from approximately S$6.7
million in FY2015 to approximately S$6.1 million in FY2016, a decrease of
approximately S$612,000 or 9.1%, due to the factors mentioned above.
The Group's taxation expenses decreased by approximately S$301,000
or 21.2% mainly due to the lower profit before tax and lower non tax
deductible expenses for the current financial year.
The increase in the Group's non-current assets of approximately S$2.9
million or 10.2% was mainly due to:
- additions of plant and equipment, capitalisation of renovation costs
for the Group's new and existing retail outlets, and capitalisation
of construction and renovation cost incurred for the Group's New
Factory. This was partially offset by depreciation expenses and fixed
assets written off for FY2016; and
- an increase in intangible assets following the purchase of a new
enterprise resource planning software and a club membership;
partially offset by
- a decrease in long term deposits largely because of reclassification of
long term lease deposits to short term lease deposits, in accordance
with the respective lease tenures, offset by additional lease deposits
paid to secure new outlets.
The decrease in the Group's current assets of approximately S$490,000 or
2.1% was mainly due to:
- a decrease in deposits of approximately S$290,000 mainly due to
the refund of deposits for closed outlets, offset by reclassification of
lease deposits from long term to short term in accordance with the
lease tenures; and
- a decrease of approximately S$740,000 in cash and bank balances
mainly due to the purchase of property, plant and equipment, the
repayment of bank loans and finance leases, and the dividends
paid during FY2016, partially offset by cash inflow from operating
activities, and proceeds from bank loan for the construction and
renovation of the New Factory.
The decrease in current assets was partially offset by an increase in
inventories largely attributable to higher purchases of raw materials
at more favourable bulk prices, and an increase in prepayment due to
advance payments for equipment purchase.
The increase in the Group's current liabilities of approximately S$973,000
or 9.8% was mainly due to:
- an increase in trade and other payables of S$1.7 million due to an
increase in period-end billings by our trade suppliers and contractors;
partially offset by
- a decrease in provision for taxation of S$812,000 mainly due to tax
payment made during FY2016, and lower current tax provision for
the current financial year.
The Group's non-current liabilities increased by approximately S$115,000
or 1.3% mainly due to increase in deferred tax provision for FY2016, offset
by the repayment of bank loans and finance lease during the year.
Net working capital
As at 31 March 2016, the Group had a positive net working capital of
approximately S$12.2 million as compared with approximately S$13.7
million as at 31 March 2015.
For FY2016, the Group generated an operating profit before working
capital changes of approximately S$10.6 million. Net cash generated
from operating activities, inclusive of working capital changes, amounted
to approximately S$10.6 million in FY2016.
In FY2016, net cash used in investing activities amounted to approximately
S$7.1 million. This was mainly attributable to renovation and construction
costs for the Group's New Factory, and the purchase of plant and
equipment for the Group's New Factory and retail outlets.
Net cash used in financing activities amounted to approximately S$4.3
million in FY2016. This was mainly due to dividends paid, and repayments
of bank loan and finance lease liabilities including interest paid, partially
offset by proceeds from bank loan.
In the financial year ended 31 March 2014, the Group commenced
construction works for our new factory facilities in both Singapore and
Iskandar Malaysia. The construction works for 4 Woodlands Terrace and
Iskandar Malaysia have been fully completed during FY2016 and both
factories are expected to be fully operational in the coming months.
Currently, the Group is undertaking reconstruction works for a new factory
facility at 2 Woodlands Terrace. When the reconstruction works at 2
Woodlands Terrace are completed in the coming months, it will be fully
integrated with the adjacent New Factory.
The integrated factory facilities at 2 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 sound
platform to organically grow our business both locally and regionally.
As the labour shortage situation in the Food & Beverage sector shows
no signs of abatement, labour costs are expected to continue trending
upwards. The Group will continue to explore ways to improve the
efficiency and profit margins of our various business units. These include
strengthening our brand positioning, product offerings and process flow,
and tapping on the strong support from government agencies whenever
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, increasing productivity at
our production facilities using state-of-the-art machinery, and introducing
further enhancements to our popular product range.
60th Anniversary of Old Chang Kee
2016 marks 60 years since Old Chang Kee was founded in 1956. To
commemorate our 60th anniversary, the Group is pleased to announce a
one-off special dividend of 3 Singapore cents per ordinary share, subject
to the approval of the shareholders at the upcoming Annual General
Meeting of the Company.
The proposed one-off special dividend, together with the interim and
proposed final dividend, will bring the Group's full year dividend payout
for FY2016 to 6 Singapore cents per ordinary share, in line with our 60th
year anniversary celebrations.
The Directors have proposed a final dividend of 1.5 Singapore cents
per ordinary share, and a special final dividend of 3 Singapore cents per
ordinary share for FY2016.
60 years is not a short time in business for a homegrown Singaporean
brand, and it would not be possible without the steadfast support from
all our stakeholders.
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