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(Extracted from Annual Report 2016)

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 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.

Other income

The increase in other income of approximately S$360,000 was mainly due to:

  1. 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
  2. insurance compensation income of approximately S$229,000 in relation to damaged equipment; offset by
  3. an absence in FY2016 of gain from disposal of motor vehicle income of approximately S$117,000 which was recognised in FY2015.

Operating Expenses

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

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.

Other 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 respectively.

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.

Finance costs

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.

Balance Sheet

Non-current assets

The increase in the Group's non-current assets of approximately S$2.9 million or 10.2% was mainly due to:

  1. 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
  2. an increase in intangible assets following the purchase of a new enterprise resource planning software and a club membership; partially offset by
  3. 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.

Current assets

The decrease in the Group's current assets of approximately S$490,000 or 2.1% was mainly due to:

  1. 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
  2. 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.

Current liabilities

The increase in the Group's current liabilities of approximately S$973,000 or 9.8% was mainly due to:

  1. 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
  2. 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.

Non-current liabilities

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.

Cash flow

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.

Significant Developments

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.

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. 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 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, 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
Executive Chairman