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FINANCIAL STATEMENTS AND RELATED ANNOUNCEMENT FOR THE THIRD QUARTER ENDED 31 DECEMBER 2016

Financials Archive

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Consolidated statement of comprehensive income

Income Statement

Balance Sheet

Balance Sheet

Review of Performance

Revenue

The Group's revenue increased from approximately S$18.9 million for the financial period from 1 October 2015 to 31 December 2015 ("3Q2016") to approximately S$20.3 million for the period from 1 October 2016 to 31 December 2016 ("3Q2017"), an increase of approximately S$1.4 million or 7.5%.

Revenue from retail outlets increased by approximately S$1.3 million or 7.0%. 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$98,000 or 58.9%, mainly due to higher sales generated from food delivery services.

As at 31 December 2016, the Group operated a total of 88 outlets in Singapore as compared to 82 outlets as at 31 December 2015.

The Group's signature puff products remained the major contributor to its revenue and accounted for approximately 32.7% of the Group's revenue in 3Q2017, as compared to approximately 31.5% in 3Q2016.

Cost of sales and gross profit

Cost of sales increased by approximately S$278,000 or 3.9%. The increase was mainly due to the higher revenue generated by the Group.

The Group's gross profit increased by approximately S$1.1 million or 9.6%. The Group's gross profit margin increased from approximately 62.6% in 3Q2016 to 63.8% in 3Q2017, mainly due to improved factory efficiency in 3Q2017, such as lower production-related depreciation, raw materials and production staff cost as a percentage of revenue in 3Q2017

Other income

Other income increased by approximately S$14,000 mainly due to a gain on disposal of motor vehicle of approximately S$19,000.

Operating Expenses

Selling and distribution expenses

Selling and distribution ("S & D") expenses increased by approximately S$653,000 or 8.8%. S & D expenses in 3Q2017 amounted to approximately 40.0% of revenue as compared to approximately 39.5% of revenue in 3Q2016.

The increase in S & D expenses as a percentage of revenue was largely attributable to an increase in staff costs of approximately S$184,000; higher outlet rental expenses of approximately $269,000 and higher advertising and packaging expenses of approximately S$140,000.

Administrative expenses

Administrative expenses increased by approximately S$192,000 or 7.0%.

The increase in administrative expenses was mainly due to an increase in head office staff costs arising from wage adjustment and higher travelling expenses.

Other expenses

The increase in other expenses of approximately S$180,000 in 3Q2017 was mainly due to higher foreign exchange losses of approximately S$169,000 primarily on Malaysian Ringgit denominated loans to a subsidiary company.

As a result of the above, total operating expenses increased by approximately S$1.0 million or 9.6%. Total operating expenses amounted to approximately 56.5% of revenue in 3Q2017 and 55.4% in 3Q2016 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 increased from approximately S$1.5 million in 3Q2016 to approximately S$1.7 million in 3Q2017, an increase of approximately S$158,000 or 10.5%.

Taxation

The Group's taxation expenses increased by approximately S$22,000 or 7.9%. The increase was mainly due to the higher profit before tax in 3Q2017 as compared to 3Q2016.

Balance Sheet

Non-current assets

The Group's non-current assets increased by approximately S$3.3 million or 10.6% mainly due to the following:

  1. purchase of fixed assets mainly for 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; partially offset by depreciation expenses and assets written off for 3Q2017; and
  2. 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$5.5 million or 23.7% mainly due to:

  1. a decrease in 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 offset by increase in tender deposits for new outlets; and
  2. a decrease of S$6.4 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 S$7.3 million paid during 9M2017, partially offset by cash inflow from operating activities.

The decrease in current assets was partially offset by:-

  1. an increase in inventories due largely attributable to higher purchases of raw materials and finished goods at more favourable bulk prices;
  2. an increase in trade and other receivables due to slower debtor repayments for sale of waste oil and credit sales from the commencement of the Malaysia factory's operations,
  3. an increase in prepayment due to advance payments for equipment purchase and renewal of insurance policies; and
  4. an increase in advances to its Malaysian associated company to fund its operational requirements.

Current liabilities

The Group's current liabilities increased by approximately S$2.1 million or 19.6% mainly due to the following:

  1. an increase in trade and other payables mainly due to increase in period-end billings by trade suppliers and contractors;
  2. an increase in provision due to provision for reinstatement cost for new outlets; and
  3. 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 period.

Non-current liabilities

The Group's non-current liabilities decreased by approximately S$910,000 or 10.2% mainly due to a decrease in deferred tax liabilities and repayment of bank loans and finance lease in 9M2017.

Net working capital

As at 31 December 2016, the Group had a positive net working capital of approximately S$4.6 million as compared to approximately S$12.2 million as at 31 March 2016.

Cash flow

For 3Q2017, the Group generated an operating profit before working capital changes of approximately S$2.9 million. Net cash generated from operating activities, inclusive of working capital changes, amounted to approximately S$3.6 million in 3Q2017.

In 3Q2017, net cash used in investing activities amounted to approximately S$3.8 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$2.1 million in 3Q2017. This was mainly due to dividends paid during the period and repayments of bank loan and finance lease liabilities, including interest paid.

Commentary

The Group expects operating lease expenses (rental) and 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. Retail conditions will continue to be challenging amidst mall revamps and with new entrants in the food and beverage market.

The Group believes that its new factory in Singapore when completed and fully operational in the later part of 2017, together with its Malaysia factory, will provide the platform for the Group to grow its business both locally and regionally, while keeping cost under control.