FINANCIAL STATEMENTS AND RELATED ANNOUNCEMENT FOR THE THIRD QUARTER ENDED 31 DECEMBER 2017
Consolidated statement of comprehensive income
Review of Performance
The Group's revenue increased from approximately S$20.3 million for the financial period from 1 October 2016
to 31 December 2016 ("3Q2017") to approximately S$22.2 million for the period from 1 October 2017 to 31
December 2017 ("3Q2018"), an increase of approximately S$2.0 million or 9.6%.
Revenue from retail outlets increased by approximately S$1.9 million or 9.3% mainly due to revenue
contribution from new outlets and increase in revenue from existing outlets, partially offset by the absence
of revenue in 3Q2018 from closed outlets.
Revenue from other services, such as delivery and catering services, increased by approximately S$0.1 million
or 36.2%, mainly due to higher events and catering sales.
As at 31 December 2017, the Group operated a total of 92 outlets in Singapore as compared to 88 outlets as
at 31 December 2016.
The Group's signature puff products remained the major contributor to its revenue and accounted for
approximately 28.1% of the Group's revenue in 3Q2018, as compared to approximately 32.7% in 3Q2017.
Cost of sales and gross profit
Cost of sales increased by approximately S$1.5 million or 20.0% mainly due to the higher revenue generated
by the Group and higher raw material cost for 3Q2018.
The Group's gross profit increased by approximately S$485,000 or 3.7%. The Group's gross profit margin
decreased from approximately 63.8% in 3Q2017 to 60.4% in 3Q2018, mainly due to higher raw material cost.
Other income increased by approximately S$18,000 mainly due to an increase in gain on disposal of property,
plant and equipment of approximately S$45,000, offset by lower grants under government employment credit
schemes of approximately $15,000 in 3Q2018.
Selling and distribution expenses
Selling and distribution ("S & D") expenses increased by approximately S$760,000 or 9.4%. S & D expenses
in 3Q2018 amounted to approximately 39.9% of revenue as compared to approximately 40.0% of revenue in
The slight decrease in S & D expenses as a percentage of revenue was largely attributable to a decrease in
staff costs as percentage of revenue from 17.5% of revenue in 3Q2017 to 17.0% in 3Q2018, offset by higher
outlet rental expenses.
Administrative expenses decreased by approximately S$83,000 or 2.8%. The decrease in administrative
expenses was mainly due to a decrease in travelling and professional expenses of approximately S$93,000 in
The increase in other expenses of approximately S$59,000 in 3Q2018 was mainly due to an increase in assets
written off of approximately S$186,000, mainly due to outlet closures, offset by foreign exchange gains of
approximately S$140,000 primarily on Malaysian Ringgit denominated loans to a subsidiary company.
As a result of the above, total operating expenses increased by approximately S$736,000 or 6.4%. Total
operating expenses amounted to approximately 54.7% of revenue in 3Q2018 and 56.3% in 3Q2017
Finance costs increased by approximately S$36,000 mainly due to loan taken, including loans drawn down in
the first quarter of the financial year ending 31 March 2018, to finance the construction and renovation of factory
Share of results of joint venture
The amount was due to start-up costs of approximately S$19,000 in 3Q2018 for a new joint venture in the
Profit before tax
The Group's profit before tax decreased from approximately S$1.7 million in 3Q2017 to approximately S$1.4
million in 3Q2018, a decrease of approximately S$293,000 or 17.6% due to the reasons stated above.
The Group's taxation expenses decreased by approximately S$166,000 or 55.5%. The decrease was mainly
due to the lower profit before tax in 3Q2018 as compared to 3Q2017 and tax write-back of approximately
S$103,000 in 3Q2018 for the prior periods' tax expense.
The Group's non-current assets increased by approximately S$4.1 million or 13.7% mainly due to the following:
- the purchase of fixed assets mainly for additions of plant and equipment and renovation costs for the
Group's new factory facility in Singapore, partially offset by depreciation expenses and assets written off
- an investment in a United Kingdom joint venture of approximately S$537,000, partially offset by start-up
costs of approximately S$72,000 for the joint venture; and
- 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 Group's current assets decreased by approximately S$4.5 million or 21.9% mainly due to a decrease of
S$4.4 million in cash and bank balances.
The decrease in cash and bank balances was 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 9M2018, partially offset by cash generated
from operations and proceeds from bank loans.
The decrease in current assets was offset by:-
- an increase in inventories largely attributable to higher purchases of finished goods;
- an increase in deposits mainly due to tender deposits for new outlets offset by reclassification of lease
deposits from short term to long term in accordance with the lease tenures;
- an increase in trade and other receivables mainly arising from credit sales of retail vouchers; and
- an increase in amount due from the Group's Malaysian associated company.
The Group's current liabilities decreased by approximately S$3.3 million or 20.7% mainly due to the following:
- a decrease in current portions of bank loans of 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
- a decrease in provision for taxation mainly due to tax paid of approximately S$1.0 million offset by tax
expenses provided for the current period.
The decrease in current liabilities was offset by an increase in trade and other payables mainly due to an
increase in period-end billings by trade suppliers and contractors and an increase in finance lease mainly due
to finance lease taken for the purchase of new motor vehicles.
The Group's non-current liabilities increased by approximately S$4.0 million or 55.9% mainly due to the
- an increase in non-current portions of bank loans due to the construction and renovation of the Singapore
factory and reclassification of bank loans from short term to long term in accordance with the loan
- an increase in finance lease mainly for the purchase of new motor vehicles; and
- an increase in deferred tax provision of approximately S$296,000 for the current period.
Net working capital
As at 31 December 2017, the Group had a positive net working capital of approximately S$3.2 million as
compared to approximately S$4.3 million as at 31 March 2017.
In 3Q2018, the Group generated an operating profit before working capital changes of approximately S$2.8
million. Net cash generated from operating activities, inclusive of working capital changes, amounted to
approximately S$2.1 million in 3Q2018.
In 3Q2018, net cash used in investing activities amounted to approximately S$1.8 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$2.3 million in 3Q2018. This was mainly due
to dividends of approximately S$1.8 million paid during 3Q2018, and repayments of bank loan and finance
lease liabilities, including interest paid during the period.
The Group's first flagship outlet in central London, United Kingdom is on track to open in 2018, generating new
revenue streams for the Group and uplifting Old Chang Kee's brand positioning.
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 completion of the new factory facilities and the commissioning of new factory equipment, the Group
will be focusing its efforts on improving its gross margins and revenues. These efforts include continuing
investment in brand positioning such as the Group's sponsorship of the movie 'Ah Boys to Men 4', bulk
purchases at more favourable prices with the expanded factory space, further expanding its product range and
increasing the production efficiency of its factories, in order to grow the business both locally and regionally.