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FINANCIAL STATEMENTS AND RELATED ANNOUNCEMENT FOR THE SECOND QUARTER ENDED 30 SEPTEMBER 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$19.1 million for the financial period from 1 July 2015 to 30 September 2015 ("2Q2016") to approximately S$20.3 million for the period from 1 July 2016 to 30 September 2016 ("2Q2017"), an increase of approximately S$1.1 million or 5.9%.

Revenue from retail outlets increased by approximately S$1.1 million or 5.8%. The increase in revenue was mainly due to revenue contribution from new outlets and higher revenue from existing outlets, partially offset by 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$49,000 or 12.8%, mainly due to higher sales generated from Malaysia factory sales.

As at 30 September 2016, the Group operated a total of 87 outlets in Singapore as compared to 84 outlets as at 30 September 2015.

The Group's signature puff products remained the major contributor to its revenue and accounted for approximately 33.4% of the Group's revenue in 2Q2017, as compared to approximately 31.7% in 2Q2016.

Cost of sales and gross profit

Cost of sales increased by approximately S$293,000 or 4.2%. The increase was mainly due to the higher revenue generated by the Group and higher depreciation expenses for the Group's new factory facilities in Singapore and Malaysia, and machinery and equipment.

The Group's gross profit increased by approximately S$838,000 or 6.9%. The Group's gross profit margin increased from approximately 63.3% in 2Q2016 to 63.9% in 2Q2017, mainly due to lower raw materials and production staff cost as a percentage of revenue, offset by higher depreciation expenses arising from the Group's new factory, and machinery and equipment.

Other income

Other income increased by approximately S$158,000 mainly due to an increase in government grant income of approximately S$154,000 to support the Group's productivity initiatives.

Operating Expenses

Selling and distribution expenses

Selling and distribution ("S & D") expenses increased by approximately S$483,000 or 6.3%. S & D expenses remained largely constant at approximately 40.4% of revenue in 2Q2017, as compared to approximately 40.3% of revenue in 2Q2016.

Administrative expenses

Administrative expenses increased by approximately S$285,000 or 10.7%.

The increase in administrative expenses was mainly due to an increase in head office staff costs, insurance, professional and computer related expenses.

Other expenses

The decrease in other expenses of approximately S$253,000 in 2Q2017 was mainly due to lower foreign exchange losses of approximately S$285,000 on Malaysian Ringgit denominated loans to subsidiary companies, offset by an increase in depreciation and amortisation expense for office renovation and computer software.

As a result of the above, total operating expenses increased by approximately S$517,000 or 4.7%. Total operating expenses amounted to approximately 56.8% of revenue in 2Q2017 and 57.5% in 2Q2016 respectively.

Depreciation

Depreciation increased by approximately S$165,000 or 17.6% in 2Q2017 as compared to 2Q2016, mainly due to higher depreciation expenses for the Group's new factory facilities in Singapore and Malaysia and new outlets' renovation and machinery and equipment purchase during 2Q2017.

Finance costs

Finance costs increased slightly by approximately S$2,000 mainly due to interest expenses on 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 2Q2016 to approximately S$2.0 million in 2Q2017, an increase of approximately S$485,000 or 32.5%.

Taxation

The Group's taxation expenses increased by approximately S$116,000 or 41.1%. The increase was mainly due to the higher profit before tax provision in 2Q2017 as compared to 2Q2016.

Balance Sheet

Non-current assets

The Group's non-current assets increased by approximately S$665,000 or 2.1% 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 for 1H2017; 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$3.2 million or 13.9% mainly due to the following:

  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 tender deposits for new outlets; and
  2. a decrease of S$4.2 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$5.5 million paid during 1H2017, 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 goods in transit and 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.

Current liabilities

The Group's current liabilities increased by approximately S$1.1 million or 9.9% 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 to tax expenses provided offset by tax paid during the period.

Non-current liabilities

The Group's non-current liabilities decreased by approximately S$669,000 or 7.5% mainly due to a decrease in deferred tax liabilities and repayment of bank loans and finance lease in 1H2017.

Net working capital

As at 30 September 2016, the Group had a positive net working capital of approximately S$7.9 million as compared to approximately S$12.2 million as at 31 March 2016.

Cash flow

For 2Q2017, the Group generated an operating profit before working capital changes of approximately S$3.2 million. Net cash generated from operating activities, inclusive of working capital changes, amounted to approximately S$2.0 million in 2Q2017.

In 2Q2017, net cash used in investing activities amounted to approximately S$1.6 million. This was mainly attributable to renovation costs for new outlets and the purchase of plant and equipment for the Group's new Singapore factory facility and retail outlets.

Net cash used in financing activities amounted to approximately S$5.8 million in 2Q2017. 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 operational, 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.