A Fatter Cup of Dividends at Super Group Ltd

Super Group (SGX: S10), being true to its company’s mission, put a smile on its shareholders face by delivering yet another year of record revenue, profit and dividends when it released its full-year earnings for 2013 yesterday afternoon.

For the whole of 2013, revenue at the company grew 7% year-on-year to S$557 million while net profit rose 26% to S$100 million. Consequently, earnings per share (EPS) grew 26% to 17.92 Singapore cents from 14.18 Singapore cents.

Super Group is an integrated instant food and beverage brand owner. The company has two main business segments – Branded Consumer and Food Ingredients. The former entails the sale of instant coffee mixes, instant tea and cereals, among others. The latter is involved in manufacturing of various beverage-ingredients for sale to other beverage manufacturers.

Super’s revenue increase of 7% for the year was due to higher sales from both the business segments. Revenue from Branded Consumer went up 3% to S$365 million mainly from higher turnover in the Southeast Asia and China markets. Meanwhile, Food Ingredients sales surged 17% year-on-year to S$193 million mainly due to “robust demand from the Southeast Asia markets, and maiden sales into new markets such as the Middle East and Europe”.

The company’s gross profit margin increased by 3 percentage points to 38% and this has been attributed to operational efficiency and effective cost management.

In May 2013, Super disposed off an associate, Sun Resources Holdings Pte Ltd, and this gave rise to a gain of S$17.1 million that was recognised in the second quarter. Likewise, in December 2013, an overseas subsidiary disposed of a plot of its leasehold land and the transaction gave rise to a gain of approximately S$2 million that was recorded in the fourth quarter. Excluding the one-off gains, the net profit for Super Group would have been around S$81 million, up only slightly more than 2% year-on-year instead of the 26% growth rate that was reported.

As of 31 December 2013, the firm had a cash hoard of S$98.5 million with no debt. That’s a slight deterioration in the company’s financial position compared to a year ago as it had S$112 million in cash with only S$670,000 in debt back then.

For 2013, Super generated net cash from operations of S$62.8 million as compared to S$85.7 million in the previous year, a decrease of 26.7%. The decrease was mainly due to working capital changes (i.e. an increase in inventories and decrease in trade payables).

Meanwhile, Super had certainly brewed a cup of fatter dividends for the year. A final dividend of S$0.07 per share has been declared during the earning release. Including the interim dividend of S$0.02 per share already paid out, the company’s total dividend for 2013 stands at S$0.09 per share, up 27% from the total dividends of S$0.071 paid out in 2012. The dividend payout ratio is 50% of net profit, in line with the company’s dividend policy.

The company also proposed a bonus issue on the basis of one bonus share for every one existing ordinary share held. The reasons for the bonus issue are three-fold: To reward shareholders for their loyalty and continued support; to increase the liquidity of shares; and to reflect the growth and expansion of the business.

During the year, Super had established a 38.58%-owned joint venture, Wuxi Tian Feng Food Ingredient Co Ltd, to manufacture liquid glucose syrup solid, a key ingredient of the company’s non-dairy creamer product. Having its own production facility for the ingredient would allow for better control over product quality and will also enhance Super’s cost competitiveness.

Also in the pipeline is the Botanical Herbal Extracts production facility in Malaysia, which converts herbal items such as tea, chicory, ginger, chrysanthemum, etc into liquid concentrate or soluble powder form.

Finally, due to the robust demand and growth for soluble coffee powder, the company is contemplating a further expansion of its soluble coffee powder production capacity in Malaysia this year.

The shares last changed hands at S$3.90 on Monday. This translates to a price-to-earnings ratio of 21.8 and a dividend yield of 2.3%, based on its full year results.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns shares in Super Group Limited.