How Did Neo Group Ltd Fare in the First Half?

Neo Group Ltd (SGX: 5UJ) had just released its half-year earnings this morning. For the six months ended 31 July 2014, increased sales at two of the company’s business divisions, namely, Food Catering and Food Retail, helped to boost its overall top-line.

Neo Group is a leading food catering group in Singapore and was ranked as the top events caterer in our shores in 2011 by research outfit Euromonitor. The company, which now has three business divisions (the other one being Catering Supplies) was started in 1992.

Under its Food Catering Business, Neo Group operates four brands: Neo Garden, Orange Clove, Deli Hub, and Best Catering. Under the Food Retail Business, Neo Group has a chain of 25 umisushi outlets in Singapore and one licensed outlet in Jakarta, Indonesia. The division also has one issho izakaya and one NANAMI UDON outlet each in Singapore.

Revenue for the half-year went up by 21.2% year-on-year to S$28 million, boosted by an increase in social catering events and growth in catering market share in corporate and government sectors. Higher delivery sales and contributions from new outlets also had a part to play in the top-line growth.

Breaking down the revenue growth segmentally, turnover from the Food Catering and Food Retail business divisions saw robust year-on-year growth of 17.3% and 29.9% respectively. Delivery sales at the Food Retail division had also grown by 9.6%.

Despite the top-line doing well, Neo Group’s bottom-line slumped by 9.1% to S$2.5 million. This was on the back of not capturing the full length of the Chinese New Year period (the reporting period for Neo Group started on 1 February 2014 while Chinese New Year fell on 31 January and 1 February this year) and an increase in staff and advertising expenses.

Speaking about reporting periods, in May this year, the financial year end for Neo Group was changed from 31 January to 31 March and as such, the current financial year covers a period of 14 months from 1 February 2014 to 31 March 2015. As of 31 July 2014, Neo had total borrowings of close to S$20 million and a cash balance of S$9 million, translating to a net debt position of around S$10 million. However, six months ago, its balance sheet was stronger as it had a net debt position of approximately S$8 million.

The firm relocated its centralised kitchen to a new 75,000 square feet premise at 1 Enterprise Road, allowing the firm to increase cost savings, and at the same time, boost business capacity, productivity, and efficiency. Neo Group will also be opening two more umisushi outlets at Eastpoint Mall and The Seletar Mall by November this year, expanding the total count of umisushi outlets to 27 islandwide.

Mr Neo Kah Kiat, Founder, Chairman, and Chief Executive Officer of Neo Group,  commented on the company’s progress over the past six months:

“The Group has achieved a sturdy bottomline for 6M2015. The appetite for Neo Group’s leading catering services and quality food has grown as part of our efforts in broadening our income streams through the introduction of new menus, brands and concepts. In the last few months, we have added tasty bites through three new brand concepts – Best Catering, issho izakaya and NANAMI UDON. We have also added several new menus within each of our award-winning brands under Neo Garden, Orange Clove, Deli Hub and umisushi.”

For the first half of the financial year, an interim dividend of 1.05 Singapore cents per share will be given out to shareholders. This translates to a dividend payout ratio of 60%. Last year, higher dividends of 1.16 Singapore cents was dished out. The dividend yield for Neo Group, at its current price of S$0.93, stands at 2.8%.

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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 doesn’t own shares in any companies mentioned.