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What Investors Should Know About the Latest Results at Japan Foods Holding Ltd

Japan Foods Holding Ltd (SGX: 5OI) released its financial results for the six months ended 30 September 2014 on Wednesday.

The firm owns a chain Japanese restaurants chain in Singapore and in parts of this region. Under its belt, it operates outlets such as Ajisen Ramen, Osaka Ohsho, and Menya Musashi.

For the first half, revenue grew 0.8% year-on-year to S$31.2 million mainly due to an increase in revenue contribution from its newer restaurant brands of Menya Musashi, Osaka Ohsho, Yonehachi and Menzo Butao.

Better control of raw material costs, bulk purchase discounts and foreign exchange differences let to an improved gross profit margin. The margin increased from 80.8% last year to 82.4% in the latest period.

Even though gross profit margins were higher, net profit plunged 52% to S$1.8 million mainly due to increase in selling and distribution expenses. The firm saw also higher rental and utilities cost on the back of newly opened stores.

Executive Chairman and Chief Executive Officer of Japan Foods, Mr Takahashi Kenichi, alluded to the fact that the operating environment has become increasingly challenging due to stronger competition and higher business costs. However, even though expenses have increased, the firm introduced a self-ordering iPad E-menu system at all its restaurants and that has enabled to control its costs slightly.

From March to September 2014, Japan Foods generated S$4.3 million in operating cash flow as opposed to S$5.6 million last year. As of 30 September 2014, the firm had a cash hoard of S$15.7 million with no debt.

The restaurant chain will be paying an interim dividend of 0.73 Singapore cents per ordinary share, a steep decline from 1.10 cents given out last year.

Going forward, the firm said it will review its pricing strategy, product offerings and service to meet the needs of the current and future customers. It also plans to increase its central kitchen capacity in the next year and through its associated companies, open more Menya Musashi restaurants in Hong Kong and China. Currently, the associated companies operate 12 such restaurants in the two countries.

Shares at Japan Foods closed at S$0.61 on Wednesday.

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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.