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Super Group Ltd’s Latest Earnings: Improvement in Sight?

Super Group Ltd (SGX: S10) reported its fourth-quarter earnings for the year ended 31 December 2014 last Friday. The reporting period was for 1 October 2014 to 31 December 2014.

Super Group is a leading instant food and beverage (F&B) brand with operations primarily in Asia. Its business can be segmented into branded consumer sales (mainly of instant coffee) and food ingredient sales. You can read more about Super Group here and catch the firm’s third quarter earnings here.

Financial highlights

Here’s a rundown on the financial figures for Super Group’s latest set of numbers:

  1. Overall revenue for the fourth quarter was $153.7 million, about flat compared with last year. Super Group finished 2014 with $539.5 million in annual revenue, about 3% below 2013’s revenue of $557 million.
  2. For the fourth quarter, profit attributable to shareholders was $25.9 million, up by 15% compared with the same quarter a year ago. For the full year, profit came in at $68.8 million, down some 31% from 2013. Profit for the quarter was boosted by the sale of the group’s property in Chin Bee crescent.
  3. For the fourth quarter, earnings per share (EPS) saw a 14.3% rise from 2.03 cents a year ago to 2.32 cents. Super Group’s 2014 EPS was 6.17 cents, down 31.1% from last year’s EPS of 8.96 cents.
  4. For the full year, cash flow from operations came in at $62 million with capital expenditures clocking in at $39.6 million. The low capex gave the F&B outfit $22.4 million in positive free cash flow, up from $15.4 million seen in 2013. Free cash flow for 2014 benefitted mainly from lower capex spending compared to 2013.
  5. As of 31 December 2014, the company had $101.3 million in cash and equivalents and borrowings of about $20 million. This is a slight step backward from end-2013 when Super Group had $98.5 million in cash and just $349,000 in borrowings.

In short, Super Group managed to stabilize its revenue and even grow its free cash flow in the fourth quarter – these are encouraging signs. But that said, we should continue to observe if such improvements – on both the revenue and free cash flow side of things – are sustainable.

A final dividend of 2.1 cents per share was also recommended by the management team. This adds up to 3.1 cents per share in total dividends for 2014. This is a decline from Super Group’s dividend of 4.5 cents per share in 2013.

Operational highlights

For the fourth quarter of 2014, branded consumer sales grew 6% year-on-year to $97 million. Revenue benefited from higher sales from Southeast Asia, China, and the Commonwealth of Independent States. Super Group’s efforts to improve branding in individual markets continues on, where marketing strategies are tailored to specific markets.

On the food ingredients side, sales fell by 9% year-on-year to $56 million for  the quarter. The F&B outfit is looking to roll out more premium products like nutritional oil powders after upgrading its plant in Wuxi, China. Furthermore, the completion of the botanical herbal extract production line would enable the company to explore new liquid concentrates and new soluble powders for products such as tea, chrysanthemum, chicory, and ginger.

Chairman and Managing Director of Super Group, David Teo, added the following commentary for 2014 and the outlook ahead:

“We are pleased to conclude the year on a positive note, reporting an increase in our net profit to S$26.8m in 4Q14 [fourth quarter of 2014]. In particular, sales in the Branded Consumer segment showed healthy growth, as our rebranding efforts have yielded positive results for our Branded Consumer business.

Moving into 2015, we remain optimistic that our strategy of branding, product innovations and diversification will bring about sustainable growth as the Group enters 2015. We will vigilantly execute our growth strategies so that we will stay ahead of competition and pave the way for the Group’s long-term growth.”

Foolish take away

At its closing price last Friday of $1.20, Super Group traded at around 19.4 times its latest trailing earnings and has a dividend yield of 2.6%.

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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 Chin Hui Leong owns shares in Super Group.