Super Group Ltd’s Latest Earnings: Has Growth Finally Returned?

Super Group Ltd (SGX: S10) reported its fiscal first-quarter earnings yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

Super Group is a leading instant food and beverage brand owner (think instant coffee and tea) with operations primarily in Asia. Its business can be segmented into branded consumer (BC) sales and food ingredient (FI) sales.

2014 wasn’t a good year for the company with its annual revenue and profit down by 3% and 31% respectively. Did Super Group manage to start 2015 on the right note?

Financial highlights

Here’s a rundown on the company’s latest financial figures:

  1. Revenue for the first quarter was down 2% year over year to $121.7 million.
  2. For the reporting quarter, profit attributable to shareholders was $13.6 million, down a hefty 24% when pitted against the same quarter a year ago.
  3. Consequently, earnings per share (EPS) saw a 23.8% decline from 1.60 cents in the first quarter last year to 1.22 cents in the reporting quarter.
  4. For the first quarter of the year, cash flow from operations came in at $5.6 million with capital expenditures clocking in at $9.1 million. This puts the F&B outfit in negative free cash flow territory to the tune of $3.5 million, up from the negative free cash flow of $5.4 million seen a year ago.
  5. As of 31 March 2015, the company had $102.4 million in cash and equivalents and borrowings of about $20 million. This is a slight step down from a year ago when Super Group had $94.7 million in cash and $960,000 in borrowings.

As you can see, top-line growth for Super Group was not inspiring while net income fell. Free cash flow was also negative for the quarter, though the firm has managed to keep its balance sheet rock solid.

Operational highlights and a future outlook

For the first quarter of 2015, the BC segment saw sales decrease by 5% year on year to $84.2 million. From a product standpoint, there were lower sales in its coffee and tea sub-segments. From a geographical standpoint, sales in Philippines and Malaysia were weaker due to the delisting of non-performing products and the implementation of a GST, respectively.

There were still bright spots in the BC segment, with management commenting that Super Group saw stronger performance in Myanmar and Thailand.

On the FI segment, sales for the quarter grew by 4% to $37.4 million over the same period. Both the non-dairy creamer product and soluble coffee product within the segment saw higher sales on a year on year basis. From a geographical standpoint, South East Asia was the major contributor to growth with Indonesia and Philippines being standout performers.

David Teo, Chairman and Managing Director of Super Group, added the following commentary in the earnings release for the company’s current performance and outlook ahead:

“We believe that our strategy of branding, product innovations and diversification will keep us ahead of competition and pave the way for the Group’s long-term growth. FI sales continued to improve while certain BC core markets such as Thailand, Myanmar and China showed revenue improvement. Despite lower net profit, the income generating capability of our integrated business model remained sound as evident in the increase in EBITDA [earnings before interest, taxes, depreciation and amortization] to S$24.6m for the first quarter of FY2015.”

Foolish take away

Super Group seems to have followed up its 2014 performance with a lackluster start to 2015. That said, there are faint encouraging sparks with the company posting growth in its core BC markets. The BC segment is Super Group’s main pillar for growth in the future, and this is where investors would need to watch.

At its closing price yesterday of $1.35, Super Group traded at around 23.3 times its trailing earnings with a dividend yield of 2.3%.

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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