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Latest Earnings From Sheng Siong Group Ltd: Dividends Jump 17%

Sheng Siong Group Ltd  (SGX: OV8) reported its fiscal fourth-quarter earnings yesterday. The reporting period was for 1 October 2015 to 31 December 2015.

As a brief background for some context later, Sheng Siong is one of the largest supermarket chains in Singapore. The company’s network of 39 stores are primarily located in the heartlands of the island. You can learn more about the company in here or catch up with the earnings from its previous quarter here.

Financial highlights

The following’s a quick summary on the latest financial figures:

  1. For 2015’s fourth-quarter, Sheng Siong’s revenue grew by 4.9% year-on-year to $187 million. For the full year, the company’s top-line expanded by 5.3% to $764.4 million.
  2. Profit for the reporting quarter did better, growing 23.9% to $14.6 million. In 2015, profit was up by 19.3% to $56.8 million.
  3. Sheng Siong’s earnings per share (EPS) rose 24.4% from 0.78 cents in the fourth-quarter of 2014 to 0.97 cents per share in the reporting quarter. EPS for 2015 was 3.78 cents, a 19% increase from the previous year.
  4. Cash flow from operations was $18.7 million for the fourth-quarter of 2015 with capital expenditures coming it at $19.1 million. Sheng Siong thus generated negative free cash flow to the tune of $400,000 the reporting quarter. For the full year, Sheng Siong also had negative free cash flow of $9.2 million. For perspective, Sheng Siong generated negative free cash flow of $48.5 million in the fourth-quarter of 2014 ($21 million in cash flow from operations and $69.4 million in capex) and negative free cash flow of $9.2 million for the full year ($71.7 million in cash flow from operations and $80.9 million in capex).
  5. As of 31 December 2015, Sheng Siong had $126 million in cash and equivalents and no debt. This is a slight decline from the $130.4 million in cash and equivalents and no debt that it had a year before.

In all, Sheng Siong had a solid quarter with steady revenue growth and strong profit growth. The retailer still sports a strong balance sheet. Sheng Siong’s only drawback for the year was the negative free cash flow generated.

The board of directors had proposed a final dividend of 1.75 cents per share, bringing the total dividend to 3.5 cents per share. This was a 17% improvement from the 3.0 cents per share paid out for 2014.

Operational highlights

In 2015, Sheng Siong’s revenue had increased by 5.3% as mentioned. This came mainly from six new stores that were opened in 2014 and 2015. Sheng Siong’s gross margin had improved on the various initiatives the supermarket operator had undertaken and a stronger Singapore dollar.

The management team remained cautious on the outlook ahead, citing a sluggish economy and keen competition. The team also commented that some of the company’s old stores in mature housing estates are facing “declining same store sales” and these stores may be candidates for major re-fitting works. If re-fitting does indeed happen, the affected stores may lose sales for a month or so.

Sheng Siong’s chief executive, Lim Hock Chee, had the following commentary on the quarter’s results:

“We are pleased to be back on track for our store expansion plans with the opening of 5 new stores in FY2015, bringing the total number of our stores to 39 with a total retail area of 431,000 sq. ft. After the renovation to Tampines Block 506 and the fitting out of our new store at Yishun Junction 9, we will add at least 25,000 sq. ft of retail space.

In line with our commitment to reach out to our potential customers in areas where we do not have presence, we will continue to look for new retail space. At the same time, we will nurture the growth of the new stores and enhance comparable same store sales. We will also remain focused on driving cost efficiency amidst the challenging business environment by increasing direct and bulk purchasing, leveraging on our Mandai Distribution Centre.”

Foolish summary

At its closing share price yesterday of $0.87, Sheng Siong traded at around 23 times trailing earnings with a trailing dividend yield of 4%.

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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 doesn’t own shares in any companies mentioned.