Sheng Siong Group Ltd’s Latest Earnings: Interim Dividend Falls 18.4%

Yesterday, Sheng Siong Group Ltd (SGX: OV8) reported its second-quarter earnings. The reporting period was from 1 April 2017 to 30 June 2017.

Sheng Siong is one of the largest supermarket chains in Singapore. The company’s network of 42 stores are mostly located at the heartlands of the island. You can learn more about the company here. You can also catch the previous quarter earnings here.

Financial highlights

Here’s a quick summary on the latest financial figures for the second quarter:

1. Revenue grew by 6.8% year on year, coming in at around $201.5 million.  

2. Net profit rose 6.1% to $16.1 million.

3. Earnings per share (EPS) was up 5.9%. EPS was 1.07 cents, up from the 1.01 cents recorded a year ago.

4. Cashflow from operations was $30.1 million and capital expenditure came in it at $1.2 million. Sheng Siong generated $28.9 million in free cash flow, a big improvement from the negative $37.2 million free cash flow reported a year ago.

5. As of 30 June 2017, Sheng Siong had $69.6 million in cash and equivalents and no debt. This is an improvement from the $50.8 million in cash and equivalents and no debt reported a year ago.  

In all, Sheng Siong put in solid quarter of revenue and profit growth. The retailer’s balance sheet strengthened while free cash flow improved compared to the previous year. 2016’s second quarter included higher capital spend for its Bedok store and payments related to Yishun Junction 9.

The board of directors proposed an interim dividend of 1.55 cents per share, an 18.4% decrease from 1.90 cents per share paid out last year.

Operational Highlights

Sheng Siong’s sales grew 6.8% year on year where new stores contributed 5.2% growth while comparable store sales grew 0.9%. Sheng Siong’s gross margins improved on efficiency gains, supplier rebates and favourable fresh product mix.

The Chief Executive Officer, Mr. Lim Hock Chee added commentary on the quarter’s results:

“We have successfully bid for a new HDB store in Woodlands with a retail area of 12,000 sq. ft. and have also entered into a lease for a new store of 4,000 sq. ft. in Fajar Road, Bukit Panjang.”

“Moving ahead, we will continue with our efforts in expanding our retail space in Singapore, particularly in locations where we do not have presence to reach out to our potential customers. At the same time, we remain committed to nurture the growth of our new stores. In order to enhance our operating margin, we will stay focused to lower our input cost by increasing direct purchasing, bulk handling and changing the sales mix to a higher proportion of fresh produce.”

“To reward shareholders for their unwavering support, we are pleased to declare an interim cash dividend of 1.55 cent per share.”

Sheng Siong added that the supermarket renovation at its Kunming (China) subsidiary in progress. The China supermarket is expected to commence operations in September this year.

The management team also said that demand is expected to be uncertain and competitive will remain keen.

Foolish summary

Sheng Siong shares closed at $0.95 on Thursday. The stock traded at 22.4 times earnings with a dividend yield of 3.6%.

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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 doesn’t own shares in any companies mentioned.