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Old Chang Kee Ltd’s Latest Earnings: What Investors Need to Know

Old Chang Kee Ltd (SGX: 5ML) is best known for its signature Curry’O puff, a popular Singapore snack. Since operating a single stall outside Rex Cinema in 1956, the food and beverage chain has grown to a total of 87 outlets currently.

Yesterday, the firm announced its financial results for the second quarter and six months ended 30 September 2017.

Here is a quick rundown of the financial figures from the latest quarter:

1. Revenue for the quarter rose 5.9% year-on-year to S$21.4 million. Sales from retail outlets increased 6.4% mainly on the back of “revenue contribution from new outlets and increase in revenue from existing outlets, partially offset by the absence of revenue from closed outlets”.

2. The share of results from joint venture was a negative S$22,000 due to start-up losses for a new joint venture in the United Kingdom. The firm mentioned that its “first flagship outlet in London, United Kingdom is targeted to open in 2018, generating new revenue streams”.

3. Despite the higher revenue, net profit plunged 52.6% to S$748,000. The decline was mainly due to lower other income, higher administrative costs, and increased selling and distribution expenses.

4. Consequently, diluted earnings per share for the quarter was 0.62 Singapore cents, down from 1.30 cents seen in the previous year’s corresponding quarter.

5. As of 30 September 2017, Old Chang Kee had S$13.1 million in cash and bank balances, with S$11.7 million in total debt. This translates to a net cash position of S$1.4 million. In comparison, at the end of March this year, it had a higher net cash position of S$5 million.

6. For the quarter, cash flow from operations was at S$2.3 million and S$2.2 million was spent on capital expenditure. Therefore, the curry puff purveyor brought in S$0.1 million in free cash flow, a drop from S$0.6 million raked in a year ago.

Old Chang Kee’s puff products remained the major contributor to revenue, accounting for 29.6% of the group’s revenue during the latest quarter, as compared to 33.4% one year ago.

As of 30 September 2017, the firm operated a total of 87 outlets in Singapore versus 89 outlets, as of the end of September last year.

On a half-year basis, revenue grew 8.2% to S$42 million, but net profit came down 42.9% to S$1.4 million.

Shareholders will receive an interim dividend of 1.5 Singapore cents per share, unchanged from a year ago.

Looking ahead, the firm said:

“On the current operations, the Group expects operating lease expenses (rental), labour and raw material costs to remain high in the next reporting period and the next 12 months, and believes that the labour market will continue to remain tight”.

It also added that it will be focusing on improving revenue and gross margin after its new factory facilities were commissioned in the second quarter. Its improvement efforts include “continuing investment in brand positioning, bulk purchases at more favourable prices with the expanded factory space, further expanding its product range and increasing the production efficiency of its factories”.

Shares of Old Chang Kee closed at S$0.75 on Monday.

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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.