The Good And Bad That Investors Should Know About JUMBO Group Ltd’s Latest Quarterly Earnings

JUMBO Group Ltd (SGX: 42R) is a restaurant operator that is perhaps most famous for the chili crab served in its Jumbo Seafood chain of seafood restaurants.

In late November, JUMBO reported its full year earnings for its fiscal year ended 30 September 2017 (FY2017). There are both positive and negative takeaways that investors may want to learn about.

The positives

Firstly, JUMBO’s revenue grew 6.1% year-on-year to S$145.1 million. The company has operations in two countries, Singapore and China, and both geographies reported growth. In China, JUMBO benefitted from a full year’s worth of revenue contributions from its third Jumbo Seafood restaurant in Shanghai.

Secondly, the company’s plan for overseas expansion progressed well during FY2017. JUMBO reported in its earnings release that its fourth Jumbo Seafood outlet in Shanghai is ”is slated to open in December 2017.” This will bring the company’s total restaurant count in China to five. Earlier this month, JUMBO also announced that it has entered into a joint-venture in Taiwan to open at least eight Jumbo Seafood restaurants in the territory.

Thirdly, JUMBO ended FY2017 with a strong balance sheet that has S$51.2 million in cash and equivalents, and zero debt.

The negatives

Firstly, JUMBO’s profit attributable to shareholders fell by 6.7% to S$14.47 million despite the aforementioned 6.1% growth in revenue. The drop in profit was driven by higher operating leases and depreciation costs.

Secondly, JUMBO’s working capital (current assets less cash and current liabilities) increased by S$7.8 million in FY2017. This was due to an increase in trade and other receivables (from S$6.03 million to S$9.04 million), an increase in inventory (from S$1.10 million to S$1.48 million) and a decrease in trade and other payables (from S$14.5 million to S$10.1 million).

Lastly, despite its plans to open more restaurants, JUMBO Group commented in its earnings release that it expects the food and beverage industry to continue to be challenging due to keen competition and pressure on operating costs.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.