The Motley Fool

3 Things Investors Should Know About Old Chang Kee Ltd’s FY2018 Earnings

Old Chang Kee Ltd (SGX: 5ML) is best known for its signature Curry’O puff, a snack that is popular in Singapore. Since operating a single stall outside Rex Cinema in 1956, the food and beverage chain has grown to a total of 90 outlets, as at 31 March 2018.

At the end of last month, Old Chang Kee announced its financial results for the full year ended 31 March 2018 (FY2018). Let’s look at three main aspects of the announcement here.

Show me the money

In FY2018, sales rose 9.1% to S$85.5 million, from S$78.3 million in the previous year. Revenue from both retail outlets and other services, such as delivery and catering services, grew for the year. The former’s growth was due to “revenue contribution from new outlets and increase in revenue from existing outlets, partially offset by the absence of revenue from closed outlets”. Meanwhile, the rise in other services’ revenue was largely due to “higher events and catering sales”.

Old Chang Kee’s signature puff products remained the major contributor to FY2018 revenue at 30.1%, as compared to 31.8% in FY2017.

Gross profit for the year went up by a smaller percentage than revenue growth, at 5.3%, to S$52.2 million due to a 15.8% increase in the cost of sales. As a result, gross profit margin fell from 63.3% to 61.1%.

Net profit surged 131.2% to S$4.0 million, mainly on the back of higher gross profit and lower other expenses, partially offset by higher selling and distribution expenses. Consequently, earnings per share improved from 1.44 Singapore cents in FY2017 to 3.32 Singapore cents in FY2018.

Old Chang Kee’s balance sheet weakened over the year. As at 31 March 2018, the firm had S$12.8 million in cash and bank balances, and total debt of S$11.3 million. This translates to a net cash position of S$1.5 million. In comparison, at the end of March 2017, it had S$5.0 million in net cash.

Cash flow from operations for FY2018 inched up slightly by 0.8% to S$9.6 million. With capital expenditure of S$8.5 million for the latest period, free cash flow came in at S$1.1 million. This is a small decline from previous year’s free cash flow of S$1.3 million. Capital expenditure for the year consisted of renovation costs for Old Chang Kee’s new retail outlets and factory facility in Singapore.


The board proposed a final dividend of 1.5 Singapore cents per share. Together with the interim dividend of 1.5 Singapore cents already paid out, the total dividend for FY2018 would be 3.0 Singapore cents per share, same as the previous year.

What the future holds?

Looking ahead, Old Chang Kee commented:

“The Group’s first flagship outlet in Covent Garden – London, United Kingdom is on track to open in June 2018, generating new revenue streams for the Group and uplifting Old Chang Kee’s brand positioning.

On the current operations, the Group expects 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.

Following the completion of the new factory facilities and the commissioning of new factory equipment, the Group will focus on improving its gross margins and revenues. These efforts include continued investment in brand positioning, bulk purchases at more favourable prices with the expanded factory space, further expanding its product range including seasonal product launches, and increasing the production efficiency of its factories.”

It would be interesting to watch whether Old Chang Kee’s snacks gain traction in an overseas market and how much the new factory improves the company’s gross margins and revenues by.

There are 28 surprising and important things we think every Singaporean investor should know—and we’ve laid them all out in The Motley Fool Singapore’s new e-book. Packed with information and insights, we believe this book will help you be a better, smarter investor. You can download the full e-book FREE of charge—simply click here now to claim your copy.

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.