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3 Things To Like About Japan Foods Holding Ltd’s FY2018 Earnings

Established in 1997, Japan Foods Holding Ltd (SGX: 5OI) is one of the leading Japanese restaurant chains in Singapore. As at 31 March 2018, Japan Foods operates 50 restaurants in Singapore under various brands, including Ajisen Ramen, Osaka Ohsho and Menya Musashi. The company also has a presence in countries overseas such as Malaysia, Vietnam, Hong Kong and China.

Early last month, Japan Foods announced its financial results for the full year ended 31 March 2018 (FY2018). Here are three things to like about the earnings update.

Record revenue, gross profit and gross profit margin

Revenue for the full year came in at S$67.8 million, an increase of 3.6% year-on-year. This revenue was at a record high for the second consecutive year. The strong performance for FY2018 was due to higher contributions from Ajisen Ramen and Menya Musashi, partially offset by lower sales from the restaurants operating under other brands such as New ManLee Bak Kut Teh, Dutch Baby Cafe and Hanamidori.

In line with the higher revenue, gross profit rose 3.8% year-on-year to S$57.7 million in FY2018. Consequently, the gross profit margin was at a commendable 85%, rising 0.1 percentage point year-on-year. The higher gross profit margin was due to Japan Foods’ “continuing efforts in bulk purchase discounts, raw material costs control, efficient material usage and product pricing strategy”. Gross profit and gross profit margin for FY2018 were at record highs for the eighth straight year.

The following shows the gross profit and gross profit margin trends from FY2011 to FY2018:Source: Japan Foods Holding Ltd FY2018 earnings presentation

Net profit for the year rose 24% to S$5.8 million while net profit margin went up by 1.4 percentage points to 8.5%.

The executive chairman and chief executive of Japan Foods, Takahashi Kenichi, commented on the latest results:

“I am very pleased that Japan Foods has set a new revenue record despite an increasingly challenging operational environment as it reflects the success of our ongoing restaurant portfolio management strategy in driving revenue. We will continue to monitor the sales of individual stores carefully in order to maintain a healthy topline and sustainable bottomline.”

Same-store sales growth

In Singapore, the bulk of the restaurants operated by Japan Foods is under the Ajisen Ramen brand at 18 outlets. This brand posted a same-store sales growth of 4% in FY2018.

Of those 18 Ajisen Ramen outlets, four have been revamped into Den by Ajisen Ramen brand restaurants in FY2018 with great success. The rejuvenation has tremendously improved the same-store sales, as seen from the chart below:Source: Japan Foods Holding Ltd FY2018 earnings presentation

Ka-ching!

Who doesn’t like higher dividend? Japan Foods didn’t disappoint on this front either.

The board of directors of Japan Foods has proposed a final dividend of 1.30 Singapore cents per share for the fourth quarter. Together with the interim dividend of 0.80 Singapore cents per share already paid out, the total dividend for FY2018 would be 2.10 Singapore cents per share. A year ago, Japan Foods paid out 2.0 Singapore cents per share.

The following shows the dividend history from FY2011 to FY2018:Source: Japan Foods Holding Ltd FY2018 earnings presentation

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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.