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3 Things I Learnt From JUMBO Group Ltd’s Latest Annual Report

JUMBO Group Ltd (SGX: 42R) is one of the leading food and beverage (F&B) establishments in Singapore. Best known for its famous chili crab dish from its Jumbo Seafood restaurant, the group also has a portfolio of other brands. These include JPOT, Chui Huay Lim Teochew Cuisine, Ng Ah Sio Bak Kut Teh, and J Café.

Here’s what I learned from Jumbo Group’s financial year 17/18 (FY17/18) annual report.

A year of expansion

FY17/18, which ended on 30 September 2018, marked a significant year of expansion for Jumbo. It opened three new company-owned outlets and four franchised outlets. In total, the group now owns 19 outlets (13 in Singapore and six overseas) and has franchised to third parties five Jumbo Seafood outlets, and one Ng Ah Sio Bak Kut Teh outlet. It also operates one Hong Kong-style cafe and manages a Singapore Seafood Republic outlet in Singapore.

In addition, in December last year, the group opened a Jumbo Seafood outlet at ION Orchard, its first Jumbo Seafood outlet in Singapore in 10 years.

Growing pains

As with all new initiatives, rapid expansion and opening of new outlets face a period of gestational losses. In the financial year, the group invariably experienced an increase in operating expenses. Consequently, the higher cost resulted in a decreased in earnings for the year.

However, chairman Tan Cher Liang remains confident that the right steps have been taken, saying:

“We are confident that this enhances our ability to create value over the longer term. Importantly, it is imperative that we embrace a calibrated approach to growth, prudently balancing the costs in tandem with our expansion plans.”

Plans for FY18/19

The group is certainly not resting on its laurels.

For the new financial year, it plans to open one more Jumbo Seafood outlet in Singapore, along with one Teochew cuisine restaurant, and two more Tsui Wah Hong-Kong-styled “Cha Chaan Teng” outlets.

While overseas expansion represents a large market opportunity, group chief executive Ang Kiam Meng still sees Singapore as the bedrock of Jumbo’s earnings growth and wants to strengthen their foothold in its core market.

The Foolish bottom line

Since its listing in 2015, Jumbo has expanded its network of restaurants and grown its geographical footprint beyond our shores. This has inevitably led to higher revenues but lower profits as the group faces initial gestational challenges and country-specific operational issues.

However, if the new initiatives are successful, these expansions can eventually amount to higher profits and open more doors for international expansion in the future. Investors who are interested in the company should continue to keep a close eye on expansion plans, updates on performances of new outlets, and how the company is managing its 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. The Motley Fool Singapore contributor Jeremy Chia does not own shares in any company mentioned.