Unaudited Financial Statements Announcement For The Half Year Ended 30 June 2018
Consolidated Statement of Comprehensive Income
Statements of Financial Position
REVIEW OF FINANCIAL PERFORMANCE
Revenue has increased by S$3.1 million or 11.2% from S$27.7 million for half year ended 30 June 2017 ("HY2017") to S$30.8 million for half-year ended 30 Jun 2018 ("HY2018") due to a net increase in the number of outlets. The new outlets contributed S$4.8 million to the increase in revenue. In view of the change of demographics such as the eating trend and convenience of mobile ordering system, customers are exploring into online delivery as opposed to dine-in. As a result, online revenue has increased by S$0.7 million while the dine-in revenue of the existing outlets has reduced by S$1.7 million from HY2017 to HY2018.
In addition, there was also a decrease in revenue of S$0.7 million from Beijing due to the closure of two outlets in March and June 2017.
Cost of Sales
Cost of sales, which comprised mainly food and beverage, employee benefits, utilities, leases of restaurants, online commissions and depreciation of property, plant and equipment, increased by S$3.4 million or 13.5% from S$25.1 million in HY2017 to S$28.5 million in HY2018. The increase was contributed by an increase in the utilities, rental and employee benefits as a result of the opening of new outlets.
In addition, online sales commission increased by S$0.2 million from S$0.6 million in HY2017 to S$0.8 million in HY2018 in line with the increase in online revenue.
Gross profit decreased by S$0.4 million or 15.4% from S$2.6 million in HY2017 to S$2.2 million in HY2018 due to increase in cost of sales.
The decrease in other income by 7.2% or S$18,000 was due mainly to lower advertisement and promotion sponsorship from beverage vendor.
Selling and distribution costs
The selling and distribution costs remained consistent at around S$0.5 million in HY2017 and HY2018.
Administrative expenses remained consistent at around S$1.9 million in HY2017 and HY2018.
These were adjustments arising from discounting refundable rental deposits and provision for restoration costs to present value made in HY2018. There were no such valuation done in HY2017.
Profit before tax
The three non-performing outlets which were closed in HY2018 recorded losses of S$0.5 million in HY2018. Accordingly, profit before tax decreased significantly by 92.6% or S$389,000 from S$420,000 in HY2017 to S$31,000 in HY2018.
REVIEW OF FINANCIAL POSITION
The Group's non-current assets decreased by S$0.2 million from S$12.2 million as at 31 December 2017 to S$12.0 million as at 30 June 2018 due to a decrease in property, plant and equipment resulting from depreciation and write-off of plant and equipment for outlets closed during the period, which was partially offset by an increase in refundable deposits for new outlets.
The Group's current assets decreased by S$1.7 million from S$10.6 million as at 31 December 2017 to S$8.9 million as at 30 June 2018 due to the decrease in trade receivables resulted from lower sales recorded in June 2018 as compared to December 2017; decrease in other receivables, resulted from lower government grant receivable; and decrease in cash and cash equivalents being monies utilised for the setup of new outlets and dividend payments to shareholders. The decrease was partially offset by an increase in prepayment and refundable deposits for the new outlets.
The Group's current liabilities decreased by S$1.2 million from S$7.3 million as at 31 December 2017 to S$6.1 million as at 30 June 2018 mainly due to decrease in trade and other payables resulted from lower purchases and renovation cost payables, as well as decrease in other liabilities arising from lower provision of bonus (6 months provision for period ended 30 June 2018 as opposed to full year provision as at 31 December 2017). The decrease was partially offset by the increase in provision of restoration cost as a result of reclassification from non-current portion for outlets with lease expiring in 2019.
The Group's non-current liabilities was reduced by S$0.1 million from S$1.3 million as at 31 December 2017 to S$1.2 million as at 30 June 2018, mainly due to reclassification of provision for restoration costs to current liabilities.
Positive working capital
As at 30 June 2018, the Group was in a positive working capital of S$2.7 million as compared with S$3.3 million as at 31 December 2017.
The decrease in Group's shareholders' equity of S$0.6 million as at 30 June 2018 was mainly attributed to the final dividend payment of S$0.6 million to its shareholders in respect of the financial year ended 31 December 2017.
REVIEW OF CASH FLOWS
The Group generated net cash of S$1.5 million from operating activities before changes in working capital. Net cash used in working capital amounted to S$1.9 million mainly due to increase in refundable deposits of S$0.8 million, prepayments for the setup of new outlets of S$0.2 million, decrease in trade and other payables of S$0.7 million and decrease in other liabilities of S$0.7 million. This was offset by a decrease in trade and other receivables of S$0.5 million. As a result, net cash used in operating activities was approximately S$0.4 million.
Net cash used in investing activities amounted to S$1.3 million due to purchase of property, plant and equipment for new outlets.
Net cash used in financing activities of S$0.6 million was due to the payment of dividend to the shareholders of the Company.
As a result of the above, the net decrease in cash and cash equivalents for the period was S$2.2 million.
The F&B industry in Singapore, and the restaurant sector in particular, continued to see fatigue in 2018, faced with low entry barriers, rising operating cost and intense competition. The redeeming spark of the industry continues to be online food delivery sales, as consumers trend towards convenience and flexibility of choice.
As at end-July 2018, the total number of outlets for the Group stood at 39 in Singapore, with four new outlets opened and three non-performing outlets closed in 1H2018. The Group has four more new outlets in the pipeline and one more non-performing outlet to be closed in the next 12 months.
The Group remained steadfast in growing its business, as well as actively managing costs. As the Group is still in its expansion phase, it will take time for new outlets to improve profitability. The Group targets to be more selective in the locations of new outlets and to maximize sales from its online food ordering and delivery services, in tandem with the changing consumer trends.
Looking towards new initiatives which will build on the foundation it has set in terms of its brand equity and presence in strategic locations in Singapore, the Group aims to focus on expanding its umbrella of brands to capture more of the market.
Overseas, the Group and Hong Kong-listed Ajisen Group opened one outlet under the "So-Pho" brand in Shanghai in FY2017 and another in Guangzhou in HY2018. An additional outlet is expected to be opened in Shanghai by end-2018 at New Raffles City, Ma Dang Road. Separately, the Group has also accepted a letter of offer to open its maiden outlet in Indonesia, in Plaza Senayan, Central Jakarta under the "So Pho" brand name. The outlet is poised to have a total area of approximately 138 square metres and looks to begin operations in early 2019. Depending on the success of this venture, the Group will look to open more outlets in Indonesia over the next two years.
Sustainable growth continues to be a priority for the Group and it will continue to explore suitable brands and businesses whether internally, through collaborations or acquisitions to add value to its operations both locally and overseas.
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