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Financials

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Unaudited Financial Statements for the Second Quarter and Half Year Ended 31 March 2018

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Income Statement

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Profit & Loss

Balance Sheet

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Balance Sheet

REVIEW OF THE GROUP'S PERFORMANCE

Revenue

Revenue increased by 6.0% or $2.3 million, from $39.4 million in the second quarter ended 31 March 2017 (“Q2 FY2017”) to $41.7 million in the second quarter ended 31 March 2018 (“Q2 FY2018”). Revenue from our Singapore operations increased by $0.8 million while revenue from our Jumbo Seafood outlets in the People’s Republic of China (“PRC”) increased by $1.5 million mainly due to contributions from our first Jumbo Seafood restaurant in Beijing, PRC and fourth Jumbo Seafood restaurant in Shanghai, PRC, which commenced operations in July 2017 and November 2017 respectively.

Cost of sales

Cost of sales which comprised raw materials and consumables used increased by 7.8% or $1.1 million, from $14.2 million in Q2 FY2017 to $15.3 million in Q2 FY2018, in line with the increase in revenue.

Gross profit

Gross profit increased by 5.0% or $1.2 million, from $25.2 million in Q2 FY2017 to $26.4 million in Q2 FY2018, due to the increase in revenue.

Gross profit margin was lower at 63.3% in Q2 FY2018 as compared to 63.9% in Q2 FY2017. This was mainly due to higher fresh seafood costs incurred as compared with the same period last year.

Other income

Other income increased by 52.5% or $0.5 million, from $0.8 million in Q2 FY2017 to $1.3 million in Q2 FY2018, mainly due to reversal of impairment for investment in associates amounting to $0.5 million, royalty fee collected from our franchisee amounting to $0.2 million and partially offset by lower government grants received as compared with the same period last year.

Employee benefits expense

Employee benefits expense increased by 25.8% or $2.7 million, from $10.3 million in Q2 FY2017 to $13.0 million in Q2 FY2018. This was mainly due to an increase in the number of employees for our new outlets in Shanghai and Beijing, PRC as well as an overall increase in headcount of our corporate head offices in Singapore and the PRC to support our regional expansion.

Operating lease expenses

Operating lease expenses increased by 5.8% or $0.2 million, from $3.5 million in Q2 FY2017 to $3.7 million in Q2 FY2018, mainly due to the leases for our new outlets in Shanghai and Beijing, PRC, and expansion of our PRC corporate office.

Utilities expenses

Utilities expenses increased by 13.8% or $0.1 million, from $0.8 million in Q2 FY2017 to $0.9 million Q2 FY2018, in line with the increase in number of outlets, as well as the expansion of our PRC corporate office.

Depreciation expenses

Depreciation expense remained stable at $1.2 million in Q2 FY2018 and Q2 FY2017.

Other operating expenses

Other operating expenses increased by 16.2% or $0.6 million, from $3.4 million in Q2 FY2017 to $4.0 million in Q2 FY2018 mainly due to the increase in the number of outlets, the expansion of our PRC corporate office and marketing expenses relating to the Group’s 30th anniversary celebrations.

Income tax expense

Income tax expense remained stable at $0.8 million in Q2 FY2018 and Q2 FY2017.

Profit after tax

As a result of the above, profit after tax decreased by 29.7% or $1.8 million, from $6.0 million in Q2 FY2017 to $4.2 million in Q2 FY2018.

Profit attributable to owners of the Company

Profit attributable to owners of the Company decreased by 27.0% or $1.5 million, from $5.8 million in Q2 FY2017 to $4.3 million in Q2 FY2018.

Review of the group's Financial Position

Current assets

The Group’s current assets decreased by $3.9 million from $62.2 million as at 30 September 2017 to $58.3 million as at 31 March 2018 mainly due to dividend payment amounting to $7.7 million and partially offset by higher trade and other receivables, in line with the increase in revenue.

Non-current assets

The Group’s non-current assets increased by $2.3 million from $21.0 million as at 30 September 2017 to $23.3 million as at 31 March 2018, mainly due to an increase in property, plant and equipment of $1.0 million for the new outlets in Shanghai and Beijing, PRC and renovation works in our central kitchen in Singapore as well as an increase in investment in associates of $1.2 million due to establishment of the new joint venture company in Taiwan in November 2017.

Current liabilities

The Group’s current liabilities decreased by $0.5 million from $14.4 million as at 30 September 2017 to $13.9 million as at 31 March 2018 mainly due to a decrease in income tax payable.

Non-current liabilities

The Group’s non-current liability remained at $0.3 million as at 30 September 2017 and 31 March 2018.

REVIEW OF THE GROUP'S CASH FLOW STATEMENT

The Group generated net cash from operating activities before movementsin working capital of $5.9 million in Q2 FY2018. Net cash used for working capital amounted to $3.3 million mainly due to a decrease in trade and other payables of $1.7 million and an increase in trade and other receivables of $1.4 million. The Group paid income tax of $1.6 million. As a result, net cash generated from operating activities was $1.0 million in Q2 FY2018.

Net cash used in investing activities amounted to $0.8 million in Q2 FY2018 and was mainly for the acquisition of property, plant and equipment in our new outlets in Shanghai and Beijing, PRC and renovation works in our central kitchen in Singapore, partially offset by the amount received from reduction of investments in associate, resulting from a capital reduction exercise of the said associate.

Net cash used in financing activities for Q2 FY2018 amounting to $7.7 million was due to payment of dividend to owners of the Company.

As a result, cash and cash equivalents decreased by $7.4 million in Q2 FY2018.

Commentary on current year prospects

As the Group continues to grow its core operations and strengthen its organization structure and depth for its planned expansion in Asia, performance may be varied as human capital, gestation period for new outlets and operational costs will be some of the key challenges faced by the Group. Pre-operating expenses and promotional expenses for new outlets and the performance of new outlets during the initial gestation period will also affect the Group’s performance. These were reflected in our Q2 FY2018 results. However the Group will continue to focus on cost efficiency and improving work flow processes, manpower utilisation and application of information technology systems to increase productivity, efficiency and lower operating costs.

In March 2018, the Group entered into a joint venture to establish and operate Hong Kong-style “Cha Chaan Teng” under the “Tsui Wah” brand in Singapore. The first Tsui Wah Cha Chaan Teng is expected to open in June 2018.

The Group intends to continue expanding the Jumbo Seafood brand to other major PRC cities. The Group’s sixth Jumbo Seafood restaurant is expected to commence operation in Xi’an by June 2018.

Outside of Singapore and the PRC, the Group will continue to explore franchising opportunities to diversify and grow its business offerings. In this respect, a second franchised Jumbo Seafood restaurant is expected to commence operation in late 2018 in Taichung, Taiwan.

The Group will continue to explore suitable opportunities to expand its network of food and beverage outlets and business through the opening of new outlets, acquisitions, joint ventures and/or strategic alliances with partners who can strengthen its market position and add value to its existing business.