Earnings of supermarket chain Sheng Siong Group edged down by 11.9% to $65.9 million in 1HFY21 ended June, from the $74.8 million posted a year ago.
On a fully diluted basis, this translates to earnings per share (EPS) of 4.39 cents, an 11.8% drop from the 4.98 cents posted in 1HFY20.
With this, the group's net asset value per share stood at 26 cents on June 30, compared to 25 cents on Dec 31 2020.
Revenue for the first six months of the year declined by 8.8% to $681.7 million due to last year’s high base that was underpinned by an elevated demand from the circuit breaker measures imposed to curb the spread of Covid-19 infections within the community.
The group added two stores to its portfolio, bringing its outlet count to 65 at the end of 1HFY21. Of this, 63 stores are in Singapore and the remaining 2 come from China.
Meanwhile, cost of sales was down 9.6% to $489.2 million in 1HFY21, in line with the decline in revenue.
Similarly, gross profit decreased by 6.7% y-o-y to $192.5 million. However, gross profit margin edged up slightly to 28.2% in 1HFY21 from 27.6% in the previous year following a change in the group’s sales mix.
Other income – which encompasses income flows from rent, sale of scrap materials, government grants and other miscellaneous items – plunged 62.2% y-o-y to $7.5 million.
This follows a sharp dip in government support which came in the form of wage credit and special employment schemes which were doled out to help companies tide through the economic downturn brought on by the pandemic in 2020.
In this time, Sheng Siong’s administrative expenses was decreased by 12.3% y-o-y to $113.4 million.
A contributor to this was a $15.2 million decline in staff costs compared to the previous year which saw the group paying out higher bonuses and additional one-month salary to reward all staff save directors for the group’s sterling results in 2Q2020.
Even so, Sheng Siong has declared an interim dividend of 3.1 cents per share for 1HFY20, which represents a dividend payout ratio of 71%.
This is down from the 3.5 cents per share disbursed in the year before.
As at end June, the group’s cash and cash equivalents stood at $248.0 million, compared to $253.9 million on Dec 31 2020.
Looking ahead, the group is hopeful that the latest slew of restrictions imposed under the Phase 2 (Heightened Alert) could increase the demand for their products on a y-o-y basis.
However, they are mindful that such an increase may taper down as the republic looks to gradually ease the restrictions and takes on a more endemic approach in dealing with the pandemic.
The group is also mindful that there will be comparatively less government grants given out as the coronavirus infection stabilises with more people being vaccinated.
Nonetheless, Sheng Siong has its sights on opening up more outlets. So far, it notes that the supply of new HDB (Housing Development Board) shops has been impacted by the current movement restrictions.
As such, the group has yet to hear on the outcome of the two tenders it has put in. Still it says it will continue to look for new retail spaces in areas where it is yet to build a presence in.
“While our expansion plans in Singapore have been impacted due to the pandemic and the release of fewer tenders of new HDB shops, we continue to be on the lookout for new retail spaces, particularly in areas where we have yet to build a presence,” says group CEO Lim Hock Chee.
Sheng Siong also has plans to expand in China and previously announced agreements for its third and fourth stores which will open in Kunming.
The third store – which has a retail space of around 37,800 sq ft – is slated to be operational by end 3Q2021, while the fourth store which spans around 30,772 sq ft is expected to start running by the end of 4Q2021.
Lim expects brick-and-mortar supermarkets to face competition from online players that have been popping up. However, he says “the group will also remain focused on improving same store sales in Singapore and China, working to drive cost efficiencies, enhance gross margins by working towards a favourable sales mix”.
In a separate filing, the group named Patrick Chee as an independent director. The 66-year-old is a legal consultant at Withers KhattarWong and sits on the boards of other SGX-listed companies such as China International Holdings, OneApex, MeGroup and QAF.
Shares in Sheng Siong Group closed down a cent or 0.64% at $1.56 on July 29, before its results announcement.
