SINGAPORE - Sakae Holdings returned to profitability in 2017, posting a fourth-quarter net profit of S$99,000 as the food and beverage group cut administrative and other operating expenses.
Sakae, which operates the Sakae Sushi chain of conveyor belt sushi restaurants, said on Thursday (Feb 15) it made a net loss of S$5.3 million in Q4 2016.
For the three months ended Dec 31, 2017, earnings per share (EPS) stood at 0.15 Singapore cent, up from a loss per share (LPS) of 2.24 cents a year ago.
Sakae's net profit for FY 2017 was S$1.1 million, or 0.69 Singapore cent per share, up from a net loss of S$12.6 million, or 5.25 Singapore cents per share, a year ago.
The stock last traded at 21 Singapore cents on Feb 8.
Fourth-quarter revenue dropped 18 per cent to S$18.6 million amid "sluggish economic conditions" that led to weaker market sentiments globally. That decline came even as a new stream of revenue from commodities trading contributed S$3 million of sales.
The rationalisation of non-performing outlets in the Singapore market contributed to the fall in group revenue, Sakae said. Gross profit margin from the retail business decreased to 51.1 per cent in the fourth quarter from 56.8 per cent a year ago.
But Sakae trimmed administrative expenses by 22 per cent to S$6.9 million during the quarter, partly due to a S$5 million drop in labour costs. Other administrative expenses including depreciation charges and other expenses have also declined accordingly with the streamlining of the group's operations.
Sakae also cut other operating expenses by 75 per cent to S$2.8 million as the group continued to carry out its rationalisation exercise on non-performing outlets. That included a S$1.4 million net reversal in the latest quarter of overprovisions made in FY2016 for early termination of leases. Reduction in rental, utilities and other expenses, resulted from the rationalisation exercise also contributed to the reduced operating expenses.
Despite the higher profit, the group had negative operating cash flows of S$8.6 million in the fourth quarter, compared to a positive operating cash flow of S$3.8 million in the year-ago period. In FY2017, the group had negative operating cash flows of S$8.3 million, larger than the S$1.4 million outflow in FY2016.
Trade receivables grew to S$5.5 million as at end-2017, from S$1.9 million at end-2016.
Sakae said that it will "continue to be cautious and take reasonable steps" to ensure continuous growth in its operations and manage its operating costs effectively.
Looking ahead, Sakae said it will continue to manage "challenging operating conditions" in the industry amid high labour and rental costs, and intense competition.