Sheng Siong rings in higher profit, raises interim dividend

Supermarket chain Sheng Siong reported an 11.3 per cent rise in net profit for the quarter ended June 30.
Supermarket chain Sheng Siong reported an 11.3 per cent rise in net profit for the quarter ended June 30.PHOTO: ST FILE

SINGAPORE - Supermarket operator Sheng Siong Group reported an 11.3 per cent rise in second quarter net profit to $15.2 million.

Revenue for the three months to June 30 was up 5.5 per cent at $188.8 million, mainly due to contribution from new store sales.

Comparable same store sales grew mainly as a result of a general improvement in sales at the older stores and the resumption of its McNair Road store which was closed for almost a month in the second quarter of last year for a total refurbishment.

If sales from the McNair store was excluded, comparable same store sales would have grown by 1.3 per cent instead of 2.2 per cent.

Furthermore, the growth in comparable same store sales was mainly attributable to the partial recovery of the Woodlands store from the effect of the weaker Malaysian ringgit, the impact of the restriction on the sale of liquor being no longer relevant as the ban took effect in the second quarter of last year.

Gross margins increased to 26.1 per cent compared with 25.2 per cent in the same period last year, predominantly due to suppliers' rebates and reduction in input cost derived mainly from bulk handling which was facilitated by continuous improvements from the central warehouse at Mandai.

Administrative expenses increased by $1.7 million owing to the increase in staff costs as more headcounts were needed to operate the new stores and a higher bonus provision as a result of the higher operating profit.

Earnings per share grew to 1.01 cents from 0.91 cent previously while net asset value per share firmed to 16.59 cents compared to 16.24 cents as at Dec 31.

Looking ahead, Sheng Siong said that competition in the supermarket industry is expected to remain keen.

Meanwhile, customer demand remains tepid and this is likely to persist so long as the global and local economic conditions continue to remain lacklustre.

"Core inflation, more particularly food inflation is likely to remain subdued, although the risks of unpredictable weather could disrupt the supply chain and distort prices," it noted.

The group is still looking for suitable retail spaces in areas where it does not have a presence.

Its Loyang Point store, which has an area of about 6,000 square feet, was closed in April as the HDB is renovating the complex.

The store is expected to re-open in the first quarter of 2017 when renovation is completed, with a larger area of some 8,000 square feet.

Its Woodlands store, with an area of about 41,500 square feet will be closed in the second quarter of next year, as the HDB is redeveloping the area. This is a key store, contributing between 5 per cent and 10 per cent to revenue.

Sheng Siong took vacant possession of the retail space at Yishun Junction 9, totalling 18,900 square feet when temporary occupation permit was granted in February.

Out of the 18,900 square feet, 15,500 square feet will be used for its supermarket operation.

The remaining 3,400 square feet would be leased to a food court operator as Sheng Siong was not successful in applying for change of use in the space.

The supermarket is now undergoing renovation and should open next month.

Due to unforeseen circumstances, the alteration works to its Tampines Central store is postponed to commence on March 1 next year instead of Oct 1 this year.

This supermarket will be temporarily closed for about two months from March 1 and should re-open with a new area of some 25,000 square feet.

Over in China, its supermarket in Kunming is likely to commence operation in the last quarter of this year.

Sheng Siong has declared an interim dividend of 1.9 cents per share, up from 1.75 cents last year.