Sheng Siong Q1 profit up 6.5% from higher revenue in new stores

Sheng Siong's gross profit outpaced revenue growth for the quarter, rising 4.9 per cent year on year to $93.1 million.
Sheng Siong's gross profit outpaced revenue growth for the quarter, rising 4.9 per cent year on year to $93.1 million.PHOTO: BERITA HARIAN

SINGAPORE (THE BUSINESS TIMES) - Supermarket operator Sheng Siong on Monday (April 26) posted a net profit of $30.9 million for its first quarter ended March 31, a rise of 6.5 per cent from the $29 million recorded in the preceding year.

The group's revenue for the quarter also rose, by 2.7 per cent year on year, from $328.7 million in the first quarter of financial year 2020 to $337.5 million in the same period of financial year 2021.

Sheng Siong noted that the slight increase in revenue for the quarter was "contributed entirely" by revenue growth in new stores that opened last year. A total of five new stores were opened in financial year 2020.

Additionally, comparable same-store sale was flat because of the high base in the first quarter of financial year 2020, it added in its business update.

"Comparable same-store sale was flat year on year due to a high base effect resulting from an elevated demand in Q1 FY20 caused by Covid-19," it added.

Nonetheless, gross profit outpaced revenue growth for the quarter, rising 4.9 per cent year on year to $93.1 million. This was on the back of a 0.6 percentage point improvement in gross margins, from 27 per cent in the first quarter of financial year 2020 to 27.6 per cent in the same period of financial year 2021.

Sheng Siong attributed this mainly to lower input prices. Meanwhile, sales mix of fresh to non-fresh produce remained largely the same in the first quarter of financial year 2021, compared with the corresponding period last year.

Earnings per share for the quarter rose 9.9 per cent year on year, from 1.9 cents the previous year to 2.1 cents.

For the quarter, Sheng Siong's administrative expenses increased by $1.8 million year on year to $55.9 million. Of this increase, $1.5 million was due to higher staff costs from additional headcount needed to man the three new stores opened after the first quarter of financial year 2020, noted the group.

The group received $1.86 million in government grants in the first quarter of financial year 2021, compared with $1.59 million in the corresponding period last year. The grants were from various government agencies under the Wage Credit, Special Employment Credit schemes and Covid-19-related grants; the increase came mainly from the Wage Credit Scheme.

With a net cash of $17.5 million generated for the quarter, the group's cash and cash-equivalent balance was $271.5 million as at the end of the first quarter of financial year 2021.

While Sheng Siong was unsuccessful in its tender submitted last November for two shops, chief executive Lim Hock Chee said in the business update that there could be a tender for a new shop soon.

He added that the group will continue to look for retail space in areas "where our potential customers reside but where we do not have a presence".

Mr Lim noted that competition is likely to remain keen among the bricks-and-mortar, as well as online, players. "Even though the food supply chain was not seriously disrupted because of Covid-19, there are still risks of disruptions because of weather, geopolitical developments or breakdown in international carriage."

Over the immediate horizon, Sheng Siong also expects revenue in the second quarter of financial year 2021 to be lower than in the same period of financial year 2020, as elevated demand had peaked in the second quarter of last year, with the group reporting a record revenue of $418.7 million.

Shares of Sheng Siong ended one cent or 0.65 per cent higher at $1.56 on Monday, prior to the results announcement.