Sheng Siong's Q1 net profit up 6.5% year on year

Supermarket operator Sheng Siong has 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 for the same period last year.

The group's revenue for the quarter also rose by 2.7 per cent to $337.5 million, from $328.7 million in the first quarter last year.

Sheng Siong noted that the slight increase in revenue was "contributed entirely" by revenue growth in new stores that opened last year. The group opened five new stores in fiscal year 2020.

Comparable same-store sales were flat, owing to the high base in the first quarter of FY2020 that was caused by elevated demand during the Covid-19 outbreak, the group said in its business update on Monday.

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 FY2020 to 27.6 per cent in the same period this year.

Sheng Siong attributed this mainly to lower input prices.

Meanwhile, the sales mix of fresh to non-fresh produce remained largely the same in the first quarter this year, compared with the corresponding period last year.

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

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 the additional headcount needed to man the three new stores opened after the first quarter of FY2020.

The group received $1.86 million in government grants in the first quarter, compared with $1.59 million in the corresponding period last year.

The grants were from various government agencies, under the Wage Credit and Special Employment Credit schemes and Covid-19-related grants. The increase came mainly from the Wage Credit Scheme.

With 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.

While Sheng Siong was unsuccessful in its tender for two shops last November, chief executive Lim Hock Chee said in the business update that there could be a tender for a new shop soon, as construction of apartments and commercial spaces that was delayed owing to the pandemic has been completed.

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

Looking ahead, Mr Lim said competition is likely to remain keen among brick-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," he said.

Sheng Siong expects revenue in the second quarter to be lower than in the corresponding quarter of FY2020, as elevated demand had peaked in the second quarter last year, with the group reporting record revenue of $418.7 million then.

Sheng Siong shares closed 1.28 per cent lower at $1.54.

THE BUSINESS TIMES