Yahoo Finance Sheng Siong posts 0.3% increase in FY2023 earnings to $133.7 mil
Sheng Siong sees marginal growth for FY2023; proposes 3.2 cents final dividend.
Local supermarket operator Sheng Siong announced that its earnings for FY2023 ended Dec 31, 2023 came in at $133.7 million, just 0.3% higher than $133.3 million a year ago.
Revenue for the period saw a slight growth of 2.1% y-o-y to $1.37 billion from $1.34 billion a year ago.
The increase was primarily driven by the six new stores, which contributed a 2.5% y-o-y increase to total sales. This was partially offset by a lower revenue contribution from the Yishun store that was closed in FY2022 due to lease expiration.
For the 2HFY2023 period, revenue was 2.2% higher y-o-y at $677.2 million, while earnings gained 3.6% y-o-y to $68.3 million.
In line with the increase in revenue, gross profit increased by 4.3% to $410.5 million in FY2023, compared to $393.5 million in FY2022. The group also recorded relatively stable margins with a gross margin expansion of 0.6 percentage points (ppts) to 30.0% in FY2023 compared to FY2022 primarily due to constant refinement efforts to establish a more favourable sales mix and addressing the increased staff costs and utilities expenses. Net profit margin for FY2023 reduced by a marginal 0.2 ppts to 9.8% compared to the previous year, primarily due to higher operating expenses.
Other income decreased by 17.2% y-o-y to $14.3 million in FY2023, mainly due to lesser supplier rebates recognised during the year.
In FY2023, the group’s operating expenses increased due to a 10.0% y-o-y increase in selling and distribution expenses to $221.4 million. This was primarily due to a $13.8 million y-o-y increase in utility expenses, the electricity supply agreement for which was renewed at a higher prevailing market rate compared to FY2022, and a $6.6 million y-o-y increase in staff costs owing to tight labour market conditions.
Despite this, the group reported a net profit after tax of $134.0 million, a marginal 0.3% increase compared with previous year’s net profit of $133.6 million.
In FY2023, cash flow from operating activities increased by $10.3 million y-o-y to $177.1 million. The group holds a healthy balance sheet with a strong cash and cash equivalents’ balance of $324.4 million as at Dec 31, 2023.
The board has proposed a final dividend of 3.2 cents per share. Together with the interim dividend of 3.05 cents already paid out, the total dividends for FY2023 is 6.25 cents, representing a payout ratio of about 70%. This is slightly higher than 6.22 cents paid out in the previous year.
Lim Hock Chee, CEO of Sheng Siong says: “As the challenges of an uncertain and rapidly developing macroeconomic and political situation unveil, the group remains committed to strengthening our core competencies to improve operational efficiency and productivity. Competition in the supermarket industry is expected to remain keen with active promotions being conducted by competitors. To tackle the margin pressures, we are working closely to seek opportunities for margin enhancement through further refinement of our sales mix.”
The group expects to face margin pressures due to Singapore's tight labour market, driven by a shortage of manpower, the ongoing geo-political tensions that are blocking major trade routes and rising energy costs. Additionally, implementation of Carbon Tax and GST increment, and enhanced sustainability and climate reporting obligations are also expected to contribute to rising operating costs.
“In terms of our store expansion in Singapore, we opened two new stores in FY2023 and secured two new stores in early 2024. The supply pipeline of new stores is robust, with HDB opening up four stores for tender in January 2024 and more coming in through the rest of the year. Expansion in China is moving as planned as one additional store was secured in FY2023 bringing the total store count to six. The sixth store is due to open in 2QFY2024,” adds Lim.
Shares in Sheng Siong closed at $1.56, 4.3% lower in the last 12-months.
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