Katrina swings into S$2.1m H1 loss after hospitality purchase

KATRINA Group has sunk into the red with a net loss of S$2.1 million for the half year ended June 30, compared to a net profit of S$31,000 a year ago.

This comes amid higher expenses arising from its recent entry into the hospitality business, as well as a surge in finance costs, according to a Wednesday night filing by the food and beverage (F&B) group, which owns and operates restaurants such as Bali Thai, Streats and So Pho in Singapore

Loss per share was 0.9 Singapore cent for the half year, versus earnings per share of 0.01 cent for the year-ago period.

No dividend was declared because the group was loss-making for the period.

Revenue grew 31.2 per cent to S$40.3 million from S$30.8 million a year ago.

The higher revenue mainly stemmed from a S$5.6 million contribution from the hospitality business acquired in December 2018, Straits Organization, as well as a net increase in the number of outlets opened and acquired in October 2018.

Straits Organization leases and manages serviced apartments and apartment units in Singapore and Hong Kong.

The new outlets contributed S$5.9 million in revenue, although this was offset by a S$2.2 million fall in revenue from the closed outlets.

Cost of sales rose 28.7 per cent to S$36.7 million for the half year. In the hospitality business, the higher cost of sales was mainly due to leases of apartments and depreciation of right-of-use assets. For the F&B business, cost of sales was up amid an increase in employee benefits, food cost, online commission and utilities resulting from the opening of new outlets.

Operating expenses climbed 72.7 per cent year on year to S$4.1 million, mainly due to the group's expansion into hospitality as well as more marketing efforts to promote the F&B and hospitality businesses.

Finance costs stood at around S$3 million for the half year, about 155 times the S$19,000 a year ago. This surge was mainly due to the unwinding of lease liabilities from the adoption of accounting standard SFRS(I)16 for leases, discounting of refundable rental deposits, and provision for restoration costs to present value, as well as interest expense from bank borrowings.

Alan Goh, founder, chief executive officer and executive chairman of Katrina Group, said that the group consolidated its F&B business by closing non-performing outlets and channelling resources into high-performing outlets, as well as intensified its growth plans for the hospitality business.

The group conducted major upgrading works for the apartments and co-living hotels it leases and manages, and is continuing its search for strategically located units to grow the customer base.

"Understandably, the newer F&B outlets will take time to improve profitability, as with our expansion plans in the hospitality segment. Nevertheless, we are cautiously optimistic for the group's growth plans," Mr Goh said.

Shares of Katrina Group last traded on Aug 5 at 16.4 Singapore cents.