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Kimly Q4 net profit dips 6% on lower revenue, higher income tax

CATALIST-LISTED coffeeshop operator Kimly saw a 6 per cent fall in net profit to S$5.4 million for the fourth quarter ended Sept 30, on the back of lower revenue and higher income tax expense.

Revenue inched down 0.9 per cent to S$52.5 million, while gross profit fell 2.7 per cent to S$10.7 million.

Though the group recorded a higher pre-tax profit of S$6.8 million – 12.3 per cent more than a year ago – income tax expense rose nearly three times to S$1.5 million, which resulted in a hit to its bottom line. Kimly noted that its effective tax rate for FY2019 was 16.2 per cent compared to 12.7 per cent in FY2018 as tax exemption and rebate were reduced.

Earnings per share was 0.47 Singapore cent, down from 0.49 cent a year earlier. For the full year, net profit fell 8.4 per cent to S$20.1 million despite a 3 per cent rise in revenue to S$208.3 million.

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Turnover was lifted by the increase in contribution from the food retail division of S$8.6 million, mainly due to the restaurants and confectionery businesses acquired in July 2018, Tonkichi and Rive Gauche. This was offset by a decrease in contribution from the outlet management division of S$2.5 million after a coffeeshop ceased operations.

Administrative expenses grew 10.1 per cent to S$15.4 million. This was mainly due to higher employee benefits expenses as headcount and salaries increased, and higher depreciation of property, plant and equipment after the Tonkichi and Rive Gauche acquisitions.

Earnings per share for the full year was 1.74 Singapore cents, compared with 1.89 cents previously.

Despite the poorer showing, Kimly has proposed a final dividend of 0.84 Singapore cent per share, up from 0.68 cent a year ago. This is on top of an interim dividend of 0.56 cent a share, which takes total dividends to 1.4 Singapore cents – its highest since listing in March 2017. Total dividends work out to a payout ratio of 80.2 per cent compared with 50.7 per cent for FY2018.

Kimly is working on a strategic shift to acquire more long-term and direct asset ownership of food outlets and stalls to boost revenue streams and reduce risks associated with leasing and tenancy.

The group expects to open two more coffeeshops in December and add another three food stalls at new coffeeshops. This brings the number of food outlets operated by Kimly to 72, and the number of food stalls in its food retail division to 135.

"The group continues to be vigilant about the challenges in the local food and beverage industry, including expected slower economic growth in Singapore and the reduction of the Foreign Worker Quota (announced in Budget 2019) which will come into effect over the next two years," Kimly said.

Kimly shares rose 0.5 Singapore cent or 2.17 per cent to 23.5 cents on Tuesday before the results were announced.