Neo Group H1 earnings up 5 times to S$13.6m

Singapore

NEO Group's first-half attributable net profit grew more than five times to S$13.6 million for the period ended Sept 30, 2020, up from S$2.3 million a year ago.

This was due to higher other income contributed by higher financial grants from the government, revenue growth from its core catering and manufacturing businesses, as well as an overall reduction in operating expenses including delivery, employee benefits and advertising, it said.

This was despite a 3.3 per cent revenue dip to S$88.1 million, mainly due to lower revenue from its supplies and trading business. Earnings per share for the six months ended Sept 30, 2020 was 9.24 Singapore cents, versus 1.58 cent a year ago.

Neo Group's founder, chairman and CE, Neo Kah Kiat noted that with the reopening of activities in June this year, there has been a gradual improvement of the catering business, which contributes over half of the group's topline.

The group has also adapted to changing consumer behaviour by introducing a variety of options ranging from bento sets to mini buffets and healthy takeaway meals, and an upscale of the recurring "tingkat" business.

Neo Group has proposed an interim cash dividend of one Singapore cent for the six-month period, but it said it will review the distribution of dividend in view of its business expansion, diversification, and the construction of its headquarters and catering hub at 30B Quality Road. A year ago, it did not pay any dividend.

Neo Group's retail business, comprising a chain of Japanese cuisine outlets, has resumed operations since Phase Two. While the physical footfall and revenue of the outlets located in the heartlands have seen improvements upon reopening, physical footfall at outlets located near offices and downtown areas remained low. The group plans to review the outlets' performance, strategise lease renewal options with landlords, and use online delivery platforms to enhance revenue.

While the short-term dormitory contracts and financial grants have helped to mitigate the impact caused by the pandemic on the group's performance in the first half, these are expected to be scaled down or discontinued in the second half. The effects of the pandemic are thus likely to continue posing further uncertainties and may curtail its growth going forward, it said.

Barring any unforeseen circumstances, it expects to stay profitable for the fiscal year ended March 31, 2021.The group also recently diversified into property for additional and recurring revenue streams through rental fees and management fees, as well as potential synergies with its existing businesses, it said.

Its shares rose 6.5 Singapore cents or 15.3 per cent to S$0.49 on Monday.