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Sheng Siong posts 6.6% Q1 profit growth on revenue rise, better margins

SUPERMARKET operator Sheng Siong Group chalked up higher profits in the first quarter on the back of an increase in turnover and improved margins.

Net profit came in at S$18.25 million for the three months to March 31, it said in unaudited results out on Friday. This was a rise of 6.6 per cent year-on-year.

Sheng Siong's profit growth largely tracked its gain in revenue. Turnover was S$228.28 million, higher by 5.1 per cent on the previous year.

Gross margin improved by one percentage point, to 26.2 per cent, as the supermarket sold more fresh products, which command better margins. It also earned rebates from suppliers, thanks to marketing efforts.

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Gross profit was offset in part by higher operating costs, as store count grew. The group has 48 supermarket outlets in Singapore - or five more than it did a year ago - after the closure of its Verge and Woodlands Block 6A stores.

Sheng Siong has also added a subsidiary in Kunming, in China, which opened in November 2017 and turned in a loss of about S$100,000, in line with the group's forecast.

It said that it will promote its brand in China "through the operations of the supermarket, and is mindful that brand-building requires time".

Earnings per share was 1.22 Singapore cents, up from 1.14 Singapore cents before, while net asset value stood at 19.22 Singapore cents a share, against 18 Singapore cents as at Dec 31, 2017.

The group noted in its outlook statement that the supermarket industry "is expected to remain competitive". "Besides competitive pressures, gross margin would be affected if input cost is increased because of food inflation, which could be caused by disruption to the supply chain or changes to prices caused by nations imposing trade tariffs," it added.

Sheng Siong's retail area footprint in Singapore is down by 4.6 per cent year-on-year, to 436,000 sq ft.

The company has won bids for two new Singapore outlets, in Bukit Batok and Yishun, and expects to have them up and running in the second quarter, subject to the grant and execution of the Housing Board leases.

Sheng Siong said that it will continue to bid "in a rational manner" for new Housing Board spaces and look for retail space in public housing estates where it does not yet have a presence.

Chief executive Lim Hock Chee said: "Moving ahead, we will continue with our efforts in expanding the network of outlets in Singapore, especially in areas where our potential customers reside, and build our brand in China.

"In addition, we remain focused on nurturing the growth of our new stores as well as rejuvenating the old stores to attract and retain our customers. In line with our gross margin enhancement initiatives, we remain committed to working towards a sales mix with a higher proportion of fresh produce and reducing the input costs by increasing direct purchasing and bulk handling."

Sheng Siong closed up by S$0.02, or 2 per cent, to S$1.02, before the announcement.