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Sheng Siong posts flat Q4 net profit of S$17.4m

HEARTLAND supermarket operator Sheng Siong on Thursday posted a fourth-quarter net profit of S$17.4 million, down 0.4 per cent from S$17.5 million in the same period a year earlier.

Revenue in the three months ended Dec 31, 2019 rose 11.8 per cent to S$247.9 million. Gross profit also rose 11.8 per cent to S$67.4 million.

New stores continued to be an important source of revenue growth, the group said. New stores accounted for an 8.6 per cent increase in fourth-quarter revenue, whereas comparable same-store sales accounted for only 1.8 per cent. The other 1.4 per cent of revenue growth came from China.

Fourth-quarter earnings per share was 1.16 Singapore cents, down slightly from 1.17 cents in the same period a year earlier.

Full-year earnings per share was 5.04 cents in 2019, up 7 per cent from 4.71 cents in 2018.

Net profit for the 2019 full year rose by 7.4 per cent to S$75.8 million as revenue grew by 11.3 per cent to S$991 million.

Comparable same-store sales contracted by 1 per cent in the first quarter of 2019 and ended flat for the whole of FY2019, Sheng Siong said.

Sales at supermarkets reported in the statistics published by Singapore's Department of Statistics reflect a backdrop of "unexciting, but slowly improving consumer sentiment in FY2019", the group said, while competition has also risen from the opening of new stores in HDB estates.

A final dividend of 1.80 cents per share has been proposed, to be paid on May 27. This is up from a final dividend of 1.75 cents per share in the same period a year earlier. The total dividend for FY2019 is 3.55 cents per share, or a payout of about 70.4 per cent of the group's net profit after tax.

The group said: "Retail sales, in particular sales at supermarkets, have not been exciting in FY2019 and could be negatively affected in FY2020 by the outbreak of the novel coronavirus. Competition in the supermarket industry is expected to remain keen. The group will also continue to look for retail space in new and existing HDB housing estates, particularly in HDB estates where the Group has no presence."

Sheng Siong opened a total of five new stores in Singapore last year, and has opened two more since. "A store on the first floor of Block 118 Aljunied Avenue 2, with an area of approximately 18,000 square feet, opened on Jan 1, 2020 and another store at Block 202 Marsiling Drive (5,540 square feet) on Jan 11, 2020. The total store count is now 61 in Singapore and two in China. Since the beginning of 2020, another four HDB shops were released by HDB for tender."

The group added that food inflation has been generally benign in FY2019 except for pork prices and occasional spikes in vegetable, fish and fruit prices caused by inclement weather.

It said: "There appears to be some disruption to the supply chain because of the coronavirus outbreak and this will raise input prices and may affect the group's gross margin if these increases cannot be passed on to customers. However, the stabilisation and support package in Budget 2020 will provide some relief. The group is increasing its inventory holding in view of the uncertainties in the supply chain.

"The group will continue to nurture the growth of the new stores and enhance gross margin by seeking for more efficiency gains in the supply chain and driving for a higher mix of fresh produce."

Net asset value per share was 20.83 Singapore cents as at Dec 31, 2019, up from 19.30 cents as at Dec 31, 2018.

Sheng Siong shares closed flat at S$1.32 on Thursday before the results were announced.