Sheng Siong to continue with 70% dividend payout ratio; expects demand to taper post pandemic

SUPERMARKET operator Sheng Siong will continue to pay out about 70 per cent of its net profit as dividends, unless there is a need for cash due to operational reasons or major capital expenditures, chief executive officer Lim Hock Chee said on Friday.

The company had abided by this practice since FY 2017, when the payout ratio was reduced from 90 per cent to 70 per cent as the board felt it needed a "war chest" on hand and decided to conserve cash, Mr Lim said.

He was responding to questions from shareholders ahead of its annual general meeting, which will be held live via a non-interactive webcast on Monday (April 26).

Buoyed by increased demand amid the Covid-19 pandemic, Sheng Siong in February posted a 84.9 per cent jump in net profit to S$32.1 million for the fourth quarter ended December 31.

The board is proposing a final dividend of three Singapore cents per share, to be paid on May 20, which will bring the total dividend for FY2020 to 6.5 Singapore cents per share.

Mr Lim said in a bourse filing after trading hours on Friday that the company expects its net profit margin to come down to pre-pandemic levels when the "elevated demand" tapers.

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Net profit margin was close to 8 per cent from 2016 to 2019, he said.

"The gradual relaxation of restrictions will reduce elevated demand, which will not benefit the supermarket industry. However, everyone is now trying to figure out how our way of life will change post Covid-19. With changes come opportunities, and we will leverage on these for growth," he said.

He noted that operating profits have grown at a compound annual growth rate of 19 per cent from 2013 to 2020.

"We grew because we were able to adapt to the rigors of competition in a changing market environment. Post pandemic, the market environment will change which will impact demand," he said.

"Whether it is pandemic or post pandemic, our people, leadership, corporate culture and innovativeness will continue to be drivers of our competitiveness, relevance and growth."

Asked about Sheng Siong's business expansion plans, Mr Lim said the company is "actively seeking" new technologies and processes to improve operational efficiencies and productivity, such as leveraging on technology to improve last-mile delivery.

Sheng Siong shares closed S$1.55 on Friday, down 0.64 per cent or one Singapore cent.