Extracted from Annual Report 2016
On behalf of the Board of Directors, I am pleased to present to you the Group's annual report for the financial year ended 31 March 2016 ("FY16").
The F&B scene in Singapore remains challenging as restaurants and related establishments continue to grapple with stiff competition, high rentals, rising wages and limited manpower. Amid these challenges, Tung Lok Restaurants (2000) Ltd ("TungLok" or the "Group") is making good progress in expanding its presence and streamlining operations.
Our ongoing efforts to keep ourselves relevant and differentiated in a highly competitive business have yielded encouraging results.
Revenue for FY16 rose 1.3% to S$86.1 million from S$85.0 million for the financial year ended 31 March 2015 ("FY15"). This was mainly due to higher revenues from two rebranded outlets and a new outlet which opened in FY16. Increased contributions from catering sales and existing restaurants also lifted overall revenue. The revenue increase was partially offset by loss in revenue contributions from the closure of two outlets in FY16 and the deconsolidation of a former subsidiary, PT Ming Cipta Rasa ("PT Ming") during FY15.
With the rise in revenue, gross profit increased 2.2% to S$62.1 million. Gross profit margin edged up to 72.2% in FY16 from 71.5% in FY15 due to better control of food costs.
The improvement in revenue, lower food and operating expenses, lower finance costs and higher income tax benefits enabled us to achieve a net profit after tax attributable to shareholders of S$611,000 in FY16. This was higher than our FY15 net profit of S$574,000.
Fully diluted earnings per share for FY16 amounted to 0.22 cent, compared to 0.23 cent for FY15.
Other operating income decreased by S$2.9 million or 48.9% to S$3.1 million in FY16 from S$6.0 million in FY15. This was mainly due to the absence of a one-off gain of S$2.2 million from the disposal of a former subsidiary and recovery of doubtful debts of S$0.3 million, as well as lower marketing promotion funds and interest income.
Administrative expenses, mainly manpower-related expenses, decreased by S$0.3 million or 1.0% to S$31.5 million in FY16 from S$31.8 million in FY15 mainly due to the absence of manpower costs from a former subsidiary (PT Ming) disposed in FY15 and lower manpower costs arising from the closure of two outlets. The decrease was partly offset by salary increments and higher Central Provident Fund contribution rates (which took effect from 1 January 2015).
Other operating expenses declined S$3.1 million or 8.3% to S$33.4 million in FY16 from S$36.5 million in FY15 mainly due to the absence of an allowance of S$2.5 million for non-trade doubtful debt due from PT Ming as well as lower utility, depreciation and utensil expenses of S$1.6 million. The decrease was offset by higher upkeep and cleaning, mooncake related, advertising and promotion, credit card commission and royalty expenses amounting to S$0.9 million.
Share of profit of our Singapore-based joint venture, T & T Gourmet Cuisine Pte Ltd, declined to S$286,000 in FY16 from S$656,000 in FY15 due to lower profitability. The Group had lower share of profit from associate companies in FY16 as its China-based associates incurred higher losses during the financial year.
The Group's total assets as at 31 March 2016 decreased by S$2.1 million or 5.5% to S$36.0 million from S$38.1 million as at 31 March 2015. This was mainly a result of decrease in plant and equipment of S$1.9 million and decrease in cash and bank balance of S$1.2 million. The overall decline was partially offset by higher trade and other receivables of S$0.3 million, an increase of S$0.3 million in the net assets of a joint venture, an increase of S$0.1 million in long-term security deposit and higher deferred tax assets of S$0.3 million.
Total liabilities of the Group decreased by S$3.3 million or 13.8% to S$20.6 million as at 31 March 2016 from S$23.9 million as at 31 March 2015 mainly due to repayment of bank borrowings and finance leases amounting to S$2.2 million as well as lower trade and other payables of S$1.4 million due to improved creditor turnover days. This was partly offset by new finance leases of S$0.3 million.
Cash and bank balances declined to S$14.0 million as at 31 March 2016 from S$15.3 million as at 31 March 2015 mainly due to payments of S$3.0 million for the acquisition of plant and equipment, S$0.5 million dividends paid to noncontrolling interests of subsidiaries and repayment of S$2.2 million for bank borrowings and finance leases. These were higher than the net cash of S$4.5 million generated from operations.
Net working capital rose to S$6.0 million as at 31 March 2016 from S$4.5 million as at 31 March 2015 largely due to the improvement in the Group's overall performance during FY16. Net asset value per share as at 31 March 2016 rose to 6.11 cents from 5.83 cents as at 31 March 2015.
With the disposal of PT Ming, we channelled our focus and resources to our operations in Singapore and China. While rising costs have always been a challenge, we managed to contain them during FY16. Manpower and other operating costs stabilised while revenue improved. We shall continue to explore and nurture concepts that encourage lean manpower requirements and streamline our menus to improve kitchen operational efficiencies.
As at 31 March 2016, the Group operates a total of 45 outlets, comprising 25 of the Group's own restaurants, 9 outlets at associate level, and 11 others under management.
We also launched a home-delivery service in October 2015. Through our online store (www.homefiesta.tunglok.com), users can choose from a wide variety of ready-to-eat dishes and dim sum.
OUTLOOK AND FORWARD STRATEGY
The Group's performance in FY16 improved compared to FY15 notwithstanding the unfavourable economic conditions and challenging operating environment for the F&B industry.
Business conditions are expected to remain challenging in the next 12 months due to the uncertain economic outlook, stiff competition as well as rising business and manpower costs.
Amid these challenges, the Group will continue to focus on improving revenue and managing operating costs. To achieve this, we will seek to further enhance productivity, capitalise on relevant government incentives and explore additional ways to streamline operations as well as reinvent our restaurant concepts to remain competitive.
CORPORATE SOCIAL RESPONSIBILITY
TungLok believes firmly in being a responsible corporate citizen. We want the communities in which we operate to thrive and share the fruits of our success.
As part of our ongoing public outreach programmes, we took part in the annual Assisi Hospice Charity Fun Day 2015 held on 14 June 2015 at St. Joseph's Institution International. The event raised funds for Assisi Hospice, which provides subsidised care for the poor and critically ill. Together with our counterparts in the F&B industry, TungLok's management and staff had a rewarding time selling food at the charity drive.
We are deeply honoured to have been recognised at the Restaurant Association of Singapore ("RAS")'s Epicurean Star Award Gala Dinner 2015 held in November last year. At the event, which honours F&B establishments for exceptional cuisines and dining experiences, we won the following awards:
Best Chinese Fine Dining – Tóng Lè Private Dining
Best Chinese Casual Dining – Lingzhi Vegetarian
Best Chinese Chain Restaurant – TungLok Signatures
Best Western Chain Restaurant – Dancing Crab
HPB Healthy Menu Award, Asian Professional - TungLok Signatures
Star Chef Competition's Asian Professional categories (Champion, 1st runner-up and 2nd runner-up) – TungLok Signatures, Lokkee and Shin Yeh, respectively
5S Excellence Award – TungLok Signatures and Ruyi
In addition to the RAS awards, Dancing Crab was named Overall Winner of Promising Franchisor of the Year at the 2015 Franchising and Licensing Association (FLA) Awards. The Group also won the Gastronomy Excellence Brand Award at the Asia Enterprise Brand Awards 2015.
As announced on 18 August 2015, the Group's board of directors reconstituted its Audit and Risk Committee following the resignation of Mdm Ng Siok Keow as a committee member. The committee is currently chaired by Dr Tan Eng Liang and comprises three other board members.
ACKNOWLEDGEMENTS AND APPRECIATION
On behalf of the directors, I would like to thank the management and staff of TungLok for their commitment and hard work. My appreciation also goes out to all shareholders, customers and business partners for their support and trust.
17 June 2016