Investor Relations

Extracted from Annual Report 2024

Dear Shareholders,

On behalf of the Board of Directors (the “Board”), we would like to present to you the Annual Report of Tung Lok Restaurants (2000) Ltd (“Tung Lok” or the “Group”) for the financial year ended 31 March 2024 (“FY24”).

This year marks our 40th anniversary since the opening of our flagship Tung Lok Restaurant at Liang Court in January 1984. The Group has grown into a household name over the decades, serving a diverse range of cuisines across Singapore, Indonesia, Japan, Vietnam and the Philippines.

Having forged numerous memories, triumphed over challenges and achieved notable successes, our journey has been, indeed, extraordinary. Each step has served as a building block, collectively moulding us into the dynamic and innovative provider of excellent culinary experiences we proudly embody today.

FINANCIAL REVIEW

Despite consumer sentiment being impacted due to prevailing inflationary pressures and an uncertain economic landscape, the Group recorded higher revenue in FY24 compared to previous financial year ended 31 March 2023 (“FY23”), underscoring our resilience and strong business fundaments as well as our ability to navigate the current challenging operating environment.

The Group’s revenue for FY24 increased by S$3.8 million or 4.4% to S$90.0 million from S$86.2 million in FY23 mainly due to the following:

1. S$4.3 million higher revenue contribution from the catering business;
2. S$2.8 million higher revenue contribution from a new outlet which opened in FY24; and
3. S$1.2 million higher revenue contribution from existing outlets.

The higher revenue was partially offset by a S$4.5 million loss of revenue contribution from 3 outlets which were closed during FY24.

In line with the higher revenue, gross profit increased by S$1.9 million or 3.1% to S$64.6 million in FY24 from S$62.7 million in FY23. Gross profit margin decreased by 0.9 percentage points to 71.9% in FY24 from 72.8% in FY23 due to higher food raw material costs.

Other operating income increased by S$0.8 million or 42.8% to S$2.8 million in FY24 from S$2.0 million in FY23, mainly due to:

1. S$0.3 million higher other administrative income;
2. S$0.2 million higher interest income earned;
3. S$0.2 million higher catering service income received; and
4. S$0.1 million higher marketing promotion funds received.

Administrative expenses, mainly manpower-related expenses, increased by S$2.1 million or 6.8% to S$33.7 million in FY24 from S$31.6 million in FY23, due to an increase in headcount by 36, in tandem with the higher revenue and the opening of a new outlet during FY24.

Other operating expenses increased by S$2.6 million or 9.8% to S$29.8 million in FY24 from S$27.2 million in FY23, in tandem with the higher revenue and business volume. The operating expenses which had increased in FY24 include advertising and promotions expenses (S$0.7 million increase), utilities expenses (S$0.5 million increase), impairment loss of property, plant and equipment (S$0.3 million increase), lease rental expenses (S$0.2 million increase), banquet commission (S$0.1 million increase), depreciation of property, plant and equipment (S$0.1 million increase), entertainment expenses (S$0.1 million increase), laundry expenses (S$0.1 million increase), loss on deregistration of a subsidiary (S$0.1 million increase), professional fee (S$0.1 million increase), upkeep and cleaning expenses (S$0.1 million increase) as well as utensils expenses (S$0.1 million increase).

Finance costs, mainly interest expenses, increased by S$287,000 or 53.6% to S$822,000 in FY24 from S$535,000 in FY23 mainly due to an increase in interest expenses on lease liabilities driven by higher lease liabilities in FY24.

Share of result of a joint venture of S$317,000 recorded in FY24 was due to net loss contribution from a joint venture.

Share of losses of associates of S$88,000 in FY24 compared to share of profits of associates of S$49,000 in FY23 was due to loss on disposal of investment in an unquoted equity recorded by an associate in FY24.

Income tax benefit of S$15,000 was recorded in FY24 compared to income tax expenses of S$68,000 in FY23 mainly due to recognition of unused tax losses and temporary differences of certain subsidiaries as deferred tax assets in FY24.

Despite the challenging operating environment in FY24, the Group continues to record revenue growth and profits attributable to the owners of the Company of S$2.0 million. This is lower compared to FY23’s S$4.2 million as inflationary cost pressures drove food ingredients, manpower, utilities and other operating costs higher and consequently impacted margins in FY24.

Total assets of the Group increased by S$7.7 million or 16.0% to S$55.7 million as of 31 March 2024 from S$48.0 million as of 31 March 2023. This was mainly due to an increase in (i) right-of-use assets of S$6.0 million; (ii) trade, other receivables and prepayments of S$1.6 million; (iii) deferred tax assets of S$0.4 million; (iv) long-term security deposits of S$0.2 million; and (v) inventories of S$0.2 million, partially offset by a decrease in cash and bank balance of S$0.7 million.

Total liabilities of the Group increased by S$7.0 million or 21.2% to S$40.0 million as of 31 March 2024 from S$33.0 million as of 31 March 2023. This was mainly due to an increase in (i) lease liabilities of S$6.2 million; (ii) trade and other payables of S$1.7 million; and (iii) income tax payable of S$0.3 million, partially offset by a decrease in bank loans of S$1.2 million.

The Group’s net working capital decreased by S$0.2 million to S$4.8 million as of 31 March 2024 from S$5.0 million as of 31 March 2023 despite generating positive operating cash due to the payment of S$2.1 million dividend to shareholders of the Company.

Net asset value per share as of 31 March 2024 remains unchanged at 5.79 Singapore cents compared to 31 March 2023. The Group’s gearing ratio increased to 1.55 times as of 31 March 2024 from 1.27 times as of 31 March 2023 mainly due to increased lease liabilities.

OPERATIONS

The Group currently operates a total of 33 outlets. Of these, 22 are directly owned, 3 are held by our associates and 8 others are under license/franchise. These restaurants are spread across Singapore, Indonesia, Japan, Vietnam and the Philippines with our Group’s business predominantly based in Singapore.

We are also delighted to report the turnaround of our catering division, which experienced severe disruptions due to the longer-than-expected post-pandemic recovery period. The increased demand for catering services, particularly with the resurgence of MICE (Meetings, Incentives, Conferences and Exhibitions) events held in Singapore in FY24, has played a pivotal role in this positive development.

The Group continues to consolidate its resources by closing 3 outlets in FY24 and channeling resources to more promising brands. Notably, we have established our fifth Tung Lok Seafood outlet at Gardens by the Bay in FY24, further leveraging the brand equity that we have built over the years.

The Group is cognisant that in order to stay relevant and thrive in the current challenging operating environment of food and beverage (“F&B”) industry, we must continuously reevaluate our strategies, infuse innovation into our offerings and leverage technology to our advantage. We will continue to refine our business strategies and proactively seek and adopt digital initiatives that optimise operational efficiencies to maintain a competitive edge.

DIVIDENDS

In view of the Group’s performance and to reward shareholders for their support, the Board of Directors has recommended a first and final tax-exempt (1-tier) cash dividend of 0.224 Singapore cents per share for FY24 to be approved by shareholders at the forthcoming Annual General Meeting (“AGM”).

OUTLOOK

While the Group continues to record profit in FY24, we anticipate that the F&B industry to continue to face challenges over the next 12 months as inflationary pressures are expected to persist, affecting consumer spending sentiment and putting pressure on our profit margins due to the rise in operating costs concurrently.

While the path ahead may be challenging, the Group is confident in the strength of our business fundaments and will be able to effectively navigate the obstacles ahead. We shall continue to remain prudent in managing our capital while also looking out for new opportunities.

ACCOLADES

In FY24, the Group’s dedication to operational and culinary excellence yielded remarkable success, exemplified by a notable array of accolades.

In November 2023, the Group received the following accolades at the Restaurant Association of Singapore’s Epicurean Star Award 2023:

Best Chinese Restaurant (Casual Dining), Winner – Tung Lok Signatures
Best Vegetarian Restaurant, Winner – LingZhi Vegetarian
Best Japanese Restaurant (Casual Dining), Winner – USHIO Sumiyaki & Sake Bar
Best Chinese Restaurant (Fine Dining), Runner-up – Tóng Lè Private Dining
Best Seafood Restaurant, Runner-up – Tung Lok Seafood

ACKNOWLEDGEMENTS

On behalf of the Board, we wish to extend our heartfelt gratitude to our customers, bankers, business associates, partners and shareholders for their valued contribution. The Board also wishes to extend our gratitude to the management team and all employees whose unwavering perseverance and dedication throughout the year have been the driving force behind the Group’s success.

We would like to express our sincere appreciation to our Board for its invaluable guidance and counsel. Additionally, we would also like to extend a warm welcome to two newly appointed Independent and Non-Executive Directors, Mr Khoo Yee Hoe and Mr Yam Ah Mee, who joined the Board during FY24. Both Mr Khoo and Mr Yam bring a wealth of experience, and we are confident their contributions will bring the Group to new heights.

The next chapter of our story promises to be just as exciting and fulfilling as the last four decades. We deeply appreciate our shareholders’ loyalty and support all these years and remain committed to delivering long-term value to you. Here’s to the past, the present, and the future of Tung Lok.

Date: 21 June 2024