CFA Society Singapore
SINGAPORE (Nov 29): No Signboard Holdings reversed into a full-year loss of $2.3 million from earnings of $7.7 million a year ago due an underperforming beer business subsidiary -- Danish Breweries.
As a result, the group recorded an impairment of goodwill and intangible assets of $4.3 million. There was also an IPO expense of $1.1 million.
Impacted by the beer business, total raw materials and consumables used and changes in inventories increased to $9.0 million in FY18. Employee benefits expense also increased 53.3% to $8.5 million. Other operating expenses and finance costs also increased to $3.8 million and $0.7 million respectively.
Revenue for FY18 rose 8.6% to $28.5 million even though sales from the restaurant business declined 10.4% due to the declining levels of tourist spending and fierce competition in the F&B industry.
The month-long World Cup tournament and its promotional activities in 2Q18 also contributed to a drop in sales and average spending per customer.
FY18 also recorded other income of $1.56 million. This included the reversal of provision for promotional support of $1 million in the beer business as well as franchise fee income arising from the restaurant business; while the other income in FY17 included the one-time recognition of income that arose from the termination of distribution agreement recorded by the beer business.
Group gross profit margin declined to 66.1% in FY18 from 75.7% in FY17 as a result of the new product mix arising from the beer business and the introduction of budget-friendly menu items with lower gross profit margins in the restaurant business.
Following an extensive review of the beer business, No Signboard acquired the remaining 20% shares in Danish Breweries from the former minority shareholder in order to secure full control over the beer business and restructure it.
A new Executive Vice President with more than 20 years of experience in the industry was appointed and the entire sales team of Danish Breweries was replaced.
Danish Breweries is carrying out rebranding exercise on its signature brand – “Draft Denmark” and is reviewing its sales and operational strategies with a focus on increasing the group’s market share.
As part of the plans, Draft Denmark will be distributed to more coffeeshops to increase brand visibility. The group has also replace one of its brewers to address quality issues with its bottled beer and is reviewing all aspects of its cost structure and supply chain to improve the efficiency of the beer business.
Year to date, shares in No Signboard are down 44% at 14 cents.