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Neo Group diversifies into food retail

Singapore

A DIVERSIFICATION into food retail and a focus on profitability are some ways that catering firm Neo Group will move ahead in its strategies, the company said in a results briefing on Thursday.

This comes after the Catalist-listed company reported a 181.1 per cent increase to S$2.7 million in its Q4 net profit for the three months ended March 31, 2017.

Revenue for Q4 FY17 rose 34.9 per cent to S$48.0 million due to higher revenue across its four business segments: food and catering, food retail, food manufacturing, and supplies and trading businesses.

For FY17, the supplies and trading segment was the key driver as it posted a 317.7 per cent increase in revenue of S$31.1 million on contribution from the group's newly-acquired frozen meat trading subsidiary, U-Market, in January this year.

Neo Group's food catering business recorded a 0.8 per cent increase in revenue to S$63.1 million in FY17, lifted by stronger performance in the last quarter of FY17 due to Chinese New Year sales. The food catering segment remains the group's key bottom line driver, the company said.

Despite a 29 per cent rise in full-year revenue to S$162 million, Neo Group's net profit for the full year fell 46 per cent to S$3.3 million.

Bottom line was impacted by one-off items, namely the absence of a one-off provisional gain from bargain purchase on acquisition in FY16 and the loss on disposal of its 14 Senoko Way property as the food manufacturing operations relocate to an enlarged facility at 22 Senoko Way this month.

Earnings per share for FY17 was 2.24 Singapore cents, down from 4.18 Singapore cents a year ago.

With a larger facility, the company is looking to add new product lines and automating more processes.

Umi Sushi, which is under Neo Group's food retail business, is expanding. While four of its outlets at MRT stations have closed, more Umi Sushi outlets will be seen in heartland malls. This is attributed to higher footfall in malls as compared to MRT stations during weekends. As at May 1, it has 25 outlets island-wide, including some in hospitals.

Neo Group recently established a 51 per cent-owned subsidiary, Gourmetz Pte Ltd, that targets the eldercare and childcare market segments. In March this year, it announced its intention to take a stake in food and beverage distributor Asia Farm F&B Pte Ltd.

But having made several acquisitions to fortify the group's reach, Neo Group is switching gear from mergers and acquisitions (M&A) to consolidating its businesses. "Our desire is 10 M&A a year but now, it's perhaps about two or three," said Neo Group's founder, chairman and CEO Neo Kah Kiat.

Neo Group's focus on profitability means that discounts and promotions for customers are now slashed. "This year, we want to change our concept by upselling, building our service and branding," added Mr Neo.

On growing overseas, he said that local markets are still small, so the company is spending more time overseas. Neo Group is also looking into selling premium dumplings that can sell as much as S$12, although little details have been provided.

Neo Group declared a final cash dividend of one Singapore cent per share. It closed trading unchanged at S$0.57 on Thursday.