Berjaya Food’s FY17 net profit falls short on Kenny Rogers Roasters
KUCHING: Berjaya Food Bhd’s (Berjaya Food) financial year 2017 (FY17) net profit has fallen short of analysts’ earnings estimates, with cumulative dividend also coming in below expectations.
In a filing on Bursa Malaysia, Berjaya Food announced that for FY17 ended April 30, pre-tax profit was lower at RM24.61 million compared to RM35.62 million in the previous financial year.
Berjaya Food’s FY17 net profit to RM11.3 million fell short of AmInvestment Bank Bhd’s ( AmInvestment Bank) and consensus earnings estimates at 57 per cent and 52 per cent respectively.
The group’s cumulative dividend amounted to 3.5 sen per share which was short of AmInvestment Bank’s expectation of 4.5 sen per share.
The earnings shortfall from the research firm’s estimates was due to impairments amounting to RM5.1 million arising from the store rationalisation exercise, which saw 11 stores shut down, Kenny Rogers Roasters ( KRR) Indonesia store closure decelerated and back-loaded vested employee options.
Starbucks’ demand was more resilient than AmInvestment Bank initially thought, posting a flat same-store sales growth (SSSG) despite higher average selling prices (ASPs).
The research firm recalled that post-goods and services tax (GST) implementation in 2015, SSSG contracted by seven per cent.
“Meanwhile, we are convinced Starbucks’ growth remains firmly intact with recent SSSG proving resilient amidst improving consumer sentiment.
“We are factoring an addition of 25 stores for FY18F and an SSSG of two per cent,” AmInvestment Bank said.
It added that the strengthening of the ringgit against the US dollar would alleviate margins as 50 per cent of raw material is purchased in US dollar.
However, AmInvestment Bank expected headwinds as Berjaya Food attempts to turn around the group’s remaining segments.
AmInvestment Bank noted that KRR Indonesia may only realise a turnaround in FY19F.
The research firm further noted that despite registering SSSG of 2.3 per cent, it led to a year to date (YTD) decline in RM9.3 million earnings before interest and tax (EBIT) earnings.
“Compounding the issue, store rationalisation is uncertain as leasing proves to be a limiting factor,” it said.
AmInvestment Bank pointed out that in contrast, KRR Malaysia should perform better heading into FY18F seeing that it is at the tail-end of store closures.
The research firm expected Jollibean to face stiff competition in Singapore.
“While Starbucks’s performance remains commendable, Berjaya Food’s may continue to see challenges in turning around its remaining segments of KRR and Jollibean,” it opined.