Yoma Strategic recorded its first taste of revenues from its local branches of US fast-food chain KFC in the first quarter of this financial year and enjoyed growth in its automotive and property rental businesses. But a sluggish real estate market left the group’s net profits down on the previous year.
The firm is the local franchise holder for KFC and opened its sixth branch in June. Revenue from the KFC business for the first quarter of this financial year was S$2.15 million (K1.84 billion; US$1.57 million) – 12.2 percent of the group’s total, Yoma announced yesterday.
The Singapore-listed company opened its first KFC store in June 2015, making the most recent quarter the first to record revenue from the new business. The group aims to have 12 KFC stores operating by March 2017, it said.
But despite the addition of KFC on the group’s income statement, net profits were down 12pc year-on-year, falling from S$2.57 million to S$2.26 million according to results released yesterday. Group revenue for the first quarter was down over 22pc year-on-year, falling from S$22.64 million to S$17.56 million.
The main culprit was a sharp fall in revenue from the sale of residences and land development rights. That business brought in S$12.3 million in the first quarter of the previous financial year – more than half of the group’s total revenue for that period. This year the first quarter figure was just S$3 million.
Yoma Strategic said the drop was due to “soft real estate market conditions”. The group also pointed to the fact that it had finished two buildings in Zone A of its Star City project, and decided to postpone selling properties in Pun Hlaing Estate until they are almost complete “in order to achieve higher margins”.
The real estate market remains sluggish, but is showing signs of recovery, Melvyn Pun, Yoma Strategic’s chief executive officer, said. However, a decision by Yangon Region government to halt construction on over 100 high-rise projects had also hurt “buyers’ sentiments”, the group said.
Yangon authorities issued a blanket suspension on high-rise construction projects in order to make sure they correspond with city development and zoning plans. Some developers are being told to drastically amend plans, although “none of the group’s on-going projects have been halted”, Yoma Strategic said.
Yoma’s real estate rental revenue, meanwhile, rose slightly from S$2.54 million to S$2.85 million year-on-year, mainly from higher occupancy and rental charges at the Star City and Pun Hlaing Estate apartments. The group also announced it expects to finish its Landmark Development project in downtown Yangon by 2020, having recently secured vital lease extensions.
In the automotive sector first-quarter revenue was S$7.41 million, up from S$6.97 million in the same quarter of last financial year, driven by the group’s New Holland tractors trading business and leasing firm Yoma Fleet. The leasing arm’s revenue more than doubled year-on-year to hit S$1.1 million in the first quarter.
Total borrowing for the group rose to S$108 million as of June 30, up from S$89.7 million at the end of March. Most of the increase went on growing the Yoma Fleet business, capital expenditure on the KFC stores and construction costs, Yoma said.
The group’s automotive business accounted for 42pc of total revenue, while the sale of residences and land development rights contributed just over 17pc. As the automotive operations have lower profit margins than real estate, this balance lowered the group’s gross profit margin from 44pc to 38.8pc, the firm said.
The company’s shares were down 0.83pc yesterday afternoon at S$0.6, having started this year at S$0.49.
Quoted from mmtimes.
