starlene ( Date: 27-Feb-2013 21:05) Posted:
| Chairman's Statement Extracted from Annual Report 2011 On behalf of the Board of Directors of Auric Pacific Group Limited (“APGL”), I am pleased to present the Group's Financial and Operations Review for the financial year ended 31 December 2011. Business Overview Asian economies, particularly Singapore, Malaysia and Hong Kong where APGL has a presence, generally continued to remain strong over the year despite concerns that ongoing uncertainties in global economies could filter into these markets. Inflation and rising living costs remain the region's strongest threat, with new entrants into the food and beverage sector significantly adding to, and intensifying, market competition for the Group's products and services. Against this backdrop, the Group turned in a positive performance. Financial Review During the year in review, Group revenue grew 0.3% or $1.3 million over the last financial year, from $381.8 million to $383.1 million. Despite encountering lower revenue contributions from our Wholesale and Distribution segment, the Group was able to augment annual revenue further with interest income generated from the Group's investment strategy to acquire and profit from real estate and real estate-related assets globally. Profit before tax attributable to shareholders for the financial year ended 31 December 2011 rose 15.6% over the previous year, from $9.6 million to $11.1 million. The improvement was mainly due to the Group's divestment of its stakeholding in Keisha Limited, originally purchased in 2007 for potential capital gains from Keisha's proposed listing. With these listing plans put on hold as a result of the global financial crisis in 2008 and 2009, the Group prudently divested this shareholding for $7.8 million, of which $1.9 million is attributed to foreign exchange gain, thus enabling the Group to add to earnings while consolidating its strategic focus on its core businesses. Group profitability was, however, eroded by lower profit returns from both the Manufacturing and Food Retail segments. In the Manufacturing segment, gross profit retracted due in large part to higher raw material costs as well as higher advertising and promotional expenses incurred during the year. Concurrently, our Food Retail segment saw lower profit for the year in comparison to FY2010. The Group's total equity of $246.2 million as at 31 December 2011 was attributable to gains on our Keisha divestment as well as profit returns from our operations. This was offset by the Group's half-year dividend payout of $3.8 million, the purchase of treasury shares by a subsidiary amounting to $1.5 million, as well as unrealised translation losses due to the weakening of foreign currencies such as the US Dollar and the Malaysian Ringgit. Net asset value per ordinary share based on the total number of issued shares as at 31 December 2011 rose to $1.79 from $1.77, while earnings per share on a fully diluted weighted average basis was 6.82 cents compared to 5.01 cents last year. The Group's cash and cash equivalents rose to $56.0 million from $52.9 million for the last financial year. Food-related businesses Wholesale and Distribution The discontinuation of its telco card business from April 2010 saw Group revenue for its Wholesale and Distribution segment retract for the year in review. The segment also experienced lower profit in FY2011, attributed both to higher advertising and promotional expenses across the business, as well as disrupted supplies of certain products. Auric Pacific Marketing, the Singapore arm of the Group's wholesale and distribution business, enjoyed revenue and profit growth for the year. This was a result of key agency brands delivering a strong performance via a greater focus on a more profitable brand and product mix, together with effective cost management to control operating expenses and manpower costs. Concurrently, the Group was able to mitigate any retail chain margin squeeze with good inventory management and the implementation of productivity improvement initiatives. Despite the discontinuation of several principals in FY2011, Auric Chun Yip, the Malaysia arm of the Group's wholesale and distribution business also recorded a positive performance for the year, introducing new house brand products, generically growing existing agency lines, and acquiring several new agencies. House Brands The Group's dairy spread and margarine house brands, Buttercup and SCS Butter, continued to generate good revenue and profit returns for the Group, due largely to the implementation of strategic promotions over the year as well as the good working relationships the Group has built up with key accounts. This was despite supply shortages and inconsistencies for butter products, an appreciation of the Australian dollar in which the Group purchases its dairy raw materials, as well as several substantial price increases. Manufacturing Profitability for the Group's Sunshine Bakeries business continued to be eroded by rising operational costs as well as higher pricing pressure from both domestic and foreign competitors. To address these issues, the Group is continuing to develop and introduce higher margin items such as walnut bread and wholemeal cream rolls into its product mix. For Auric Pacific Food Processing, the Group's Buttercup dairy spread manufacturing arm in Malaysia, margins continued to be trimmed by rising prices for key ingredients and the appreciation of the Australian dollar. However, Buttercup continues to dominate the Malaysian butter blend market in terms of sales, with the company planning to leverage its brand strength to promote new variants going forward. Food Retail The influx of new entrants in the food retail segment intensified market competition for the Group during the year. Accordingly, a restructuring exercise was undertaken to ensure optimal utilisation of our manufacturing and retail facilities, and improve our pricing competitiveness. Our Delifrance outlets in Shanghai and Thailand were wound down, with the objective of developing more cafés and kiosks in our key markets of Singapore, Malaysia and Hong Kong. Contemporary design concepts and menu innovations were also introduced to enhance the Delifrance gourmet experience. Delifrance Singapore turned in positive results for FY2011 as a result of this segment's Enhanced Cafe Concept strategy implemented in FY2010, winding down its last bistro in November, adding three new outlets and revamping another two. It now operates a total of 28 cafes, takeaway kiosks and bake-off corners, with Delifrance Express Corners now found in 61 petrol stations and 13 Cheers convenience stores across Singapore. Delifrance Malaysia's new plant is now fully operational and it has concurrently enhanced its branding initiatives with a new corporate identity, sustainable promotions and abovethe- line sponsored media placements. Although a decrease in sales was posted for the year in review, it has nurtured strategic partnerships and built up good inter-company synergies with the Singapore division, efforts which are expected to help it enhance revenue in the year ahead. As a result of strong consumption demand in the Hong Kong market, Delifrance Hong Kong registered double-digit yearon- year same store growth for FY2011. Additionally, despite the rising rental market limiting its outlets from 36 in FY2010 to 34 this year thereby affecting revenues, it was still able to post profit growth for the year, due in part to new menu additions designed to enhance its French café branding. Food Court Under the Food Court segment, Group subsidiary, Food Junction Holdings, posted profit growth due mainly to the full year contributions from its newly opened food courts at the National University of Singapore and Nex Shopping Mall, as well as the improved performance of its existing food courts. As at end December 2011, the Group managed and operated a total of 19 food courts, 35 self-operated food court stalls (December 2010: 40) and 9 toast@work outlets. As at 31 December 2011, the Group's suite of food retail offerings include the revamped LP+Tetsu, 1 Malone's selfoperated restaurant, 2 soEZ cooking studios, the Lippo Chiuchow Chinese restaurant and a new mediterranean restaurant concept, Medzs. Since the start of the current financial year, the Group has already rolled out new restaurant concepts such as Eggs & Berries, and is expected to unveil several others in the year ahead as part of its ongoing strategy to expand its food service footprint in the region. Investment Activities On 11 November 2011, the Group subscribed for a 30% interest in DXS Capital Resources Fund, an exempt limited partnership that has secured copper mining concessions in Utah, USA. The subscription of US$ 7.32 million was made through our wholly-owned subsidiary Auric Pacific Realty Pte Ltd, in partnership with non-related parties Cosmica Holding Ltd and Grandbiz Investments Limited, both incorporated in the British Virgin Islands. The acquisition, which will see the Group secure a profit-sharing percentage in the Fund equal to 30% of all distributions available, enables it to leverage on new opportunities in the mining industry while generating better returns on its cash. Corporate Governance In FY2011, the Group reinforced its management capabilities with the appointments of Group CFO, Hee Siew Fong, previously Group Financial Controller CEO Delifrance Asia, Chan Chee Mun Timothy, previously Delifrance COO and CEO Food Group, Stephen Lim Say Kian. During the year, the Group also appointed Joyce-Lynn Yap Ping Sin as Group Legal Counsel and Company Secretary. On behalf of the Board, I would like to welcome them to the Auric Pacific team and look forward to their continued commitment to the Group's success. The Board of Directors would also like to express our appreciation to Group Managing Director and Company Director, Mr. Yao Che Wan who will relinquish these positions on 29 April 2012 on the expiry of his service contract. We would like to thank him for his 13 years of service and contributions to the Group, and wish him well in all his future endeavours. Prospects The global uncertainty in the food and beverage sector looks set to continue in the near term, with price competitiveness and rising raw material and commodity costs due to climatic change expected to inhibit margin gains for both retailers and brand owners. However, despite these ongoing pressures and the highly competitive nature of our industrial landscape, the Group will continue to reinforce its core business strengths to mitigate market risks, while innovating on new food manufacturing and retail concepts to enhance its operational scope. In this regard, the Group will put greater emphasis on the strategic selling of retail products with higher margin contributions. It will also develop more proprietary brands as a key engine for growth in FY2012. This will help the Group enhance its profit potential and reduce its reliance on agency brands. Concurrently, it will continue to manage rising costs and productivity levels as part of its efforts to sustain and improve profitability, while continuing to stay vigilant to new synergistic business opportunities that will help the Group develop to its full growth potential. Dividend For the financial year ended 31 December 2011, the Board proposes paying out a one-tier final dividend of 3 cents per ordinary share (tax exempt) as part of the Group's ongoing commitment to reward shareholders for their continued support. Subject to approval at our annual AGM, this dividend shall be paid on 24 May 2012. Acknowledgements Finally, I would like to thank the Board of Directors of Auric Pacific for their invaluable counsel and together with them, would like to express our gratitude to all our shareholders, customers, principals, union and business associates for their continued support. I would also like to thank our management team and all our staff for their continuous dedication and commitment to the Group. We look forward to your continued support in the year ahead. Albert Saychuan Cheok Chairman The Chairman is also CEO of First REIT |
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