SUPERMARKET operator Sheng Siong on Wednesday posted a net profit of S$32.1 million for the fourth quarter ended Dec 31, up 84.9 per cent from S$17.4 million a year ago.

 

Riding on elevated demand driven by the pandemic, revenue rose 28.8 per cent to S$319.3 million from S$247.9 million in Q4 2019. The increase was attributed to better performance at existing stores (18.2 percentage points) and new stores opened in 2020 (10.6 percentage points).

 

Earnings per share stood at 2.13 Singapore cents, up from 1.16 cents previously.

 

For the full year, Sheng Siong' s net profit was S$139.1 million, or 83.7 per cent higher than the S$75.8 million reported for FY2019.

 

Full-year revenue was S$1.4 billion, a 40.6 per cent improvement from S$991.3 million a year ago. About two thirds of this increase (29.1 percentage points) was attributed to existing stores the remainder was largely contributed by new stores.

 

Staff costs accounted for most of a 41.9 per cent increase in administrative expenses, amounting to S$67.8 million of the S$72.6 million spent. This was because Sheng Siong hired additional staff to cope with pandemic-related measures, made higher provision for bonuses and paid staff an additional one month of salary in Q2 2020.

 

Earnings per share surged to 9.22 cents from 5.04 cents.

 

The board is proposing a final dividend of 3 cents per share, to be paid on May 20. Last year, Sheng Siong paid out a final dividend of 1.8 cent per share for Q4.

 

The total dividend for FY2020 would be 6.5 cents per share, or about 70.5 per cent payout of the group' s net profit after tax.

SHENG Siong Group created a stir last week after news surfaced that the mainboard-listed supermarket chain operator will be rewarding its more than 3,000 employees with up to 16 months of bonuses.

 

The supermarket operator later filed a statement with the Singapore Exchange to say that there has been no change to how it has been rewarding its staff since 2007 - before it went public in 2011.

 

Way before ESG - the acronym for environmental, social and corporate governance - became a buzzword and funds with ESG themes exploded in popularity, the supermarket operator had already adopted at least the social aspect of ESG.

 

The term ESG is used today as a catch-all for how a company performs as a steward of nature (environment) how it manages relationships with employees, suppliers, customers, and the communities where it operates (social) and how its leaders manage executive pay, audits, internal controls, and shareholder rights (governance).

 

While companies were once expected to focus on maximising profits, they are these days increasingly required to devote their attentions to ESG factors too. So important are these factors to institutional investors that companies sometimes deploy small armies to produce elaborate reports and generate news flow about ESG compliance.

 

For Sheng Siong, however, the wellbeing of its staff has been a policy that makes sense.

 

At the point of its IPO, Sheng Siong' s prospectus had listed the support and dedication of its management and employees as one of the factors determining its continued success.

 

It has thus implemented strategies such as employee loyalty and bonus schemes to motivate and retain its staff. Its remuneration policy also emphasises staff efficiency and productivity.

 

Among its practices is the setting of performance targets for each of its stores. Staff are entitled to a share of the excess profits when the stores they work at exceed performance targets. For Sheng Siong, employees are not a cost to be managed down. Instead, they are valued as human capital.

 

And by keeping staff happy and motivated, Sheng Siong says its customers will stay pleased and its cash registers will keep ringing. Customers visiting any of the group' s 60-plus supermarkets might find themselves being recommended items on offer for the day.

 

Sheng Siong' s management has long expressed a belief in serving the customer well. It shares the philosophy of Sam Walton, founder of the US listed retailer Walmart, that there is only one boss: the customer. It is the customer who ultimately could put everyone in the company out of a job simply by spending his money elsewhere.

 

Sheng Siong' s workers are clear about the group' s customer-focused culture, which includes keeping queues in the supermarket short and keeping customers or their de facto pay masters satisfied.

 

When Ivo Knoepfel, founder of Swiss boutique strategy and investment consulting firm onValues, coined the term ESG in 2005, he had asserted that considering ESG factors when investing makes good business sense.

 

Mr Knoepfel had argued, in his landmark study entitled Who Cares Wins, that investors making decisions based on ESG performance would avoid companies that are facing financial risks due to their practices. ESG, he said, makes good business sense.

 

In the case of Sheng Siong, this has been true. The supermarket is a relatively commoditised business with slim margins, so good service is an important differentiating factor - especially with online players now competing for a slice of the pie.

 

In fact, businesses rarely go wrong providing good service - regardless of the industry they are in. By extension, they would certainly do better by taking care of their employees.

SUPERMARKET operator Sheng Siong said that it expects its revenue and net profit for its fourth quarter to vary by less than 5 per cent from the figures recorded for the previous quarter, in a profit guidance after trading hours on Wednesday.

 

This comes as demand in the fourth quarter of 2020 was stable compared with the quarter before Covid-19 restrictions were similar, except that Phase 3 started on Dec 28, 2020, it said.

 

Sheng Siong also clarified that there has been no change to the system and method of calculating the group' s employee bonus payments, which has been in place since FY2007.

 

Accordingly, staff bonus payments for FY2020 were calculated by factoring in the group' s financial performance, it said.

 

The clarification came in the wake of earlier reports that total bonuses for eligible Sheng Siong staff (inclusive of the annual wage supplement) ranged from 4.68 months for eligible part-time staff to 15.72 months for those ranked as assistant managers and above.

 

This was due to the company performing " tremendously well" in FY2020, as a result of elevated demand on the back of Covid-19.

 

Eligible employees are entitled to 20 per cent of the group' s profit before tax as variable bonus, said the memo.

 

For its nine months ended Sept 30, 2020, Sheng Siong' s net profit jumped 83.3 per cent to S$107 million from the year before its revenue was up 44.6 per cent to S$1.07 billion.

 

Sheng Siong will announce its fourth-quarter and full-year results on Feb 24.