Kimly' s Q2 profit up 20%

SINGAPORE (Feb 9): Kimly, the traditional coffee shop operator, has announced earnings of $5.7 million for 1Q18, down 13.9% from $6.7 million reported a year ago on higher expenses.

Revenue for the quarter grew 6.8% to $50.1 million, due mainly to higher revenue contribution from the Outlet Management Division with higher sales of beverages and tobacco products, as well as higher income from sub-leasing of coffee shops and food courts and related cleaning and utilities services provided.

In line with the higher revenue, cost of sales grew to $40 million compared to $36.5 million a year ago.

Meanwhile, selling and distribution expenses grew 12.7% to $0.8 million due to the increase in cleaning & packaging materials used, also in line with the increase in revenue.

Administrative expenses grew 17.1% to $3 million compared to $2.5 million a year ago. This was largely due to higher employee benefit expenses due to an increase in headcount, salaries and incentive bonus for executive directors, as well as higher depreciation of property, plant and equipment.

In its outlook, Kimly says it expects the operating environment the local F& B scene to remain challenging with tight labour supply, keen competition and low entry barriers.

Despite these challenges, the group says it remains focused on managing costs and improving productivity and efficiency, while also actively exploring suitable opportunities to grow its business via acquisitions, joint ventures and forming strategic alliances with parties that can help to strengthen its market position.

Vincent Chia, executive director of Kimly, attributes the lower gross profit margin for the latest quarter to the group&rsquo s expansion activities over the past year.

&ldquo In tandem with this expansion, operating cost also increased with the hiring of more employees and in operating lease expense,&rdquo says Chia. He attributes the drop in net profit to the time required for new outlets to ramp up sales and generate economies of scale.

&ldquo Going forward, the group remains focused on managing cost and improving productivity and operational efficiency. To this end, we have stepped up investments in IT infrastructure and proprietary software, which also resulted in higher depreciation expense in1Q18, to manage our business and automate back office functions to maximise our manpower resources,&rdquo he adds.

Shares in Kimly closed 2 cents lower at 34 cents on Friday.