NTUC experiences significant decline in profits due to higher operating expenses and absence of one-time restructuring gains recorded last year - 2018 Annual Report

2020/02/04

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NTUC FairPrice (NTUC)

Source: NTUC

NTUC is a co-operative founded in 1973 with a social mission to moderate the cost of living in Singapore. NTUC is now Singapore’s largest retailer – with over 200 outlets, a Fresh Food Distribution Centre, as well as a centralized warehousing and distribution company.

FY 2018 Financial Highlights:

Source: NTUC FY 2018 Annual & Sustainability Report

NTUC saw its revenue increase marginally from SGD 3.40 billion in FY 2017 to SGD 3.45 billion in FY 2018.
However, profit from operations dropped by 47.7% to SGD 49.1 million, while profit before tax declined by 60.0% to SGD 152.5 million.
After contributions to the Central Co-operative Fund and Singapore Labour Foundation (as required under the Co-operative Societies Act), NTUC’s net profit was SGD 128.7 million, compared to the SGD 280.0 million in FY 2017.

Performance Drivers:

Source: NTUC FY 2018 Annual & Sustainability Report

NTUC saw a marginal year-on-year increase in its FY 2018 revenue, but significant declines in both profit from operations and profit before tax. The declines were largely due to higher operating expenses and the absence of one-time gains that were recorded in FY 2017.

Performance Drivers (Positive Factors)

Increase in Revenue

Despite the increased competition and softer retail market, NTUC saw a slight rise in its FY 2108 revenue. The co-operative also achieved double digit growth on its e-commerce platform. Meanwhile, NTUC continues to adapt – pursuing fresh revenue streams and seeking new investments to extend their capabilities and talent pool.

Increase in Share of Profit from Associates

NTUC recorded a 64.6% year-on-year increase in their share of profit from associates to reach SGD 45.1 million in FY 2018. This increase was mainly due to higher contributions from NTUC’s real estate subsidiary, Mercatus Co-operative Limited.

Performance Drivers (Negative Factors)

Higher Expenses

NTUC experienced a hike in operating expenses in FY 2018, especially in staff costs and rental expenses. In response, the co-operative implemented appropriate and prudent cost management measures, including an operational headcount freeze. In addition, staff compensation was reduced in line with the decline in operational profit.

Decline in Profit before Tax

NTUC suffered a significant year-on-year decline in its FY 2018’s profit before tax, primarily due to the absence of a one-time restructuring gain recorded last year. The gain resulted mainly from the sale of property, plant and equipment to an associate, which was concluded in FY 2017.

In addition, NTUC registered a 15.2% year-on-year drop in investment income, from the SGD 68.8 million in FY 2017 to SGD 58.3 million in FY 2018. This was largely due to the absence of a gain on disposal of available-for-sale financial assets that was recorded in FY 2017.

Source: NTUC FY 2018 Annual & Sustainability Report