OldTown to gain from lower interest rates as consumer spending to rise.
KUALA LUMPUR: OldTown Bhd's earnings for the first quarter ended June 30, 2017, was 20.8% higher to RM16.77mil from the year-ago quarter.
This came on the back of revenue of RM109.3mil, which was a 6% increase over RM102.89 mil in the previous corresponding quarter.
The group's cafe chains operations recorded 49% higher profit before tax of RM6.45mil for the quarter under view, owing mainly to the write back of the provision of doubtful debts of RM3.06mil in the cafe chain operations.
The group's manufacturing of beverages division, however, recorded a marginal 0.1% decrease in profit before tax to RM15.52mil year-on-year despite recording 11% higher revenue at RM63.72mil.
This was owing to an RM2.1mil unrealised foreign exchange loss and higher operating expenses resulting from an increase in selling and distribution expenses from a year ago.
However, sequentially, profit before tax in the division was 34% higher due to lower selling and distribution expenses compared to the immediate preceding quarter.
On prospects, the group plans to focus on the traditional format "Generic" outlets for new openings in Malaysia although it will continue identifying locations for the lower-cost model known as OldTown White Coffee Basic.
The group will remain focused on strenghtening value perception of the brand to counter a tougher business environment.
"We believe the weak consumer sentiments that continue to prevail will impact the consumer purchase behaviour with regards to eat out of home occasions and in turn will create a tougher business environment for the café chain operations.
"We also expect more of the tightening regulations and policies of the government that directly impact F&B industry and this will further create an adverse impact on the business," the company said in its filing with Bursa Malaysia.
For its Singapore operations, outlet expansion will be pushed via the "Basic" concept outlets. The group will also continue to identify and correct inefficiencies in its operations and explore working with third-party delivery companies.
On efforts in other overseas markets, the groups says it intends to focus on the China and Indo-China markets, following which it would look at growth in the Middle East halal markets.
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