Financial Reports

Unaudited Full Year Financial Statement and Dividend Announcement for the Period Ended 31 January 2008

Income Statement

Balance Sheet

Revenue

For the financial year ended 31 January 2008 ("FY2008"), the Group registered a double-digit revenue growth rate for the first time in 6 years, fuelled mainly by the strong sales performance of its beverage business. The Group's total revenue increased 15.4% to a record S$167.9 million in FY2008, as compared to S$145.5 million in the previous financial year ("FY2007").

Beverage business

The Group's beverage business experienced sales growth of 20.5% to S$112.9 million in FY2008, compared to S$93.7 million in FY2007, to account for 67.2% of total revenue. This is mainly attributable to the success of the Group's marketing initiatives in Singapore and its export markets to improve beverage sales.

During the year, the Group continued to enhance its distribution capabilities and market position in Singapore. It was entrusted with the category management (which entails the planning and arrangement of retail shelf-space) for non-alcoholic beverages in the outlets of major supermarkets and petrol chains. The Group also continued to make progress in the expansion of its vending machine business in Singapore. As a result, revenue generated from beverage sales in vending machines increased by 115.2% to S$3.6 million in FY2008, compared to S$1.7 million in FY2007.

In its export markets, the Group benefited from an increase in sales volume to the Middle East and Europe, which translated into revenue growth of 20.1% to S$17.3 million and 13.2% to S$11.8 million respectively. Growth in these regions was driven mainly by the Group's efforts to strengthen its distribution network and concerted marketing and promotional campaigns undertaken jointly with oversea distributors.

Restaurant business

During FY2008, the Group's restaurant business benefited from the strong economies in Singapore and Hong Kong to report an improvement in revenue to S$53.2 million, compared to S$51.0 million in FY2007. This performance was achieved in spite of the intense competitive conditions typical of the restaurant sector as well as the Group having fewer restaurants in operation. During the year, the Group closed the West Kowloon Café and Mikichi outlet in Hong Kong.

In Hong Kong, the newly opened Pokka Café at Kowloon Bay and renovated café at Shatin (Pokka Café Grill Specialist) have already contributed to the sales and profitability of the restaurant business in FY2008. Revenue and profit arising from the Group's restaurants in Hong Kong would have been higher, if not for the dampening effect of currency translation loss caused by the weaker Hong Kong dollar against the Singapore dollar.

As at 31 January 2008, the Group owns and operates a chain of 27 restaurants and food outlets under well-known brand names in Hong Kong, Singapore and Macau. This comprises 13 Pokka Café, five Tonkichi Restaurants, two Buono Nuobo Pizza Café, two Rive Gauche and other single restaurants / outlets namely Pasta Café, Wasabi Japanese restaurant, Donguri Japanese Restaurant, Fusion Bowl and Pokka Café Grill Specialist.

Other Revenue

The Group also registered an increase of 113.5% in other revenue to S$1.8 million in FY2008 from S$0.8 million in FY2007. This is mainly attributable to an increase in membership income from the loyalty programmes of its Hong Kong and Singapore restaurants, higher interest income, as well as insurance claims amounting to about S$0.4 million.

Profitability

The Group's profit before interest and tax (PBIT) rose by 157.2% to S$11.9 million in FY2008, compared to S$4.6 million in FY2007. PBIT margin expanded to 7.1% in FY2008 from 3.2% in FY2007, due to the improved margins of its beverage business (6.2% in FY2008 versus 1.4% in FY2007) and restaurant business (10.2% in FY2008 versus 7.9% in FY2007).

The improvement in profitability during the year is attributed to the success of cost rationalisation efforts that are being made across the Group. This resulted in a slower 1.0% increase in the Group's other operating expenses to S$43.1 million, compared to 15.4% growth in total revenue during FY2008. Financing costs were also reduced by 28.5% to S$0.7 million as the Group pared its borrowings. These cost savings have helped to offset the rising costs for raw materials and production utilities, as well as a higher foreign exchange loss of S$0.9 million (FY2007 – S$0.5 million) arising from the depreciation of the US dollar against the Singapore dollar.

As a result of the above, the profit attributable to the equity holders of the Company increased approximately seven-fold to $7.0 million in FY2008, compared to $1.0 million in FY2007.

Commentary on the Balance Sheet

As a result of its strong performance in FY2008, the Group had positive reserves of S$4.5 million as at 31 January 2008, compared to negative reserves of S$0.3 million as at 31 January 2007. This has in turn lifted the Group's total equity attributable to equity holders of the Company to S$31.3 million at the end of FY2008, up from S$26.5 million a year ago.

Trade receivables increased to S$20.5 million as at 31 January 2008, from S$18.3 million, in line with the increase in beverage sales during the year. Other receivables also increased to S$2.5 million (FY2007 : S$2.0 million) due to advance payments on behalf of suppliers and amounts due from related parties, immediate holding company and associated company. Trade and other payables increased to S$30.2 million from S$28.0 million, in line with the increases in purchases of raw materials to support the growth in sales.

Inventories increased to S$15.0 million, from S$13.6 million, as the Group held a higher level of finished goods to meet the demand for its beverage products.

In addition, the Group reduced its loans and borrowings by S$6.5 million to S$14.7 million as at 31 January 2008, compared to S$21.2 million as at 31 January 2007.

Commentary on the Cash Flow Statement

The Group continued to generate positive operating cashflows in the current year. After deducting cash used for investing and financing activities, the Group closed FY2008 with cash and cash equivalents of S$12.0 million, compared to S$13.9 million as at 31 January 2007.

Capital Investments

In FY2007, the Group invested S$1.5 million in its factory in Singapore, which resulted in a 30% increase of its production capacity of its aseptic PET (Polyethylene Terephthalate) line during FY2008.

In FY2008, the Group spent S$0.5 million to increase the level of automation of its aseptic PET line, which should result in future cost savings. The Group also spent around S$1.7 million in FY2008 to enlarge its central kitchen in Hong Kong to support future business expansion.

As at year end, the Group has committed to invest another S$1.0 million on its aseptic PET line. The investment is expected to increase the line's capacity by 25%. The upgrade is scheduled to take place in April 2008.

Dividends

During FY2008, the Group paid a special interim dividend of 1.7 cents per ordinary share on 17 October 2007, which was for the purpose of utilising the bulk of its Section 44 tax credit. To further reward shareholders, the Group is proposing a final one-tier tax-exempt cash dividend of 0.5 cents per ordinary share for FY2008.

Commentary

There are increasing concerns that the sub-prime loan crisis in the USA could lead to a possible slowdown in the global economy, which will dampen consumer and business sentiments. To better withstand any adverse changes in the global economic climate, the Group intends to continue with its current efforts on cost rationalisation to improve profitability and strengthen its financial position, as well as implement effective marketing initiatives to build on the encouraging sales growth seen in FY2008.

While competitive conditions and rising operating costs are expected to prevail in both the beverage and restaurant sectors, the Group believes it is well positioned to continue making progress in its core businesses.

For its beverage division, the Group's strategy is to defend and expand its market share in Singapore and overseas markets. Leveraging on its strong brand equity and widening distribution network in Singapore's beverage market, as well as its captainship status for category management of non-alcoholic beverages, the Group aims to further strengthen its market position in the local beverage industry. The Group also intends to capitalise on the increasing awareness and acceptance of Pokka beverages in overseas markets to make further inroads and drive export sales. With additional production capacity coming onstream in FY2009, the Group will be better positioned to cater to increasing demand for its beverage products. To mitigate the impact of rising cost of raw materials, the Group is also continually working towards a higher level of production and workflow efficiency.

The restaurant business continues to perform well in terms of sales and profits despite stiff competition in this industry. Besides continuing to improve sales at its current restaurants and food outlets, the Group plans to seek promising new locations in Hong Kong and Singapore to set up new restaurants. At the same time, the Group will also explore the addition of new and appealing brand concepts to capture a broader spectrum of the consumer market. To facilitate its expansion plans, the Group has enlarged its central kitchen in Hong Kong in December 2007 to support up to 30 restaurants. Besides ensuring consistency in the quality of food, the central kitchens in Hong Kong and Singapore also enable the Group to enjoy economies of scale. Going forward, the Group will maintain its focus on cost management for its restaurant operations to cushion the impact of higher rental and raw material costs, and higher staff costs caused by the tight labour markets in Singapore and Hong Kong.

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