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See How Kimly Built Organizational Resilience In FY2025 · Investor Exchange

• 0:02
  Time for another Investor Exchange Podcast. Here are your hosts, Matt and Sally.
• 0:08
  Okay, let's unpack this. We are diving deep into Kimley Limited,
• 0:11
  one of Singapore's largest and most recognizable traditional coffee shop operators.
• 0:17
  They've just wrapped up their financial year 2025, which ended on September 30th.
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  And their whole corporate presentation was built around this very telling theme.
• 0:28
  Balancing headwinds, building resilience. Exactly.
• 0:31
  I mean, that phrase is a perfect summary of the F&B scene in Singapore right now. It is saturated.
• 0:37
  Costs are just skyrocketing, especially labor and rent.
• 0:40
  And, you know, consumers are being a lot more careful with their money.
• 0:44
  So our job today is to really take the sources you shared and just dissect their
• 0:48
  FY 2025 results to see how they actually pulled off that resilience.
• 0:52
  Or if they just managed to tread water.
• 0:54
  It's a good question. So let's jump straight into the top line numbers because
• 0:57
  they they offer the first sort of layer of the puzzle. Okay.
• 1:00
  For the full year 2025, Kinley clocked in as $322.1 million in revenue.
• 1:06
  Right. That's growth, yes, but just barely.
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  A marginal gain of 309% year on year. Almost flat.
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  And the net profit attributable to owners grew by an even smaller sliver,
• 1:17
  up 0.4%, hitting as $33.3 million.
• 1:22
  You know, when you look at those headline figures, you might be tempted to just call the year flat.
• 1:27
  Yeah, you would. But when you really understand the severity of the cost pressures
• 1:31
  in the market, the volatility, just maintaining as $33.3 million in profit and
• 1:36
  getting any revenue growth at all is, well, it's genuinely impressive.
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  So the critical question for us to answer is, where did that tiny bit of growth come from?
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  And maybe more importantly, how did they stop costs from just eating up that
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  entire profit line? Exactly.
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  That 0.9% figure is like a veil, hiding some really dramatic shifts happening
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  underneath. It really is.
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  So let's break down the segments because the strength absolutely did not come
• 1:59
  from their main business of, you know, selling food.
• 2:01
  No, that's the most surprising part of the whole presentation, I think.
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  The division that truly carried the load was their outlet management division.
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  Which is their business of actually running the coffee shops and leasing out the stalls.
• 2:13
  Precisely. And revenue there jumped significantly, up $4.5 million.
• 2:18
  No, wait a minute, because this is where it gets really interesting for anyone studying this sector.
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  They opened a few new coffee shops, three shops, one drink stall in FY 2025,
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  but that wasn't the main boost.
• 2:30
  No, not at all. The sources are really clear on this.
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  S4.2 million dollars of that growth came directly from providing cleaning services.
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  From cleaning contracts. Yeah, new cleaning contracts. That's the strategic
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  pivot right there, isn't it?
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  It is. Kimley is using its immense scale. I mean, they manage dozens of properties.
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  Right. To leverage facility management as more stable revenue stream than the food business itself.
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  So they're finding profit in the infrastructure, not just the noodles.
• 2:56
  That's a perfect way to put it. It makes you wonder, are they slowly becoming
• 3:00
  a property and facility management company that just happens to sell coffee?
• 3:04
  It kind of feels like it. I mean, they are stabilizing their revenue using the
• 3:08
  least volatile parts of their entire business model.
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  Their outlet investment arm also grew by about $6.4 million.
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  So these two non-food divisions basically canceled out the severe softness they saw everywhere else.
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  And we have to talk about that softness because it's in the segment most of
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  us interact with every day. the food retail division.
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  This is their own stalls, like Tender Fresh, 300, Nassi Lumac.
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  That revenue actually dropped.
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  It went down by $2.2 million, or 1.2%. And that decline, it signals real pressure on the ground.
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  The presentation confirms a major S7. million dollar decrease in revenue from
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  their existing food stall. From existing ones. Yes.
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  Yeah. This is no one-off problem. This is, you know, it's either increased competition
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  or just consumer caution hitting their established businesses hard.
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  And on top of that decline, they're clearly doing some aggressive triage.
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  They closed six underperforming stalls this year. Which followed an even bigger
• 4:08
  cleanup last year in FY 2024, where they shut eight stalls and a whole restaurant.
• 4:13
  Wow, that sounds less like resilience and, I don't know, more like managed decline
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  for their core retail business, doesn't it?
• 4:20
  Well, it's a calculated rationalization. They're just systematically pruning
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  the least efficient parts to conserve cash.
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  Thankfully, they did open 12 new food stalls this year, which,
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  as you can see, it partially offset that $7 million decline from their older locations.
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  But the picture is very clear. What's the picture? They are stabilizing the
• 4:37
  entire company through property management and acquisitions,
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  while their day-to-day food sales are really struggling.
• 4:43
  Okay, so given that retail was soft and overall revenue growth was just 0.9%,
• 4:47
  here's where it gets really interesting for me. Go on.
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  Their gross profit jumped 3.8% to S$94.1 million.
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  And that pushed their gross profit margin up by 0.8 percentage points to 29.2%.
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  So how do you dramatically improve profitability when your top line is basically standing still?
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  That is the telltale sign of successful financial engineering and really tight
• 5:13
  cost control, completely separate from sales volume. OK.
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  So while revenue barely moved, their cost of sales actually went down slightly by about $41.8 million.
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  And crucially, it fell as a percentage of revenue.
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  It went from 71.6% down to 70.8%. They just got better at squeezing margin from
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  every single dollar they earned. That's exactly it.
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  So where did they find those immediate savings?
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  Well, the biggest saving, logically, came from their main expense, ingredients.
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  They recorded a S$2.9 million reduction in food ingredient costs.
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  Which makes sense. It directly correlates with the lower sales volume in the
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  food retail segment we just talked about. It does.
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  Fewer sales means less food purchased, which, you know, automatically helps the gross margin.
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  So in a weird way, they benefited from the fact that they sold less food,
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  which lowered their cost of goods sold.
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  That's a strange silver lining. It is a strange silver lining.
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  They also saw about a CP.6 million dollar decline in rental expenses on their short-term leases.
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  But you have to contrast those savings with the huge structural costs that everyone in F&B is facing.
• 6:18
  Right. Let's talk about those unavoidable headwinds. What pressures were they just forced to absorb?
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  Labor costs, hands down. Employee benefits expense rose S1.1 million dollars.
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  And the main reason for that was salary adjustments from the progressive wage
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  model, or PWM. And for anyone listening, the PWM isn't optional, is it?
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  It's a key government initiative to uplift lower-wage workers by setting mandatory salary benchmarks.
• 6:41
  Precisely. It's a non-negotiable structural cost increase across the entire industry.
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  Kimley can't just cut wages. They have to comply, and that drives labor costs up for everyone.
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  And if that wasn't enough pressure, the cost of borrowing money also chewed
• 6:57
  into their bottom line, which is, you know, critical for a business that manages
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  so much property. Look, they took a serious hit here.
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  Finance costs rose substantially, up all $1.8 million.
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  And the overwhelming driver of that was a S2.0 million dollar rise in interest
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  expense from the, and this is a technical term, the unwinding of lease liabilities.
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  OK, that phrase, unwinding of lease liabilities, sounds very technical.
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  Can you break that down? What's the real world impact?
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  Think of it this way. When you lease a coffee shop long term,
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  it's treated on your balance sheet like debt of liability.
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  When those old leases came up for renewal in FY 2025 or when they signed new
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  ones, they had to be repriced at the current, much higher interest rates.
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  It's basically like refinancing a huge commercial loan at a much higher rate.
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  So they're just paying more for the same spaces.
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  A lot more. They paid next $46.5 million in repayment of those lease liabilities
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  and interest this year, which just shows you the sheer scale of that cash outflow.
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  So on one hand, they're meticulously controlling food costs.
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  On the other, inflation in labor and capital are actively trying to pull them down.
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  Which brings us to their long-term survival strategy, Reinforcing the foundation.
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  The strategic resilience part.
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  Exactly. And it relies on capital spending.
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  Their biggest moves in FY 2025 were all about strengthening their real estate
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  portfolio to defend against that rental volatility.
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  They made two huge acquisitions. They spent a chunk of cash, didn't they?
• 8:22
  The sources list Block 204 Serangoon Central for $13.15 million and 110 Yuxun
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  Ring Road for S11.0 dollars.
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  They're aggressively toning those short-term liabilities into long-term assets.
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  It's a fortress building strategy. When they own the property,
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  they completely eliminate the risk of those sudden dramatic rent hikes that
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  plague so many other operators.
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  These acquisitions significantly increased their proportion of what they call foundation leases.
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  Which means they're relying more and more on long-term, stable property obligations.
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  Precisely. Foundation leases include HDB leases and their own properties.
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  By the end of this year, these stable assets accounted for 70.8% of their total outlets.
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  For the listener, just think of it as swapping a volatile month-to-month rental
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  for a predictable mortgage you own.
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  That stability is priceless right now. Okay, so stability through heavy spending.
• 9:15
  But beyond buying property, they're also attacking that other major cost, labor.
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  And the shared kitchen model, that's a fascinating example of using space to save on labor.
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  The shared portfolio kitchen layout is highly strategic for fighting those PWM cost increases.
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  They rolled this out at their Kredi Kopi outlets like in Yishun and Hague Road. So what does it do?
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  It lets them house multiple in-house brands like 3Ody, Nasi,
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  Lamek, Pasta Pizza, Tender Best, all using the same central kitchen space.
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  So instead of three separate stalls needing three separate sets of equipment
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  and three prep staffs, you just, you consolidate it all.
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  You consolidate everything. You maximize kitchen space.
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  And crucially, you streamline your manpower.
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  Fewer individual chefs, fewer assistants, fewer dishwashers for the whole operation.
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  And the technology they're bringing in, like the rotary oven,
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  that's also designed to reduce manpower, right?
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  The rotary oven is a perfect example of targeted tech investment.
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  In a normal kitchen, you need staff constantly watching and turning things.
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  A rotary oven can automate the cooking for high-volume items,
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  meaning fewer hands are needed.
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  These small changes are crucial for scaling up without needing more staff,
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  which directly neutralizes some of that wage pressure.
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  And operationally, the structure seems pretty healthy. They maintained a really
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  high occupancy rate of 97.5% across all their stalls.
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  Which is foundational for that stabilizing outlet management revenue stream we talked about.
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  So beyond operations, they're also fighting back on the retail side with product
• 10:41
  innovation. They know they can't just rely on volume anymore.
• 10:44
  No, they need higher margin differentiated products. Right.
• 10:48
  And Tinder Fresh's new Nasi Kari series is a great example. The sources said
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  they sold over 20,000 portions since May.
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  That shows they can still create a hit menu item.
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  And we also saw collaborations like Hawkerman partnering with chef Eric Lowe
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  for new halal dishes and Kimley Dim Sum moving into the pre-packed retail space
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  with things like Otak Otak.
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  That move into pre-packed items feels crucial for boosting sales outside the
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  coffee shop, tapping into that whole home convenience market.
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  And they're fighting the volume battle with digital partnerships,
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  too, on platforms like ShopBack and ChrisPlusMate.
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  Okay, so we've seen the struggle in retail, the stability from property management,
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  and the engineering behind the margins.
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  Let's turn to the outlook. What did Kimley tell you about the environment they expect next year?
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  Well, their outlook is decidedly cautious. The sources are clear.
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  The F&B sector is still navigating some very heavy currents.
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  Just same old story. Pretty much.
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  They anticipate continued market saturation, intense competition,
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  and persistently high operating costs. Rent, labor, utilities, you name it.
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  And what about from the consumer side? That's also amplifying the caution.
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  Global tensions, rising living costs.
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  It all means people are expected to remain very price sensitive.
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  So they can't just hike prices to cover their rising costs.
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  No, not without risking a serious drop in customers. It's a constant battle.
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  So what does this all mean for their strategy in FY 2026? Where do they go from here?
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  Their strategy is basically an intensified version of what worked this year.
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  Defensive property ownership combined with aggressive operational efficiency.
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  So more of the same, more acquisitions. Definitely. They plan for active footprint
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  expansion, and they're always looking for M&A opportunities.
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  They even mentioned acquiring 12 Hague Road right after the year ended,
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  so this is ongoing. And in their food retail division.
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  An unwavering focus on expanding the halal business through Tender Fresh,
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  which is a major growth driver.
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  And critically, advancing their central kitchens with more technology.
• 12:43
  That shared kitchen model is probably going to be expanded aggressively.
• 12:47
  So in summary, the story of FY 2025 isn't one of booming sales at all.
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  It's a story of resilience, but resilience achieved through smart financial
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  moves. I think that's right.
• 12:58
  Their stable property revenues, coupled with those efficiencies like shared
• 13:02
  kitchens and cost control, they successfully compensated for the softness in
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  their traditional food retail business.
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  And despite all those headwinds and the heavy spending on property,
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  they upheld an incredibly strong commitment to their shareholders.
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  They did. The total dividend payout for FY 2025 is 2.00 cents per share,
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  which represents a payout ratio of 74.8 percent. Wow, 74.8 percent.
• 13:26
  That is a massive vote of confidence from management in this new property heavy
• 13:30
  business model. Very bold statement in a tough market.
• 13:33
  Yeah, that high payout ratio, it underlines that they believe the cash flow
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  from the outlet management side can sustain that kind of shareholder return.
• 13:40
  And that leaves us with a final provocative thought for you to chew on.
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  Given the acknowledged structural pressure on margins from rising labor and
• 13:47
  rental costs, how critical is the sustained success of these technology-driven
• 13:51
  improvements, like the shared kitchen model and the rotary ovens,
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  going to be for sustaining that impressive 74.8% dividend? It's everything.
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  In this business, it seems the future of shareholder returns now relies almost
• 14:03
  entirely on the success of their efficiency measures, not just market expansion.
• 14:11
  You.