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JUMBO Group FY2025 Profit Plunge – What Triggered The Dramatic Cost Hike? · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:07
  Okay, let's unpack this. We are diving deep today into one of Singapore's.
• 0:14
  Well, culinary institutions, JMBO Group Limited, or JBGL.
• 0:19
  This isn't just any company. This is the group that basically put Singapore
• 0:22
  Chili Crab on the global map, and they're operating in a super,
• 0:26
  super competitive F&B market.
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  And that context is so important because what we're looking at here is a real financial paradox.
• 0:34
  A paradox. So what we're going to do is dig into their full year FY 2025 results
• 0:39
  and try to figure out how on earth a company keeps its sales rock steady while
• 0:44
  its net profit just falls off a cliff. Exactly.
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  And, you know, this wasn't a total shock. We have to start with that profit
• 0:50
  guidance they issued back on November 10th. That was the warning shot. It really was.
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  They told the market, look, expect a significant lower net profit because of
• 0:58
  a notable increase in operating expenses.
• 1:00
  So right away, the spotlight was on their spending.
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  So for you, the listener, the central question is already there.
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  Is this profit drop a sign of, you know, bad business health?
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  Or is it the planned, maybe unavoidable price of a huge strategic overhaul?
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  That's the billion dollar question or, well, the multimillion dollar question
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  in this case. Revenue is stable, which sounds great, but the bottom line plunges
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  36.6%. We really need to dig into that trade-off.
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  Short-term pain for long-term gain, we'll say.
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  All right, let's start with the top line, the revenue, because that's the one
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  piece of good news in the whole report.
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  For the financial year ending September 30th, 2025, group revenue was $190.3 million.
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  Which is almost identical to the year before. Almost identical.
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  It's a tiny, tiny decrease of just 0.1% from FY 2024's $190.4 million.
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  Holding steady at that level in what they call a challenging operating environment
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  is, honestly, it's pretty impressive. It is impressive, but this is where it
• 1:57
  gets really interesting.
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  That stability on the top line just completely hides the chaos happening below.
• 2:02
  Profit attributable to the owners of the company just plummeted.
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  It went down 36.6% year on year, dropping from $13.7 million in FY 2024 all
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  the way down to $8.7 million.
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  And profit before tax, same story, down 35.8%. Okay. So help me understand this.
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  Revenue is flat. Profit is down by more than a third. that has to mean there
• 2:24
  was a complete radical change to their costs.
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  What does that mean for the average investor looking at this?
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  Well, the most direct impact is on earnings per share, right? The EPS.
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  That also dropped by 34.6 percent, from 2.2 cents down to 1.4 cents.
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  So for every dollar in sales, they're just keeping a lot less.
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  A lot less. So this isn't a problem with getting people to the door.
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  This is all about what happens after the customer pays the bill.
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  OK, so before we get into that cost explosion, let's just quickly nail down
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  how they kept sales so stable.
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  Singapore is their main market. Revenue there went down just a little bit.
• 2:57
  1.0%. And management was pretty upfront about why.
• 3:01
  They said they're facing a more competitive dining landscape and a moderation
• 3:05
  in discretionary dining spend. People are just being more careful with their money. Makes sense.
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  But that tiny decrease is actually a huge credit to their team because the sources
• 3:13
  show they were fighting back.
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  They opened two new outlets in Singapore and the extra cash from those helped
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  offset the slowdown everywhere else.
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  So they were expanding to stand still. That's aggressive.
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  What about their other big market, the PRC operations?
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  Revenue there also dipped a bit from $18.9 million to $18.3 million.
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  What's the story there? The story is really key to not misinterpreting that number.
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  It wasn't just, you know, a weak market. That dip was partly caused by the planned
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  closure of one outlet and a temporary two-month refurbishment of another one.
• 3:49
  Ah, so operational downtime.
• 3:51
  Exactly. If you actually pulled those effects out of the numbers,
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  the outlets that were open the whole time delivered a slight improvement year on year.
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  That was driven by local marketing and better customer engagement.
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  So the sales story is one of resilience.
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  They're working really hard just to stay flat. Right.
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  Now we have to talk about the main event, the cost shock. Management said it
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  themselves, lower profitability is primarily due to a notable increase in operating expenses.
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  So where did the money go? The biggest hit, the one that explains almost everything,
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  came from costs tied to their long-term strategy, specifically new leases.
• 4:26
  You have to think of it less as an operational mistake and more as a huge planned accounting shift.
• 4:32
  Okay, give us the specifics on that. So you've got two big things that surge.
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  First, depreciation for what they call right-of-use assets or ROU assets.
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  That went up by 13.6%, a $1.6 million jump.
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  But listen to this. the interest expense on those same leases.
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  It surged by an incredible 96.4%. It nearly doubled in a year.
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  Doubled. A nearly doubled interest cost on leases feels incredibly risky,
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  especially when they're saying it's a challenging environment.
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  How can they be sure that growth will come fast enough to cover that?
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  That's the bet they're making. And to understand that jump, we have to explain what an ROU asset is.
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  For you, the listener, just think of it this way. A few years ago, the rules changed.
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  Companies like Jangbomom now have to take their long-term leases and put them
• 5:17
  on the balance sheet as both an asset and a liability.
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  So it's like booking the entire 20-year rental commitment on day one.
• 5:23
  Precisely. And this surge, you could almost call it a lease tsunami,
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  it's directly tied to them signing new long-term leases for some huge strategic projects. Like what?
• 5:34
  Their new corporate office, their new central kitchen, and three new outlets.
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  And one of those hadn't even opened yet. Ah, so they basically traded flexible,
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  shorter-term rental costs for what feels more like a 30-year mortgage on their
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  entire infrastructure.
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  All those future costs hit the books this year. That is the perfect analogy.
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  This wasn't just the light bill going up. You could see this massive strategic
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  shift on their balance sheet.
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  Non-current assets, those ROU assets, went up by $28.6 million.
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  And the non-current liabilities, the lease debt, went up by $32.8 million.
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  They took a huge leap. And FY 2025 was the year it landed on the P&L statement.
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  So those lease costs are clearly the biggest piece of the puzzle.
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  What else drove up expenses? Well, employee costs are always a huge factor in
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  F&B. They rose too. Employee benefits went up by 2.2%, which is about $1.4 million.
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  And that's from the new staff for the new outlets.
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  Exactly. More headcount to staff, the new operations, plus, you know,
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  your standard annual salary adjustments and bonuses.
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  So the expansion hits you with infrastructure costs and people costs at the same time.
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  Right. And then there's that catch-all category, other operating expenses,
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  which jumped by almost 19%, another $3.6 million.
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  What's hiding in there? It's a mix of one-off spring cleaning costs and just the cost of competing.
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  The sources mention a $1.2 million loss on getting rid of old property, plant, and equipment.
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  So think of that as the cost of clearing out old kitchen gear when you're moving
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  into a shiny new central kitchen.
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  They also spent more on marketing, about a million dollars more just to stay
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  visible, and general supplies went up too.
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  But it wasn't all bad news on the cost front. It looks like they were managing
• 7:12
  their other investments pretty well.
• 7:14
  Yes. The share of results from their associates actually flipped from a $4.1
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  million loss last year to a gain of $3.4 million this year.
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  And that's a really important little detail. It shows that while their core
• 7:25
  business was bleeding cash for these investments, their non-core associated
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  companies, like one called Vista F&B, were actually performing better.
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  It's a small cushion, but it shows some smart management on the periphery.
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  Okay, so let's pivot to the future.
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  All these huge costs are tied to this big infrastructure play.
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  What does this aggressive spending mean for their outlook over the next 12 months for FY2026?
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  Well, management is still saying they have a cautious outlook.
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  You know, the economy is uncertain. Consumer spending is down.
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  But the strategy is clear.
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  Disciplined growth. And now a huge focus on operational efficiency and cost
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  control to start paying for all these new fixed expenses.
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  And the absolute key milestone for FY2026 is actually moving in,
• 8:10
  consolidating the central kitchen and the headquarters into that one single facility.
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  Why is that one move so important that it justified all this short-term pain?
• 8:18
  This is the entire synergy argument. In a market like Singapore,
• 8:22
  you just can't survive an F&B without economies of scale.
• 8:24
  Right, the big chains all have them. They all have central kitchens.
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  They control their supply chain. They manage waste. They ensure every plate
• 8:31
  of chili crab tastes the same.
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  This move is supposed to unlock all those efficiencies in production,
• 8:36
  logistics, training, everything.
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  So the goal isn't just saving a bit on rent. It's about getting total control
• 8:42
  over quality and cost, which you have to have if you want to expand the brand. Exactly.
• 8:46
  The goal isn't short-term savings. It is all about improving scalability for the future.
• 8:52
  They're building a much bigger, better engine room. So when they launch new
• 8:57
  Jambo outlets around the region, the support structure is already there,
• 9:01
  optimized and centralized.
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  And it's not just back office stuff. They're also adding an innovative eatery
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  concept, like a seafood market and a food hall to the new building.
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  So it's an investment in the brand experience, too. The whole narrative is there.
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  The sharp drop in profit to $8.7 million is a direct, calculated choice.
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  They took the hit now to set themselves up for what they believe is more sustainable
• 9:24
  and more profitable long-term growth.
• 9:27
  Okay, hold on. This brings us to the final paradox, and this is where I get confused.
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  Revenue is flat, profit's in the tank, but they're paying out more in dividends.
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  The board recommended a total dividend of 1.25 cents per share.
• 9:41
  How does that even work? I know, it's the ultimate mixed signal, right?
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  But what's fascinating here is that the total cash value of that dividend,
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  about $7.5 million, is actually higher than the $6 million they paid out in FY 2024.
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  So what are they trying to tell people? They're trying to tell the market,
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  our core operating business is healthy.
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  This profit drop is mostly an accounting issue, not a cash issue.
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  But how can they afford a higher payout if the profit collapsed?
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  Because they look at cash flow, not just the accounting profit.
• 10:09
  Their net cash generated from actual operations was still a very healthy $20.5 million.
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  Those massive lease costs would be talked about. They hit the profit and loss
• 10:19
  statement through non-cash items, mainly depreciation.
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  Since they still have the operating cash, paying that higher dividend signals
• 10:25
  real confidence that this dip is temporary and their big bet is going to pay off.
• 10:30
  Okay, so let's bring this deep dive home. The story of Gemma Lowe's FY 2025
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  is a massive, deliberate tradeoff. They gave up short-term profit for these
• 10:40
  huge long-term strategic assets.
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  The new HQ, the central kitchen, the new outlets. So the real test,
• 10:46
  the thing to watch for in FY2026, is whether those promised efficiencies actually
• 10:51
  show up fast enough to offset the huge increase in fixed costs they've now locked in. Absolutely.
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  The market will be watching their gross profit margins like a hawk.
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  If they can get those costs under control with the new system,
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  then this $8.7 million profit will look like a historical blip.
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  And if we connect this back to the bigger picture, raises a really interesting
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  final thought for you to mull over.
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  We mentioned they had gains from associates, but they also got rid of two of
• 11:14
  them, Singapore Seafood Republic and S.S.R. Sentosa.
• 11:18
  Given how much they're spending on their core operations and their focus on
• 11:21
  disciplined execution, is this just a bit of portfolio cleanup to raise cash?
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  Or does it signal a bigger long-term strategy to focus only on the core Jambo
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  brand and shed everything else as they get ready to scale up?
• 11:34
  That's something to think about as we wait for next year's numbers.