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Honey Bun stock, profit riding high

Published:Tuesday | May 10, 2016 | 12:00 AMSteven Jackson
Michelle Chong, CEO of Honey Bun.

Bakery company Honey Bun posted strong quarterly results this week, validating market confidence in the stock for which the trading price has doubled since January.

On the flip side, the company also announced that it will resume paying income tax, effective June 3, marking the end of its five years of full waivers as a junior market company. It still qualifies for a 50 per cent waiver for the next five years.

Still,the bakery did pay $4 million of taxes over for the half-year period, October 2015 to March 2016 $2 million of which was incurred in the second quarter but did not say why the charge was incurred.

Net profit for the March quarter totalled $49.4 million or nearly two-thirds higher than a year ago. Sales hit some $315 million compared to $248 million a year ago. Half-year sales amounted to $607 million compared to $454 million in the 2015 period, while profit doubled from $47 million to $95 million.



The company warns, however, that this performance may not be replicated in the upcoming quarters, saying "due to seasonal variations, the first and second quarters are

normally more profitable than the third and fourth quarters".

Meanwhile, the bakery stock, which trades as HONBUN, has gained 196 per cent in value since January the price closed at $18 on Monday beating the entire market of more than 60 other stocks in the process.

Comparatively, growth in the JSE Combined Index over the same period is 2.8 per cent.

Honey Bun chief executive officer Michelle Chong said the second quarter financials reflect a five percentage point differential between the growth in revenues and core expenses.

"While revenue increased by 27 per cent, administrative expenses and selling and distribution costs increased by 22 per cent combined," Chong said in a statement.

Export sales were up 20 per cent at half year.

Honey Bun, which is majority owned by the Chong family, was listed on the junior arm of the JSExchange in June 2011, which entitled it to 10 years of tax breaks.

"Therefore, June 2, 2016 will mark five years of being listed and also mark the end of our 100 per cent exemption from corporate income tax. From June 3, 2016 onward for five years, the company's earnings will be subjected to 50 per cent corporate income tax," Chong said.