Neo Group's losses decline 73.6% to $0.65m

Thanks to operational improvements in the food manufacturing business.

Neo Group reported losses of $0.65m in 1QFY18, which is significantly lower than last year’s $2.5m loss for the same period.

The reduced losses were attributed to better cost control and a turnaround at the food manufacturing business, according to RHB Research. The Group also cut its advertising and promotional activities to support margins.

RHB noted that the company's revenue grew 27% YoY to $40.6m, thanks to the newly acquired U-Market Place and Hi-Q plastic grabbed in January and April.

Neo Group's food catering business also improved by 5% after it tried a new market segment for eldercare and childcare. Its food manufacturing business also gained 5% from the launch of new products.

Here’s more from RHB:

As a result of aggressive acquisitions in past years, net gearing reached a record high of 204%. The interest coverage ratio was below 1x based on FY17’s full-year results, and the Group is in a net liability position. The management announced that it has sufficient cash to support the Group’s operations when its debt is due. We note that the Group is also slowing down its pace of acquisitions to prevent its costs from increasing more than its revenue. It has terminated the proposed acquisition of Park Food Manufacturing and extended the exclusive period for the proposed acquisition for Lavish Dine and Asia Farm.