Phil-Seven profit jumps 172% to P54.83M in 2008

Phil-Seven Corp., the local franchise holder for the 7-Eleven chain of convenience stores, said its earnings jumped 172 percent last year on the back of higher sales, helped by successful cost-containment measures and improved support from trade suppliers.

Based on its financial report filed with the Philippine Stock Exchange, Phil-Seven said its 2007 net profit reached P54.83 million from only P20.14 million a year earlier. Revenues from merchandise sold amounted to P4.95 billion, up 6.91 percent from P4.63 billion while cost of merchandise rose 9.63 percent to P3.53 billion.

Phil-Seven said its net earnings last year translated to a 1.1-percent return on sales and 8.2-percent return on equity. Earnings per share grew to P0.23 from only P0.08.

Systemwide sales, which represent the overall retail sales to customers of corporate and franchise-operated stores, increased 12 percent to P5.56 billion. Average sales per day in each store improved to P52,000 from P50,000.

As of end 2007, Phil-Seven had a total of 311 stores, eight percent more than the previous year’s 287. Out of the total store base, 151 are company-owned and the rest are franchise-operated.

Gross profit stood at P1.42 billion while gross profit as a percentage of sales declined 170 points partly due to the dilution brought about by the increase in the company’s sales to franchise stores.

General and administrative expenses, which comprised store operating and selling expenses as well as headquarter expenses, increased  four percent to P1.68 billion.

Commission income, on the other hand, dropped 23 percent to P21.9 million due to other competitors in downstream channels and maturing telecommunications business.

Marketing income which comprises promotional support and display allowance, improved by P15.1 million from the 2006 level due to the higher promotional support collected from suppliers. In addition, the company penalized suppliers when valuable shelf space was vacant due to the production problem.

Franchise revenue, meanwhile, rose to P204 million from only P148 million. This was the result of the increased number of franchise-operated stores. The number of stores operated under the conventional franchise package increased by 28 with 85 stores.

Rent income arising from the stores’ subleased spaces reached P39.6 million, Phil-Seven said.

As of end 2007, Phil-Seven had total assets of P1.88 billion or an increase of three percent.

Phil-Seven said it was able to prepay some of its loan as a result of improved profitability in 2007 and expects to reduce the level of its debt within the next three years to minimize the impact of interest expense in the net income and consequently reduce the leverage ratios.

Jose Victor Paterno, president of Phil-Seven said the company intends to end the year with a total of 400 stores  through continuous landmark expansion.

“We shall continue to add value to our customers far beyond just the products we sell them and in so doing, we become an important service provider. More programs are lined up to boost our sales margin and customer count in partnership with our suppliers,” Paterno said.

“We shall continue to collaborate with our suppliers to provide high quality and fresh product selections that are more saleable and more profitable,” he added.