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BreadTalk Group Limited’s Latest Earnings: What Investors Should Know

BreadTalk Group Limited (SGX: 5DA) reported its fiscal first-quarter earnings yesterday evening. The reporting period was for 1 January 2015 to 31 March 2015.

The company may be best known for its pork floss buns that it sells in its namesake bakeries all around the island and other parts of Asia. Beyond the Bakery division, BreadTalk also has two other divisions, namely the Restaurant division and Food Atrium division.

To learn more about the company, go here.

Financial highlights

Here’s a rundown on BreadTalk’s latest financial figures:

  1. For the first quarter of 2015, revenue for BreadTalk rose by 8.6% to $152.5 million when pitted against the same quarter a year ago. Sales growth was broad-based across all divisions.
  2. Net profit attributable to shareholders increased by 10.9% year on year to $2 million.
  3. Earnings per share (EPS) followed suit with a 10.9% increase from 0.64 cents in the first quarter of 2014 to 0.71 cents in the reporting quarter.
  4. For the first quarter of 2015, BreadTalk’s cashflow from operations was $5 million with capital expenditures clocking in at $16.6 million. This gave the food & beverage outfit a negative free cash flow of $11.6 million. The selfsame figures a year ago were $4.4 million (cashflow from operations), $12.1 million (capital expenditures), and -$7.7 million (free cash flow).
  5. As of 31 March 2015, BreadTalk had $86.3 million in cash and equivalents and $202.7 million in debt, giving rise to a net debt position of $116.4 million. We can see that BreadTalk’s balance sheet has improved slightly given the net debt position of $120.4 million seen at 31 March 2014.

In all, BreadTalk had demonstrated good revenue and profit growth. On the other hand, the company remains free cashflow negative and still has a sizeable amount of debt on its balance sheet. These are developments which we may want to monitor.

Operational highlights

BreadTalk’s fiscal first-quarter saw revenue growth across all its business divisions. To that point, the Bakery, Food Atrium, and Restaurant divisions reported year-on-year revenue growth of 11.3%, 7.8%, and 13.2%. respectively.

The total number of outlets inched up to 922, compared to 914 in the previous quarter. Most of the outlet gains came from the Bakery division. The Restaurant division oversaw the closure of six non-performing Ramenplay stores which contributed to the division’s bottom line as those stores were making losses.

Looking ahead, Breadtalk’s management team had given the following comments in the earnings release:

“Bakery Division is in the process of launching a new concept café and also consolidating its market leadership position in Singapore. The restructuring of Ramen Play has reached a significant milestone with the closure of 6 of its non-performing stores last year which resulted in lower losses during 1Q 2015. The focus going forward is to turnaround the business through better product offerings and customers in-store experience. Food Atrium division is intensifying its marketing efforts to boost sales from the coming summer school holiday period. The division is also in the process of improving its product mix to better suit consumers’ palates.

Barring any unforeseen circumstances, the Group expects to remain profitable for the rest of FY2015. “

Foolish summary

At its closing price yesterday of $1.40, BreadTalk traded at around 31.9 times its trailing earnings with a dividend yield of around 1.1% (based on its annual dividend of 1.5 cents in 2014).

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.