BreadTalk Group Limited’s Latest Earnings: Continued Growth in Revenue and Profit

BreadTalk Group Limited (SGX: 5DA) released its second-quarter earnings for its fiscal year ending 31 December 2015 yesterday evening. The reporting period was for 1 April 2015 to 30 June 2015.

The food purveyor may be best known for its signature pork floss buns that it sells in its namesake BreadTalk bakeries all around our Garden city and other parts of Asia. Beyond bakeries, BreadTalk also organizes its businesses into the Restaurant and Food Atrium (think food courts) divisions.

To learn more about the company, go here.

Financial highlights

The following’s a quick take on BreadTalk’s latest financial figures:

  1. For the second-quarter of 2015, revenue rose 10.7% year-on-year to S$154.9 million. Sales growth was broad-based across all business divisions.
  2. Consequently, net profit increased by 10% to $2.9 million from a year ago. The rise came about as the firm managed to maintain its net margin at the same level as compared to the second-quarter of 2014.
  3. Earnings per share (EPS) for the quarter followed suit with a 9.9% year-on-year increase from 0.93 cents to 1.02 cents.
  4. For the second-quarter of 2015, BreadTalk’s cash flow from operations was $12.7 million with capital expenditures clocking in at $4.3 million. This gave rise to free cash flow of $8.3 million for the reporting quarter, up significantly from the -$1.9 million in free cash flow ($13.1 million in cash flow from operations and $15.0 million in capital expenditures) that was seen a year ago.
  5. As of 30 June 2015, BreadTalk had $98.1 million in cash and equivalents and $228.8 million in debt. The condition of the food & beverage outfit’s balance sheet had not changed much from a year ago when it had $57.9 million in cash and equivalents and $186.9 million in debt.

In summary, BreadTalk had demonstrated good top-line and bottom-line growth in the reporting quarter. This is a nice continuation of the healthy revenue and profit increases that BreadTalk had achieved in the first-quarter of 2015. There’s more good news as well as the company had managed to generate positive free cash flow for the reporting quarter.

But, BreadTalk’s balance sheet still holds a high level of borrowings and as Foolish investors, we should continue to keep an eye on it.

Last but not least, BreadTalk’s board of directors had declared an interim dividend of 0.5 cents per share for the reporting quarter. This was unchanged from a year ago.

Operational highlights

For the first-half of 2015, BreadTalk saw revenue growth across all its business divisions. To that point, the Bakery, Food Atrium, and Restaurant divisions had reported year-on-year revenue growth rates of 10.5%, 7.3%, and 10.6%, respectively, for the period.

When it comes to the bottom-line however, the level of performance in the first-half of 2015 was more varied. The Restaurant and Bakery divisions saw year-on-year EBITDA (earnings before interest, taxes, depreciation, and amortisation) growth of 64.3% and 14.5%, respectively. The Food Atrium division was a laggard however, as its EBITDA plunged by 24.3%.

BreadTalk ended 30 June 2015 with a total of 932 outlets across all its geographical markets and business divisions, up from 922 in the previous quarter and 844 in the second-quarter of 2014. On both occasions, it was predominantly the increase in the number of Bakery outlets which had contributed to the total outlet gains.

The following are some important comments in the earnings release from BreadTalk’s management team on the firm’s future plans:

“Bakery Division is in the process of implementing new strategies to improve its profitability, including better manpower cost control and closing the underperformance gaps in certain areas such as Hong Kong, Malaysia and Toast Box in Mainland China.

Food Atrium Division continues to see operating challenges from the slowdown in Mainland China, translating to weaker footfalls in the shopping malls where our outlets operate. However, this is partially mitigated by the good mix of residential and office customer base in the catchment of our food atria.

Restaurant Division remains focused on executing its core strategies for Din Tai Fung to continue to drive revenue growth and margin expansion in both Singapore and Thailand. The streamlining process of underperforming Ramen Play outlets in Singapore and China is expected to continue. “

Foolish summary

At its closing price yesterday of $1.36, BreadTalk traded at around 30.3 times its trailing earnings and offered a trailing dividend yield of around 1.1%.

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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.