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BreadTalk Group Limited’s Latest Earnings: A Mixed Bag

BreadTalk Group Limited (SGX: 5DA) reported its second-quarter earnings yesterday evening. The reporting period was for 1 April 2016 to 30 June 2016.

The company may be best known for its signature pork floss buns that it sells in its namesake BreadTalk bakeries all around the Garden city and other parts of Asia. BreadTalk has three main business segments: Bakery, Restaurant, and Food Atrium.

To learn more about the company, go here.

Financial highlights

The following’s a quick rundown on some of the latest financial figures for BreadTalk:

  1. For 2016’s second quarter, BreadTalk’s revenue fell by 3.3% year-on-year to $149.8 million. The Food Atrium and Bakery segments both experienced weaker sales (more on this later).
  2. But, the company’s net profit attributable to shareholders sank by nearly 55% year-on-year to just $1.3 million.
  3. BreadTalk’s diluted earnings per share (EPS) consequently suffered a near-55% decline from 1.02 cents in the second-quarter of 2015 to 0.46 cents in the reporting quarter.
  4. For the second-quarter of 2016, cash flow from operations was $17.7 million while capital expenditure clocked in at $6.1 million. This gave BreadTalk positive free cash flow of $11.6 million, up from the $8.3 million seen a year ago ($12.7 million in cash flow from operations and $4.3 million in capex).
  5. As of 30 June 2016, the company had $112 million in cash and equivalents and $202.6 million in debt. This gave BreadTalk a net debt position of $90.6 million. This is an improvement from its net debt position of $130.7 million reported for 30 June 2015.
  6. The board of directors recommended an interim dividend of 0.5 cents per share, unchanged from a year ago.

Overall, BreadTalk reported a mixed bag of results.

Revenue had ticked downwards and profit plunged. But, the food and beverage firm managed to improve its balance sheet (although it still remains in a net debt position) and generated stronger free cash flow.

Operational highlights

For the reporting quarter, the Bakery and Food Atrium segments saw revenue declines of 2.8% and 9.5% year-on-year, respectively. The Restaurant division bucked the trend by posting a 2.9% revenue increase.

When it comes to profit, it was a different story. In terms of EBITDA (earnings before interest, taxes, depreciation and amortisation), the Restaurant and Bakery segments recorded year-on-year growth of 15.2% and 30.4%, respectively. The Food Atrium segment saw its EBITDA fall by 70.8%.

BreadTalk currently has a total of 934 F&B outlets, down from the 957 outlets it had at the end of 2015 and up slightly from the 932 seen at end-June 2015.

A future outlook

On the topic of its outlook, BreadTalk provided the following commentary:

“Bakery Division remains on its recovery path as the execution of our strategy to moderate the pace of outlet expansion and focusing on cost control and quality of earnings continues.

While the Food Atrium Division still faces certain headwinds in China, the situation has largely come under control following the completion of our evaluation process of the respective outlets within our portfolio.

Restaurant Division continues its steady improvement supported by both same store sales growth and good cost control.”

BreadTalk’s shares closed yesterday at $1.12. At that price,  BreadTalk traded at 49 times trailing earnings and has a dividend yield of 1.3%.

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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.