BreadTalk Group Limited’s Latest Earnings: Another Mixed Bag

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

The food purveyor 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.

You can catch up with the results from BreadTalk’s previous quarter here.

Financial highlights

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

  1. For 2016’s third quarter, BreadTalk’s revenue fell by 2.7% year-on-year to $157.3 million.
  2. But, net profit attributable to shareholders was up 108% to $3.26 million.
  3. BreadTalk’s diluted earnings per share (EPS) was also up 108.5% year-on-year, going from 0.56 cents in the third-quarter of 2015 to 1.16 cents in the reporting quarter.
  4. For the third-quarter of 2016, cash flow from operations was $34.0 million while capital expenditure clocked in at $12.9 million. This gave BreadTalk positive free cash flow of $22.4 million, up from $14.67 million in the previous year.
  5. As of 30 September 2016, BreadTalk has $112.5 million in cash and equivalents and $192.4 million in debt. This gave BreadTalk a net debt position of around $80 million. This is an improvement from the net debt position of $117.8 million seen on 30 September 2015.

Overall, it is another mixed bag of results, just like what BreadTalk handed in for the second-quarter of 2015.

BreadTalk’s revenue slipped, but profit increased sharply. The food and beverage firm remains in a net debt position, but its cash position improved. It also logged another quarter of positive free cash flow.

Operational highlights

For the reporting quarter, the Bakery and Food Atrium segments saw their revenues decline by 0.1% and 11.4% year-on-year, respectively. The Restaurant segment managed to grow revenue by 2.4%.

When it comes to profit, it was a different story for the segments. In terms of EBITDA (earnings before interest, taxes, depreciation and amortization), the Bakery segment recorded a 142% year-on-year increase. But, the Food Atrium and Restaurant segments’ EBITDAs fell by 37.9% and 2.5% year-on-year.

BreadTalk ended the reporting quarter with a total of 936 outlets, down from the 957 outlets it had at the end of last year.

Future outlook

In its earnings release, BreadTalk had provided the following outlook:

“The Group has embarked on a consolidation path in its business, especially in China, in view of a still challenging food and beverage retail environment in that market.

With its efforts in tightening cost controls and improving its supply chain operations having borne fruits, the Bakery Division has also commenced the review of its existing franchise portfolio with the aim to consolidate its operations and position the franchise business for future expansion.

The under-performance situation at the Food Atrium Division has largely come under control, with a clear turnaround plan in place. New outlets openings to be committed over the next 12 months will largely be focused on key cities where we have existing strong operating track record and capital expenditures on such outlets will be more stringently controlled to shorten the payback period.

Restaurant Division continues to see steady performance. It will also explore new opportunities for growth both in existing and new markets.”

At its closing share price of $1.00 today, BreadTalk trades at 34 times trailing earnings with a dividend yield of around 2.9%.

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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.