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

Yesterday, BreadTalk Group Limited (SGX: 5DA) reported its 2016 fourth quarter and full year earnings.

The food & beverage retailer 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 also has a Restaurant business segment and a Food Atrium business segment.

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

Financial highlights

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

  1. For 2016’s fourth quarter, BreadTalk’s revenue fell 1.1% year-on-year to $153.3 million. For 2016, BreadTalk recorded $615 million in revenue, down 1.5% from 2015.
  2. Net profit attributable to shareholders was up 286.6% year-on-year to $4.4 million for the fourth quarter. For the full year, profit was up 50.4% to end at $11.4 million. BreadTalk’s bottom-line benefited from a 107.5% increase in the Other income line to S$33.8 million.
  3. Consequently, BreadTalk’s diluted earnings per share (EPS) jumped from 0.41 cents in the fourth quarter of 2015 to 1.57 cents in the reporting quarter. For 2016, BreadTalk recorded a diluted EPS of 4.06 cents, up 50.9% from 2015.
  4. For the fourth quarter of 2016, cashflow from operations was $27.4 million while capital expenditure came in at $6.6 million. This gave BreadTalk positive free cash flow of $20.8 million, up from the positive free cash flow of S$16.2 million (S$25 million in cashflow from operations and S$8.8 million in capex) seen in 2015’s fourth quarter. For 2016, BreadTalk generated $51.9 million in free cash flow, up from 2015’s S$28.9 million.
  5. As of 31 December 2016, BreadTalk had around $120.6 million in cash and equivalents and $182.1 million in total debt. This gave BreadTalk a net debt position of around $61.5 million. This is an improvement from its net debt position of $107.5 million seen on 31 December 2015.

In all, BreadTalk did not grow its sales, but managed to improve its profitability and balance sheet, and grow its free cash flow.

The food and beverage firm does remain in a net debt position, but the amount of cash grew. The free cash flow produced also shows that the firm is able to generate cash when it needs to.

The board recommended a final dividend of two cents per share for 2016, up from one cent per share in 2015. BreadTalk also paid out an interim dividend of 0.5 cents per share and a special interim dividend of 1.35 cents per share. In total, BreadTalk’s dividend for 2016 will be 3.85 cents per share, a significant jump from 2015’s total dividend of 1.5 cents per share.

Operational highlights

For 2016, BreadTalk’s Bakery division recorded a slight decline in revenue to $305.9 million. In terms of EBITDA (earnings before interest, taxes, depreciation and amortization), the Bakery division logged in a 35.5% year-on-year increase to $30.3 million.

For the Food Atrium segment, revenue declined 8.2% to end 2016 at $159.8 million. The segment’s EBITDA did no better, falling 31.8% to $12.2 million.

Elsewhere, BreadTalk’s Restaurant division bucked the trend by posting a 4.9% year-on-year revenue increase. The latter division contributed $150.2 million in sales. EBITDA was down 9.9%, though, to $30.5 million.

BreadTalk ended 2016 with 862 bakeries, 57 food atriums, and 32 restaurants. In 2015, BreadTalk had the same number of bakeries, 65 food atriums and 30 restaurants.

Future outlook

Looking forward, BreadTalk provided the following outlook:

“The Bakery Division continues to drive higher same store sales growth in its existing direct operated stores. In addition, it commenced the review of its existing franchise portfolio with the aim of consolidating its operations, and position the franchise business for future expansion. Closer to home, the Group will open its first BreadTalk outlet in Yangon, Myanmar in early 2017.

Food Atrium Division introduced key action plans to reduce outlet stall vacancy, improve tenant mix and profile, as well as drive same store sales growth. New outlets will be situated in cities where the Group have strong operating track record.

Restaurant Division continues its steady performance at Din Tai Fung Singapore and Thailand. In November 2016, the Group inked an agreement to operate the Din Tai Fung brand in the United Kingdom. The first Din Tai Fung restaurant is expected to open in London by end 2017. Looking ahead, the Group’s consolidation strategy comprises of streamlining its operations, improving supply chain relationships and managing costs. The Group is optimistic to pilot through the testing food & beverage retail landscape of 2017.”

At its closing share price yesterday of $1.32, BreadTalk traded at around 32.4 times trailing earnings with a dividend yield of around 2.9% (note: the trailing dividend includes a special interim dividend).

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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.