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BreadTalk Group Limited’s Latest Earnings: Pulling Back on Stores to Focus on Profits

Yesterday, BreadTalk Group Limited (SGX: 5DA) reported its 2017 first quarter earnings. The reporting period was for 1 January 2017 to 31 March 2017.

As a quick background, BreadTalk Group runs bakeries, restaurants, and food atriums across Asia. You can catch up with the results from the company’s 2016 fourth quarter here.

Financial highlights

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

1. For 2017’s first quarter, revenue fell 4.5% year-on-year to $147.6 million.

2. Net profit attributable to shareholders was $9.7 million, up big from last year’s $0.84 million.

3. BreadTalk’s diluted earnings per share (EPS) was 3.8 cents, up from 0.87 cents in the first quarter last year.

4. For the first quarter of 2017, cashflow from operations was $16.3 million and capital expenditure was $12.2 million. This gave BreadTalk free cash flow of $4.1 million.

5. As of 31 March 2017, BreadTalk had $109.2 million in cash and equivalents and $166.8 million in debt. With this, BreadTalk has a net debt position of $57.6 million, which is an improvement from end-2016’s net debt of $90.5 million.

Overall, it was a mixed bag of numbers. BreadTalk’s revenue slipped, but profit increased sharply. Free cash flow was also positive while the balance sheet showed sequential improvement.

Operational highlights

For the reporting quarter, the Bakery and Food Atrium segments saw year-on-year revenue declines of 3% and 13.1%, respectively. The Restaurant segment was the bright spot with a 2.3% increase in sales.

In terms of EBITDA (earnings before interest, taxes, depreciation and amortization), the Bakery segment recorded a 12.5% decline to $5.9 million. Meanwhile, the Food Atrium segment’s EBITDA was $4.9 million while the Restaurant EBITDA was $7.4 million. These were increases of 417% and 13.9%, respectively.

At the end of the reporting quarter, BreadTalk had 855 bakery outlets, 57 food atriums, and 32 restaurants in total. This is a slight decline from a year ago when there were 858 bakery outlets, 60 food atriums, and 30 restaurants.

Future outlook

BreadTalk provided the following outlook in its earnings release:

“The Group has seen strong recovery in its core business supported by its commitment to slow down its pace of outlet expansion amidst a more cautious F&B / retail environment, streamline our operations and better control our costs.

The focus shall remain on profitability and the quality of earnings in FY2017.”

BreadTalk’s shares closed at $1.39 each yesterday, giving the company a price-to-earnings ratio of 19.9 and a dividend yield of 2.8%.

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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.