3 Things Investors Should Know About BreadTalk Group Limited’s Food Atrium Business

BreadTalk Group Limited (SGX: 5DA) is a food & beverage retail company that has three main business segments: Bakery, Restaurant, and Food Atrium.

The company reported its 2017 second quarter results earlier this month. In this article, I want to look at some useful information about the Food Atrium segment that was shared in the company’s earnings presentation. In a previous article, I had covered the Restaurant segment, which you can find here.

As a quick introduction, BreadTalk’s Food Atrium segment operates food courts in malls around the world that are mainly under the Food Republic brand.

Historical financials

The two charts below show the Food Atrium segment’s revenue and EBITDA (earnings before interest, taxes, depreciation, and amortisation) going back to 2010:

Source: BreadTalk 2017 second quarter earnings presentation

As you can see, the Food Atrium segment’s revenue has grown at a respectable compound annual growth rate (CAGR) of 8.7% from 2010 to 2016, with the bulk of the growth taking place between 2012 and 2015.

The EBITDA margin, however, had declined drastically from 16.8% in 2010 to 7.7% in 2016. But, the segment’s EBITDA margin had improved significantly to 14.6% in first half of 2017. The higher margin was driven by the removal of poorly performing stores.

Change in outlet count

Here’s a chart that shows the growth of the Food Atrium’s outlet count since 2006:

Source: BreadTalk 2017 second quarter earnings presentation

From 2006 to 2016, the number of Food Atriums had jumped from 19 to 57. As of the first half of 2017, the company had 56 Food Atrium outlets, of which China, Singapore, and Hong Kong accounted for 28, 15, and, five respectively. The remaining eight outlets are found in Taiwan and the rest of Southeast Asia.

Revenue by geography

The following chart show the Restaurant segment’s revenue breakdown by geography in the first half of 2017:

Source: BreadTalk 2017 second quarter earnings presentation

BreadTalk’s Food Atrium business is pretty diversified, with Singapore accounting for 44% of revenue, with the rest coming from at least three other territories.

A Foolish conclusion

In sum, BreakTalk’s Food Atrium business went through a period of rapid growth in store count and revenue between 2006 and 2015. But, the segment appeared to pay little attention to its profit margin.

The company is currently shifting its strategy from store-growth to consolidation of stores to improve productivity. This has started to work, given the improvement in margin in the first half of 2017.

Editor's note: An article covering the Bakery segment has been published. It can be found here.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.