3 Things Investors Should Know About BreadTalk Group Limited’s Bakery 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 Bakery segment that was shared in the company’s earnings presentation. In previous articles, I had covered the Restaurant segment and Food Atrium segment, which you can find here and here, respectively.

As a quick introduction, Breadtalk’s bakery business comprises of brands such as BreadTalk, Toast Box, and Bread Society.

Historical financials

From the two charts below, you can see how the Bakery segment’s revenue and EBITDA (earnings before interest, taxes, depreciation, and amortisation) has changed going back to 2010:


Source: BreadTalk 2017 second quarter earnings presentation

What’s useful to note is that revenue at the segment has grown at a compound annual rate of a respectable 9.9% from 2010 to 2016, with the bulk of the growth occurring from 2010 to 2015.

The EBITDA margin, though falling since 2010, had rebounded in 2016 as a result of better cost controls and productivity gains. As a result, BreadTalk’s EBITDA had increased at an annual rate of around 9.7% from 2010 to 2016.

Change in outlet count

The chart below shows the growth of the Bakery segment’s outlet count since 2006:

Source: BreadTalk 2017 second quarter earnings presentation

We can see that the number of bakery outlets jumped from 129 in 2006 to 862 in 2016.

But, we also can see that 2017 has so far been a year where the number of outlets declined as a result of the company’s consolidation activity to remove poorly performing stores.

Of the 856 outlets the Bakery segment had in end-June 2017, 259 are direct-operated stores, while the rest are franchised.

Revenue by geography

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

Source: BreadTalk 2017 second quarter earnings presentation

With the Bakery segment, both Singapore and China are significant markets, since they make up 44% and 41% of its revenue, respectively.

A Foolish conclusion

One thing that is clear from the three charts above is that after years of rapid growth in store count and revenue at the Bakery segment, BreadTalk now has a focus on improving productivity and expanding its margin.

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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.