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Highlights From BreadTalk Group Limited’s First Quarter of 2018 Results

BreadTalk Group Limited (SGX:5DA) is perhaps one of Singapore’s most recognisable companies. It owns or manages a variety of prominent F&B concepts including its namesake BreadTalk, Toast Box, Din Tai Fung , Food Republic and Song Fa Bak Kut Teh, among others.

Last week, BreadTalk Group released its earnings for the first quarter of 2018. Here are some of the highlights.

Sales increased marginally

Revenue for the quarter inched up 0.5% to S$148.5 million from S$147.7 million over the same period last year. The group said that this was in line with its plan to restart its outlet expansion following two years of “business consolidation”.

Profit after tax and minority interests (PATMI), however, declined 89.1% to S$1.2 million. This was largely because of a one-off recognition of S$9.3 million in capital gain in the first quarter of 2017. Excluding the one-off capital gain, the management said that net profit from its core business would have, in fact, increased 89.4% to S$2.9 million from S$1.6 million a year ago.

Earnings per share, consequently, decreased 89% to 0.42 cents from 3.84 cents one year back.

Bakery division underperforms 

The bakery division, which includes its most prominent brand, BreadTalk, posted a decline of 4.5% in revenue year-on-year. This was largely due to fewer franchised outlets in China. The total number of franchised outlets in China decreased from 278 a year ago to 254 at the end of the quarter.

However, this was compensated for by an improved performance by its food atrium division and restaurant division which saw revenues increase 3.3% and 6.2% respectively. This was driven by improved same store sales in existing food atrium businesses and the opening of three new restaurants.

Stable balance sheet

As of 31 March 2018, the group had total assets valued at S$674 million and liabilities of S$464 million. It, therefore, had net assets of S$210 million. The group had total borrowings of S$260 million and cash of S$211 million. This puts it in a net debt position of S$49 million. This was slightly higher than 2017, when it had a net debt position of S$41 million.

Other notable events during the quarter and outlook for 2018

During the quarter, the group signed a joint venture agreement to operate Wu Pao Chun Bakery in four major cities in China. It also came to an agreement with a third-party to operate Toast Box outlets in Indonesia, with the first outlet to open in central Jakarta later this year.

On the outlook for the rest of the year, the group’s management said:

“The Group will stay focused on deepening the penetration of our existing markets and leverage our regional platform to bring more new food concepts and brands into our portfolio to drive our growth. We also expect to see better procurement cost outcomes as our BTG-Shinmei Venture commences its procurement operations soon.”

However, the team warned:

“We expect short term earnings volatility as certain capital and operating expenditures will need to be incurred and invested to realise our medium to long term goals.”

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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 Jeremy Chia doesn’t own shares in any companies mentioned.