SINGAPORE (May 3): BreadTalk reported 1Q18 earnings to $1.18 million, down 89.1% from $10.8 million in 1Q17.

The drop in earnings was due to the recognition of a one-off gain of $9.3 million from the divestment of the group’s investment in TripleOne Somerset in 1Q17.

During the quarter, the group brought forward the early closure of eight Bakery outlets in China and one Food Atrium outlet in Hangzhou.

Revenue for the quarter was 0.5% higher at $148.5 million from $147.7 million in the previous year. This was in line with the group’s plan to cautiously restart its outlet expansion following two years of business consolidation.

BreadTalk’s Bakery division revenue dropped 4.5% y-o-y to $70.4 million due to lower revenue from direct operated stores at Shanghai, Beijing and Hong Kong, as well as lower franchise revenue from China.

As at March 31, the group has 254 China franchise outlets across 28 cities compared with 278 outlets across 36 cities.

Revenue for the group’s Food Atrium Division increased 3.3% y-o-y to $37.5 million, despite having four less outlets than a year ago, driven by strong same store sales growth momentum across the entire portfolio.

Restaurant division also saw revenue rising 6.2% y-o-y to $36.9 million with the addition of three more outlets – one in Singapore and two in Thailand during the current period.

4orth Division turned in a revenue of $2.7 million for 1Q18. This business division comprises five outlets of So Ramen in Singapore and one outlet of Song Fa Bak Kut Teh in Shanghai, China. The y-o-y comparison is not meaningful as the results of 1Q17 were related to the now defunct RamenPlay brand.

With cost of sales dropping 1.9% y-o-y to $65.4 million, gross profit for 1Q18 came in at $83.2 million, 2.6% higher than $81.1 million last year.

Other income halved to $7.10 million, compared to $15.2 million a year ago.

Interest expense also increased by 81.6% to $2.49 million compared to $1.37 million in 1Q17.

Looking ahead, BreadTalk will stay focused on deepening the penetration of its existing markets and leverage on its regional platform to bring more new food concepts and brands into its portfolio to drive growth.

The group also expects to see better procurement cost outcomes as the BTG-Shinmei Venture commences its procurement operations soon.

George Quek, chairman of BreadTalk says, “We will continue to identify new growth opportunities through joint-venture partnerships and invest in talent development. Through higher operational efficiencies, we remain well positioned to pilot through a challenging food and beverage retail landscape in FY18.”

Shares in BreadTalk closed 9 cents lower at $1.83 on Thursday.