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BreadTalk's FY18 earnings fall 29.9% to $15.2 mil in absence of TripleOne Somerset divestment gain

Michelle Zhu
Michelle Zhu • 3 min read
BreadTalk's FY18 earnings fall 29.9% to $15.2 mil in absence of TripleOne Somerset divestment gain
SINGAPORE (Feb 19): BreadTalk Group delivered earnings of $15.2 million for FY18, declining 29.9% from its earnings of $21.7 million for FY17 despite booking revenue growth for the year.
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SINGAPORE (Feb 19): BreadTalk Group delivered earnings of $15.2 million for FY18, declining 29.9% from its earnings of $21.7 million for FY17 despite booking revenue growth for the year.

This was largely due to the absence of a $9.3 million net capital gain from the divestment of BreadTalk’s partial stake in TripleOne Somerset, excluding which the group would have seen 1.1% higher core net profit on a y-o-y basis.

For the 4Q ended Dec 2018, BreadTalk’s earnings grew 82.5% to $8.9 million from its 4Q17 restated earnings of $4.9 million on the back of higher revenue, which grew 3.1% to $154.8 million compared to $150.1 million a year ago.

Revenue for the full year rose 1.7% to $609.8 million from restated FY17 revenue of $599.6 million, led by growth from the Food Atrium and Restaurant divisions.

The higher contributions from the Food Atrium division was mainly due to the addition of a new revenue stream as it adapted its business model into smaller-store formats in shopping malls through additional directed operated restaurants (DOR).

EBITDA margin for this division improved to 19.9% compared to 16.8% a year ago, due to higher revenue driven by low stall vacancy.

Meanwhile, the Restaurant division saw the addition of four more outlets in Singapore, Thailand and the UK although one outlet closed in Singapore upon the expiry of its lease. EBITDA for this division notably fell 6.6% y-o-y to $28.1 million, primarily due to higher staff and administrative costs related to the start-up of BreadTalk’s UK operations.

The 4orth Food Concepts division contributed $14.2 million to the group’s overall revenue in FY18. Currently, it comprises outlets under the So Ramen, TaiGai, Nayuki, Song Fa Bak Kut The and Wu Pao Chun Bakery in Singapore and China.

While the division reported at EBITDA loss of $2.9 million due to pre-opening expenses, BreadTalk highlights that So Ramen has been contributing positive net profit to the division over FY18.

Meanwhile, revenue from the Bakery division fell 5.1% on-year to $282 million due to lower revenue from direct operated stores in Shanghai, Beijing and Hong Kong, as well as lower franchise revenue from China.

Overall interest expense for FY18 increased 69.9% to $9.2 million from $5.2 million on higher total debt as the group issued $100 million of five-year, 4% medium-term notes in Jan 2018 in anticipation of capital expenditure requirements for FY18-19.

The group adds that plans are already underway for the construction of its new integrated central production facility in China, which it expects to provide greater production capacity to support the growth of its existing and new businesses.

In all, earnings per share (EPS) on a fully diluted basis fell to 2.7 cents from 3.85 cents in FY17, while net asset value (NAV) grew to 28.9 cents as at end-2018 compared to 27.5 cents a year ago.

Looking ahead, BreadTalk says it remains mindful of significant headwinds faced at the Bakery business as it adopted a more aggressive stance to turn the segment around. The group intends to be “all hands on deck for the team” over FY19, with its group CEO Henry Chu personally leading the efforts.

“Our centralised procurement efforts have been gaining notable traction in delivering cost savings. Lastly, greater efforts have also been placed into R&D to create a stronger pipeline of products that will help drive revenue,” concludes the group.

Shares in BreadTalk closed flat at 88 cents on Tuesday.

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