The Good And The Bad: What Investors Should Know About BreadTalk Group Limited’s Latest First Quarter Earnings
BreadTalk Group Limited (SGX: 5D) is a food & beverage retail company with a geographical focus on Asia. It currently has 855 bakery outlets, 57 food atriums, and 32 restaurants around the world. .
In early May, the company released its 2017 first quarter earnings. There are both positive and negative takeaways from the company’s latest results that investors may want to learn about. Let’s take a look, starting with an overview of the numbers:
1. The overall numbers
Here’s a table showing some important items from BreadTalk’s income statement for the first quarters of 2017 and 2016:
Source: BreadTalk 2017 first quarter earnings release
There was a mixed performance from BreadTalk. On one hand, the company’s revenue was down 4.5% year-on-year. On the other hand, there was a big improvement in profitability as BreadTalk’s net profit jumped by 337.2%.
2. The positives
Firstly, the company’s Restaurant segment reported revenue growth 2.3% in the reporting quarter largely due to the opening of three new outlets in Singapore in Punggol Waterway Point, City Square Mall, and Centrepoint.
Secondly, the profit margins for BreadTalk’s Food Atrium and Restaurant segments both improved. In the case of the former, the segment turned a loss of S$4.3 million in the same quarter a year ago to a profit of S$0.86 million.
Thirdly, BreadTalk’s balance sheet has strengthened from a year ago, judging by how its net-debt position has declined from S$96.8 million to S$57.6 million.
3. The negatives
Firstly, the company had to close down stores in the reporting quarter (its total store count fell from 951 in December 2016 to 944). Is this a sign that some of BreadTalk’s markets are saturated? That’s something to think about.
Secondly, the Bakery segment saw its profit margin decline slightly from 2.5% a year ago to 2.4%. The Bakery segment accounts for half of BreadTalk’s revenue, so developments there are important to watch.