Record profit growth for BreadTalk Group - VF Franchise Consulting
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Record profit growth for BreadTalk Group

Feb 22, 2018

SINGAPORE - 02 OCT 2016: BreadTalk in Sentosa Island Singapore. BreadTalk Group has a network of over 500 bakery outlets in 15 countries.

With a record 91 per cent profit growth, lifestyle F&B company BreadTalk Group says it is ready to soar in a challenging market.

Its record net profit for last year came in at US$21.8 million despite an “unpredictable” macro retail environment, says the Singapore-headquartered company.

“We are well positioned to soar above the challenging retail market conditions,” says chairman Dr George Quek.

“The group remains determined to identify innovative food concepts and partnerships, delivering them promptly across our 17 territories.”

In line with the group’s consolidation strategy for the year, group revenue eased 2.5 per cent to $599.7 million.

For the same period, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 3.5 per cent to $84.4 million, with EBITDA margin steady at 14.1 per cent.

Profit after tax and minority interests (PATMI) improved 91 per cent from $11.4 million to $21.8 million. PATMI margin rose from 1.9 to 3.6 per cent.

During the year, $9.3 million in net capital gain was recognised from the divestment of the group’s investment in TripleOne Somerset in the first quarter.

Excluding one-off items, core F&B business net profit for the year would have been $17.7 million, an improvement of 153.3 per cent.

Bakery less bouyant

Bakery-division revenue declined 3.2 per cent to $297.2 million, attributed to lower revenue from directly run stores in Beijing, Shanghai and Hong Kong, as well as lower franchise revenue from China because of the planned early termination of eight franchisees during the year.

There were 20 fewer directly run stores at 240, following the reclassification of the eight outlets in Malaysia in the fourth quarter to franchise, as well as closures in China and Singapore.

Franchise outlets ended the year at 631, 29 more because of the addition of the re-classified outlets from Malaysia as well as more outlet openings by franchisees in Indonesia, Philippines and Thailand.

EBITDA for the division declined 20.5 per cent to $23.2 million, with EBITDA margin at 7.8 per cent, down from 9.5 per cent, mainly because of lower profitability at Shanghai and Singapore directly run stores, and lower high-margin revenue contribution from the China franchise business.

For the food atrium division, revenue was 5.4 per cent lower at $149.3 million with four fewer outlets. The same-store sales growth momentum for the entire food atrium portfolio was strong, especially in China. Two outlets opened in Shenzhen during the fourth quarter, at MIXC World and Uniwalk.

EBITDA improved 53.7 per cent to $25.1 million, with EBITDA margin improving from 10.3 to 16.8 per cent.

London debut

For the restaurant division, revenue was up 2.2 per cent to $140.7 million, with one outlet being added in Thailand. EBITDA rose in tandem by 2.1 per cent to $30.1 million with EBITDA margin steady at 21.4 per cent despite costs related to the start-up of the group’s first Din Tai Fung outlet in London.

A new business division, the 4orth Division, was launched with the objective of incubating F&B concepts, as well as enter into joint ventures. The division ended the year with revenue of $7.9 million and EBITDA of $500,000, translating to an EBITDA margin of 6.8 per cent.

“Significant” efforts were put into consolidating and turning around the group’s bakery business, particularly underperforming stores in China and Singapore. Also, the Toast Box product in China was revamped to better suit the local palate and to meet the consumers’ mobile lifestyle.

BreadTalk’s food-atrium division ended the year with a record low stall vacancies of less than 2 per cent.

The management team is also staying focused on deepening reach in Singapore and Thailand to further optimise economies of scale. Two outlets were opened last month, at the new Northpoint City in Singapore and at Thonglor in Bangkok.

All five Ramen Play outlets were rebranded as So, turning the business profitable. The group’s first JV, Song Fa Bak Kut Teh outlet at Jing An Kerry Centre in Shanghai officially opened last month, to be followed by further Song Fa outlets in other parts of Shanghai as well as in other cities in China and Thailand.

Source: Inside Retail Asia

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