BreadTalk sees 139.5% spike in net profit, sells off MY bakery business

Mainboard-listed BreadTalk Group stated in its Q3 financials that it is delivering higher profits in spite of a challenging retail environment, with 139.5% year-on-year (yoy) increase in net profit. This is attained by the Group’s unwavering focus on assessing and re-organising existing business portfolios while identifying new growth opportunities in profitable segments of the Group.

In the ninth month of FY2017, revenue declined 2.7% yoy to SG$223.1 million in the bakery division. The decline was primarily attributed to weaker direct operated stores performance in Singapore, Shanghai and Beijing. The Group said it is reviewing its brand positioning and menu offerings to ensure attractive products for customers. While direct operated stores remained relatively unchanged at 255, there was an increase of 15 franchise outlets yoy to 604. This is aligned with the Group's direction to further streamline its bakery division franchise portfolio for higher business efficiencies.

In the first nine months of 2017, the Group proactively concluded the agreements of several underperforming franchises in China. In September 2017, the Group entered into a sale and purchase agreement for its Malaysia bakery business with United Malayan Land (UMLand). This deal enabled the Group to leverage on UMLand’s extensive experience in the Malaysian property market and placed the company “on strong foundation to deliver attractive growth prospects for Malaysia".

Soaring above the challenging retail landscape, total revenue increased at a steady pace of 2.5% yoy from SG$102.2 million to SG$104.8 million in the restaurant division. This upward trend is driven primarily by the "stellar" performance and effective cost management of the Group's Din Tai Fung restaurants in Singapore and Thailand. In line with the overall Group strategy, the consolidated food atrium portfolio in China and Singapore continued to demonstrate robust recovery, with the vacancy rate across food atrium outlets remaining at a "record low" of under 2.5%.

“Our core food and beverage net profit increased fivefold to SG$12.1 million for Q3, signifying the underlying strength of BreadTalk Group’s core businesses. This bears testament to our team’s unwavering dedication and effort on streamlining our existing business portfolio and identifying new commercial opportunities accurately,” George Quek, chairman, BreadTalk Group, said.

He added that the group will continue to be nimble in identifying new food and beverage trends, and suitable joint-venture partnership opportunities to develop "exciting" products for a progressively competitive marketplace. Meanwhile, he said the two-pronged strategy of consolidating underperforming operations and focusing on high performing markets has proven to be effective.

“We continue to develop new growth engines as represented by Din Tai Fung in the UK and Song Fa joint venture. They will generate new revenue streams for the Group. Our first Song Fa Bak Kut Teh outlet in Shanghai and our first Din Tai Fung outlet in the UK are expected to open in 2018. The Group remains in a good position to improve overall profitability and quality of earnings for FY 2017,” Quek added.