BreadTalk reports 3Q18 net profit dropped 29 percent amid new business expenses

BreadTalk outlet in Singapore; taken September 2018.BreadTalk outlet in Singapore; taken September 2018.

Singapore’s iconic bakery chain BreadTalk reported its net profit for the third quarter dropped 29.2 percent on-year to S$2.70 million amid one-off expenses for its new business investments.

Revenue for the quarter ended 30 September rose 2.3 percent on-year to S$157.66 million, the bun-maker said in a filing to SGX on Monday.

Distribution and selling expenses for the quarter increased 4.7 percent on-year to S$62.05 million, while administrative expenses rose 34.1 percent on-year to S$28.64 million, BreadTalk said.

“The lower year-on-year profit during the third quarter was caused by one-off expenses in the run up to the opening of our Din Tai Fung business in London and other new businesses, as well as certain underperforming segments of our Bakery business which we are already in the process of restructuring,” Henry Chu, BreadTalk CEO, said in the statement.

But he pointed to the quarter’s revenue growth as a sign that the company’s long-term strategies would pay off.

“What has kept us on the international F&B map is our ambition to stay relevant through meeting the needs of consumers in key markets,” Chu said. “In the last nine months, we continue to build the pipeline for future growth by entering into strategic joint ventures for our F&B businesses, as well as investing in our support infrastructure.”

For the nine-month period, BreadTalk reported its net profit fell 62.5 percent on-year to S$6.31 million, while revenue increased 1.2 percent on-year to S$455.02 million.

Bakery division revenue for the nine-month period fell 5.0 percent on-year to S$212.0 million on lower revenue from its direct-operated stores in Shanghai, Beijing and Hong Kong and lower franchise revenue in China, partly offset by stronger revenue from direct-operated stores in Singapore and higher international franchise revenue, it said.

The total direct-operated outlet count dropped to 223 from 240 during the nine-month period, while the franchise outlet count fell to 616 from 631 over the same period, largely due to a decline in China, BreadTalk said.

Food Atrium division revenue rose 4.3 percent on-year in the nine-month period to S$117.2 million, amid low stall vacancy, it said.

The Restaurant division revenue rose 7.7 percent on-year in the nine-month period to S$112.9 million as it added two more outlets, one in Singapore and one in Thailand, it said.

The 4orth division, which comprises five So Ramen and one TaiGai outlets in Singapore, two Song Fa Bak Kut Teh and one Una-Yu outlets in China, saw revenue of S$9.7 million in the nine-month period, while reporting an earnings before interest, tax, depreciation and amortization (EBITDA) loss of S$800,000 on pre-opening expenses, it said.

In the nine-month period, interest expenses more than doubled on-year to S$7.3 million on higher total debt after the company issued S$100 million of five-year 4.00 percent medium-term notes in January, to meet planned capital expenditures, it said.

BreadTalk has around 1,000 retail outlets in 18 territories, with its brands including BreadTalk, Toast Box, Food Republic, Din Tai Fung, Bread Society, Thye Moh Chan, The Icing Room, Nayuki, TaiGai, So Ramen and Song Fa Fak Kut Tech in China and Thailand, it said.

The owned bakery outlets are in Singapore, China, Malaysia, Hong Kong and Thailand, while it has franchised outlets in Asia and the Middle East, it said. It operates Din Tai Fung restaurants in Singapore and Thailand and Food Republic food courts in Singapore, China, Taiwan, Hong Kong and Malaysia, it said.

In September, it opened its first TaiGai outlet in NEX Serangoon mall in Singapore, and before the end of the year, it plans to open its first Din Tai Fung outlet in London and its first Nayuki Tea and Bakery cafe in VivoCity mall in Singapore, BreadTalk said.