BreadTalk reports 2Q19 net profit dropped 58 percent on accounting changes

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

Iconic Singapore bun maker BreadTalk reported Thursday its second quarter net profit dropped 57.9 percent on-year to S$1.0 million amid changes to accounting standards for leases.

Revenue for the quarter ended 30 June rose 9.8 percent on-year to S$163.3 million, the bun maker said in a filing to SGX.

Earnings before interest, tax, depreciation and amortization (EBITDA) jumped 174.8 percent on-year in the quarter to S$49.7 million, BreadTalk said. That was due to lease-related expenses, which were previously classified as operating expenses, now being recognized as depreciation and interest expense, the filing said.

Interest expense on borrowings fell 25.7 percent in the quarter to S$1.8 million, while the interest expense for leases was S$3.69 million, compared with nil the previous year, the filing said.

“In spite of the continual headwinds faced by the group in overseas markets, the constant focus on diversifying its portfolio of brands while enhancing overall profitability of existing partnerships enabled the group to deliver better results,” BreadTalk said in the filing.

Bakery division

The bakery division reported second quarter revenue rose 3.3 percent on-year to S$70.8 million, while EBITDA rose 207 percent on-year to S$12.7 million. The division reported a loss before tax of S$1.9 million in the quarter, compared with a year-ago profit before tax of S$1.5 million.

Contributions from the acquisition of a 50 percent interest in BTM (Thailand) from Minor Food boosted the bakery division’s revenue, offsetting lower revenue from the direct-operated and franchise business in China, BreadTalk said. Direct operated stores in Singapore and the international franchise business posted stronger revenue, the filing said.

“Efforts to turnaround the Bakery business, particularly in China and Thailand remain underway, while we continue to build on the strong performance of the business in Singapore,” BreadTalk said.

Food atrium

The food atrium division reported revenue rose 2.0 percent on-year to S$39.6 million, while EBITDA jumped 197.9 percent on-year to S$22.9 million in the quarter. The division’s profit before tax rose 12.6 percent on-year to S$4.2 million, the filing said.

That was after the food atrium division opened three direct operated restaurants in Shanghai, Hong Kong and Bangkok under the Sergeant Kitchen brand, the filing said.

“Same store sales growth remained generally strong across the entire portfolio with North China, East China and Hong Kong providing the main thrust. Stall vacancy remains low,” the filing said.


The restaurant division reported second quarter revenue increased 18.2 percent on-year to S$44.0 million, while EBITDA jumped 110.9 percent on-year to S$14.9 million. The division’s profit before tax rose 37.2 percent on-year to S$7.8 million, the filing said.

That was after the division opened four more outlets, three in Singapore and one in Thailand, but the revenue boost was offset by higher operating costs in Singapore and as the U.K. operations haven’t yet turned profitable, the filing said.


The 4orth division reported revenue jumped 157.8 percent on-year to S$7.8 million, while EBITDA was a loss of S$800,000 for the quarter, wider than the S$100,000 loss in the year-ago quarter.

“The period saw the commencement of our Song Fa Bak Kut Teh operations in Beijing, Guangzhou and Bangkok, as well as the deepening of the brand’s presence in Shanghai. Wu Pao Chun opened its first outlet while Nayuki opened its second outlet in Singapore during the second quarter,” BreadTalk said.

The 4orth division reported a loss before tax of S$3.2 million, wider than the year-ago loss before tax of S$200,000, mainly on start-up costs for new outlets.

BreadTalk declared an interim dividend of 0.5 Singapore cent a share, unchanged on-year.

For the first half, BreadTalk reported net profit fell 35.3 percent on-year to S$2.3 million on revenue of S$321.0 million, up 7.9 percent on-year. EBITDA for the first half rose 181.5 percent on-year to S$96.8 million, the filing said.

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