BreadTalk’s earnings jump 22% to $2.4m in Q1

Thanks to its divestment of 112 Katong.

BreadTalk’s Q1 profit after tax and minority interests (PATMI) surged 22% YoY to $2.4m, thanks largely to an exceptional gain from the divestment of 112 Katong.

According to OCBC, stripping out this one-off boost conceivably puts BreadTalk’s bottomline at a loss. This is mainly on back of a steep spike in overall personnel costs.

Moreover, BreadTalk’s food atrium arm saw deeper losses during the quarter as well. Its revenue was down 0.4% to $41.8m, while earnings before interest, tax, dividends, and amortisation (EBITDA) crashed 82% to $900,000. The segment’s profit, though, was down from a loss of $37,000 in 1Q15 fo $4.3m.

“Keeping in mind that the group had 2 fewer outlets compared to 1Q15, the group also cited impact from weaker traffic in certain shopping malls in Mainland China. In addition, start-up costs from new outlets, write-offs from outlet closures, and higher operating expenses added pressure to profitability,” further notes OCBC.

Meanwhile, other segments saw better results. The bakery segment’s revenue slipped 1.3% to $75.9m due to some decline in same store sales for BreadTalk outlets in Singapore, Hong Kong, and Beijing on top of a slowdown for franchise outlets in China. Nevertheless, EBITDA margins improved from 7.9% in 1Q15 to 8.9%, thanks to improved expense control and productivity gains.

The group’s restaurant segment continued to be driven by strong SSSG, with revenue shooting up 9.9% to $36.9m while EBITDA margin inched up from 16.9% in 1Q15 to 17.7%.

OCBC notes that overall number of outlets have slipped from 957 in Q4 to 948 this quarter, largely due to four net closures for the bakery division and five for net atrium. OCBC anticipates more consolidation amid BreadTalk’s efforts towards cost management and productivity initiatives.