Latest Financial Information

1Q 2019

Financial Statements And Related Annoucement

Income Statement

Statement Of Financial Position

Review of Performance


(A) Statement of Comprehensive Income

Group revenue for 1Q FY2019 rose 6.1% Y/Y from S$148.5 million to S$157.6 million, led by growth across all business divisions. Following the adoption of SFRS(I) 16 this financial year, Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA") for the Group during 1Q FY2019 stood at S$47.2 million, 188.9% higher Y/Y, as a significant portion of lease-related expenses that were earlier classified as operating expenses are now recognised as depreciation and interest expense. EBITDA Margin for 1Q FY2019 was 29.9% (1Q FY2018: 11.0%). Profit After Tax and Minority Interests ("PATMI") for 1Q FY2019 improved 11.5% from S$1.2 million to S$1.3 million.

Bakery Division revenue rose 2.3% Y/Y to S$72.0 million during 1Q FY2019, with the consolidation of revenue from the Thailand Bakery business following the acquisition of the 50% interest in BTM (Thailand) Ltd from Minor Food Group. Excluding that, revenue would have been lower by 5.7% Y/Y, attributed to lower revenue from the direct operated stores in Beijing and the franchise business in China, partly offset by stronger revenue by the direct operated stores in Singapore. The consolidation of the Thailand business added 47 BreadTalk outlets to our direct operated store count. EBITDA for the quarter was S$14.4 million compared to S$3.8 million in 1Q FY2018.

Food Atrium Division revenue grew 3.1% Y/Y to S$38.6 million. During 1Q FY2019, the Division opened 1 direct operated restaurant (DOR) in Shanghai under the "Sergeant Kitchen" brand. 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. EBITDA for the quarter was S$20.2 million compared to S$5.3 million in 1Q FY2018.

Restaurant Division revenue rose 9.8% Y/Y to S$40.5 million for 1Q FY2019. 1Q FY2019 also saw the full quarter revenue contribution by our first Din Tai Fung outlet in London as well as the CentralPlaza Pinklao outlet in Bangkok, both of which were opened in December 2018. During the quarter, the Division also added 2 more outlets – 1 in Singapore (Great World City) and 1 in Thailand (Terminal 21). Same store sale growth for the Singapore operations came in at a high single digit percentage, signifying the underlying strength of the Din Tai Fung brand amongst consumers. EBITDA for the quarter was S$10.5 million compared to S$8.7 million in 1Q FY2018.

4orth Division delivered a revenue of S$5.5 million for 1Q FY2019 compared to S$2.7 million for 1Q FY2018. The quarter saw the commencement of our Song Fa Bak Kut Teh operations in Beijing, China and Bangkok, Thailand with the opening of the outlets in Beijing APM Mall and CentralWorld, Bangkok respectively. The Division reported an EBITDA loss of S$0.5 million primarily attributed to start-up costs related to new outlets. On a standalone basis, Sō Ramen has been contributing positive net profit to the Division.

Overall interest expense for 1Q FY2019 increased 136.2% Y/Y to S$5.9 million, as the adoption of SFRS(I) 16 resulted in the recognition of lease-related interest expense attributed to the amortisation of the lease liabilities on the balance sheet, and is unrelated to our bank borrowings or medium term note in issue. Of the S$5.9 million of interest expense incurred during the quarter, just S$2.3 million was related to bank borrowings and the outstanding medium term note, which was 7.0% lower Y/Y.

As presented in notes to the income statement, the adoption of SFRS(I) 16 also resulted in the recognition of leaserelated depreciation attributed to the right-of-use assets on the balance sheet. Depreciation and amortisation expense for 1Q FY2019 increased 338.2% Y/Y to S$38.1 million. Of the S$38.1 million of depreciation and amortisation incurred, S$29.0 million was related to the right-of-use assets. Barring the effect of adopting the SFRS(I) 16, depreciation and amortisation would have been 4.3% higher Y/Y, amounting to S$9.1 million.

1Q FY2019 saw the disposal and de-recognition of our entire interest in Carl Karcher Enterprises (Cayman) Ltd, which had been loss-making, bringing down the losses from Share of results of associates by 81.9% to S$0.05 million from S$0.3 million in 1Q FY2018. Share of results of joint ventures turned in a slight profit of S$0.02 million this quarter, compared to S$0.3 million in 1Q FY2018.

Earnings per share (EPS) on a fully diluted basis for 1Q FY2019 was 0.23 cents compared to 0.21 cents for 1Q FY2018.

Net asset value (NAV) per share was 26.7 cents as at 31 March 2019 compared to 28.9 cents as at 31 December 2018.

Number of outlets including franchise under the Group:

(B) Balance Sheet

As at 31 March 2019,

Non-current assets increased by S$360.9 million or 106.0% from S$340.5 million to S$701.4 million mainly due to increase in:

  1. right-of-use assets by S$355.1 million largely arising from the adoption of the SFRS(I) 16 on 1 January 2019;
  2. property, plant and equipment by S$7.4 million; and
  3. investment securities by S$1.9 million

offset by a decrease in join venture by S$5.2 million.

Current assets decreased by S$24.0 million or 8.9% from S$268.4 million to S$244.4 million mainly due to decrease in cash and cash equivalents by S$33.8 million

offset by a decrease in:

  1. trade and other receivables by S$5.7 million;
  2. inventories by S$4.0 million; and
  3. prepayments by S$1.7 million.

Current liabilities increased by S$22.6 million or 7.4% from S$304.9 million to S$327.5 million mainly due to increase in lease liabilities by S$111.6 million arising from the adoption of SFRS(I) 16

offset by a decrease in:

  1. notes payable by S$75.0 million;
  2. trade and other payables by S$11.1 million; and
  3. other liabilities by S$2.4 million.

Non-current liabilities increased by S$326.5 million or 231.3% from S$141.2 million to S$467.7 million mainly due to increase in:

  1. lease liabilities by S$269.9 million arising from the adoption of SFRS(I) 16; and
  2. (ii) long term loans by S$63.7 million

offset by a decrease in other liabilities by S$7.6 million.

(C) Cash Flow Statement

The Group generated net cash flow from operating activities of S$17.1 million in 1Q FY2019 as compared to S$6.2 million in 1Q FY2018.

Net cash flow used in investing activities was S$10.7 million in 1Q FY2019. Net cash flow was used primarily in the purchase of property, plant and equipment amounting to S$10.3 million and purchase of investment securities amounting to S$2.1 million.

Net cash flow used in financing activities was S$40.3 million in 1Q FY2019. Including the repayment of S$75.0 million from the maturity of the Medium Term Note, there was a net repayment of loans amounting to S$13.1 million compared to the net borrowings of S$77.4 million in 1Q FY2018. The Group continues its effort to pare down borrowings.

Overall, the Group reported a net decrease in cash and cash equivalents of S$33.9 million in 1Q FY2019, ending the period with a cash and cash equivalents of S$151.2 million.

Commentary On Current Year Prospects

The Group started the year with a positive momentum having successfully divested the loss-making Carl's Jr business in China, consolidated our shareholding in our profitable Food Republic business in Guangzhou, and acquired the remaining 50% in BTM (Thailand) which brought the bakery business in Thailand back into the fold of the Group.

The organic growth momentum of the Group will continue where we expect to see our Food Atrium business deepen its penetration in existing and new markets like Mainland China, Hong Kong, Taiwan and Cambodia. Plans are also underway to deliver the second Din Tai Fung restaurant in London while we remain focused on new outlets pipeline in Singapore and Thailand. The opening of more Song Fa Bak Kut Teh outlets at the 4orth Division will gain further momentum into the rest of the year as we continue to expand across all the five territories of Shanghai, Beijing, Shenzhen, Guangzhou and Thailand. Following its success, plans are also underway to explore new territories to take the brand into. Efforts to turnaround of the Bakery business have intensified and we have seen some positive outcomes.

Our strong balance sheet and cash flow generation capabilities enabled us to repay the S$75 million, 4.60% medium term notes when they matured on 1 April 2019. The Group has recently established a new S$500 million multicurrency medium term note programme on 17 April 2019 to avail the war chest for the Group's growth plans, whether organic or inorganic, in the most cost effective manner.

Our recent acquisition of a strategic stake in Thailand-listed NPPG (Thailand) Public Company Limited demonstrates our constant pursuit for undervalued assets whose businesses are synergistic to our core operations. The investment will allow us to leverage on NPPG's capabilities in food packaging and manufacturing as well as access its strong network of local partners in large scale food production and distribution. We will keep the market updated as we execute on our collaboration plans with NPPG as well as its other partners which are expected to create value for BreadTalk Group.