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BreadTalk Q2 net profit drops 57.9% amid costs of expansion drive

MAINBOARD-LISTED food and beverage operator BreadTalk Group's second-quarter earnings were more than halved on expansion-related costs, according to results released on Thursday.

Net profit fell by 57.9 per cent to S$1.02 million for the three months to June 30, even as revenue rose by 9.8 per cent to S$163.3 million.

Despite higher takings across the key bakery, food atrium, restaurant and "4orth" food concept businesses, the bottom line was done in by a jump in distribution and selling expenses.

Earnings per share for the quarter stood at 0.18 Singapore cent, down from 0.43 Singapore cent before, while net asset value declined to 25.9 Singapore cents a share, against 28.9 Singapore cents as at Dec 31, 2018.

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Net profit for the half-year came in 35.3 per cent lower at S$2.34 million, while revenue was up by 7.9 per cent to S$321 million.

The bakery division fell into the red on a pre-tax basis during the six months, according to BreadTalk's financial statements, while 4orth remains loss-making amid startup costs for new outlets.

Meanwhile, restaurant pre-tax profit fell by 12.6 per cent on losses in Britain and higher operating costs in Singapore. But the food atrium division saw a 23.8 per cent increase in pre-tax earnings, on the back of low stall vacancy as well as "generally strong" sales growth led by mainland China and Hong Kong.

BreadTalk said in its outlook statement that it "will continue to focus our resources in the expansion of key markets", citing food atrium growth in mainland China, Hong Kong, Taiwan and Cambodia.

It plans to expand the restaurant footprint in Singapore and Thailand, and will open its first Song Fa Bak Kut Teh outlet in Taiwan in the second half of the year.

"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," it added.

BreadTalk has more than 990 stores across 16 markets worldwide, with close to two-thirds being bakery franchisee outlets - although those have been shrinking in number. Shares of results from associates and joint ventures saw narrowing losses in the latest quarter.

The portfolio includes the directly-owned Toast Box, Food Republic and The Icing Room, while the group manages outlets for Din Tai Fung, Song Fa Bak Kut Teh, Wu Pao Chun Bakery and other brands.

The board recommended an interim dividend of half a Singapore cent, flat on the year before.

The counter added S$0.015 or 2.14 per cent to S$0.715 on Thursday before the results were released.