Financial and Non-Financial Performance Analysis of Breadtalk Group Limited

The report provides an insight into the financial and nonfinancial performance of Breadtalk Group Limited through evaluation of its financial performance with the use of ratio analysis technique and examination of its non-financial performance through reviewing its corporate governance policies. It also proposes a medium-term financial strategy for the company to achieve dominant position within its respective industry sector.

FINM036 Assignment Two

Executive Summary
The main purpose of the report is to provide an insight into the financial and non-
financial performance of a selected company, that is, Breadtalk Group Limited. This is done
through evaluation of its financial performance with the use of ratio analysis technique. This is
followed by examination of its non-financial performance through reviewing its corporate
governance policies. Lastly, it has proposed a medium-term financial strategy for the company to
achieve dominant position within its respective industry sector.

Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Brief Introduction to the Selected Company ‘BREADTALK GROUP LIMITED’....................4
Section A: Part 1: Performance of the selected company (Breadtalk)............................................4
Ratio Analysis..............................................................................................................................4
Profitability Analysis................................................................................................................4
Asset Efficiency Analysis........................................................................................................6
Liquidity Analysis....................................................................................................................8
Section B........................................................................................................................................10
Part 1: Corporate Governance Policies & Its Impact on Brand Reputation...............................10
Part 2: Discussion of the Proposed Medium Term Financial Strategies for Selected Company
....................................................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

Introduction
The critical analysis of an organization can be undertaken by examining its financial and
nonfinancial information that helps in gaining an insight into its key performance indicators. This
report is developed for the Board of Directors of a selected company to present them an insight
into its strategic and financial performance. It is prepared as a part of interviewing process for a
potential applicant seeking the appointment as a finance director of the company. It is developed
on the prerequisite of the Board of the company seeking to assess the knowledge of the potential
candidate in relation to the accounting and corporate governance concepts. The reports is divided
into two sections, the first section has analyzed the performance of a selected company through
the use of relevant financial and non-financial ratios. The next section of the report has presented
a critical evaluation of the corporate governance compliance of the company and also presented a
discussion in relation to the medium term financial strategies to be adopted by it for its
sustainable growth and development.
Brief Introduction to the Selected Company ‘BREADTALK GROUP LIMITED’
The report is directed to the Board of Directors of the company ‘BreadTalk Group
limited’ that is known to be a multinational food and beverage company of Singapore. The
company is publicly traded on SGX have a revenue realization of about 61.5 million till the end
of the year 2016. It is known to be an investment holding company and that undergone rapid
expansion and development with growth realized in the sectors of food and beverage, bakery,
food court and restaurant. The company is also engaged in franchising activities and wholesale
of confectionary and bakery products. It is known to operate about 871 bakeries, 25 restaurants
and 53 food outlets across the world. The company is providing employment to about 7K people
worldwide which are significantly higher in the restaurant industry (Company Overview of
BreadTalk Group Limited, 2018).
Section A: Part 1: Performance of the selected company (Breadtalk)
Ratio Analysis
Ratio analysis refers to the financial tool that is used to evaluate the financial
performance of the company through using the financial ratios. It also helps to make the

comparison of the financial performance of current year with previous year (Lumby and Jones,
2007). It means ratio analysis provides the comparability of the financial performance of current
year with the past years and also allows comparing with the financial performance of companies.
In this section ratio analysis of last five years of Breadtalk has been done in order to report the
financial performance of the company.
Profitability Analysis
Profitability analysis is the most important part of the ratio analysis as it provides
information on the ability of the company on how it generates earnings, profits and cash flows
during the period. Some of the important profitability ratios that have been computed to analyse
the performance of Breadtalk are net profit ratio, return on assets and return on equity.
Financial data of BreadTalk for last five years
Particulars 2012 2013 2014 2015 2016 2017
Amount in million dollar
Net revenue $ 536.50$ 589.60$ 624.10$ 614.90$ 599.70
Total Assets
$
356.40 $ 468.25$ 538.80$ 545.13$ 533.89$ 557.19
Average total assets $ 412.33$ 503.53$ 541.97$ 539.51$ 545.54
Shareholder's equity
$
91.02 $ 103.98$ 138.49$ 146.42$ 151.94$ 160.47
Average
shareholder's equity $ 97.50$ 121.24$ 142.46$ 149.18$ 156.21
Net Profit $ 16.13$ 26.03$ 14.60$ 17.59$ 29.91
(Breadtalk Group: Annual report, 2017, Breadtalk Group: Annual report, 2015 and Breadtalk
Group: Annual report, 2013)
Financial Ratios of BreadTalk for last five years

Profitability ratios
Ratios Formula 2013 2014 2015 2016 2017
Net Profit Ratio
Net profit / Net
revenue 3.01% 4.41% 2.34% 2.86% 4.99%
Return on asset
Net profit / Average
total assets 3.91% 5.17% 2.69% 3.26% 5.48%
Return on Equity
Net profit / Average
shareholder's equity 16.54% 21.47% 10.25% 11.79% 19.15%
2013 2014 2015 2016 2017
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Profitability Ratios
Percentage
Net profit ratio: This profitability ratio provides the percentage of net income earned on total
revenue. This ratio is the key ratio in terms of profitability as it shows the percentage of net
profit earned by company which is very important for the point of shareholders. Looking at the
profitability of Breadtalk over the last years it can be said that company has very poor
profitability performance. Maximum net profit of 4.99% has been earned in year 2017 that
indicates company has improved its profitability performance through better utilization of
resources.

Return on assets: This profitability ratio is important from the point of management as it reveals
how management has performed to achieve maximum earnings. There has been constant
increase in this ratio that other than year 2015 and in year 2017 company has maximum
percentage on return on assets. So it can be concluded that Breadtalk has highest profitability
performance in year 2017.
Return on equity: This profitability ratio is very important from the investor’s point of view as
reveals how the owner’s capital has been utilized to earn the maximum profits. It is management
duty to allocate the capital in assets in optimum manner to it provides best results. Return on
equity was higher in year 2014 and next higher in year 2017.
Overall profitability performance of BreadTalk was very strong in year 2017 as compare
previous years. However it was seemed that there is need to work on net profit ratio so that
maximum profits can be provided to the shareholders (Krantz, 2016).
Asset Efficiency Analysis
The asset efficiency ratio provides a measurement of the ability of a company to
effectively manage its assets. The asset efficiency analysis position of the selected company can
be carried out through calculation of the following ratios:
Financial data of BreadTalk for last five years
Particulars 2012 2013 2014 2015 2016 2017
Amount in Singapore dollar
Net revenue $ 536.50
$
589.60 $ 624.10
$
614.90 $ 599.70
Total Assets
$
356.40 $ 468.25
$
538.80 $ 545.13
$
533.89 $ 557.19
Average total
assets $ 412.33
$
503.53 $ 541.97
$
539.51 $ 545.54
Shareholder's $ $ 103.98 $ $ 146.42 $ $ 160.47

equity 91.02 138.49 151.94
Account
Receivables
$
43.61 $ 49.14
$
54.49 $ 60.03
$
57.47 $ 57.54
Average
Accounts
Receivables $ 46.38
$
51.82 $ 57.26
$
58.75 $ 57.51
(Breadtalk Group: Annual report, 2017, Breadtalk Group: Annual report, 2015 and Breadtalk
Group: Annual report, 2013)
Financial Ratios of BreadTalk for last five years
Asset Efficiency ratios
Ratios Formula 2013 2014 2015 2016 2017
Asset Turnover in days
Average total
assets*365/Revenue 280.52 311.71 316.96 320.25 332.04
Average collection period in
days
Average accounts
receivable *365/ Net
Revenue 31.55 32.08 33.49 34.87 35.00

2013 2014 2015 2016 2017
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Asset Efficiency ratios
Days
Asset Turnover in days: It can be regarded as a financial ratio that depicts the efficiency of the
company to utilize its assets for generating sales. Thus, the high or low turnover of the company
is dependent on its profit margins. It is clearly depicted through the ratio calculated for the
company over the past five years from 2013-2017 that its asset turnover has improved
considerably. This depicts that the company capability to realize sales from the use of its assets is
increasing depicting that it is gaining higher profit margins from the sue of its asset resources.
Average Collection Period in days: The ratio can be used for assessing the number of days
taken by the company to collect its account receivables. It can be stated as the average number of
days that is required for gathering invoice amounts from the customers. The average collection
period of the company is increasing over the selected financial period from 2013-2017. This
cannot be stated good for the company as the time-period required for collection of invoices
form the customers is increasing that can negatively impacts its cash-flows in the future context.
Thus, the company is recommended to adopt adequate measures for reducing its collection
period to prove its efficiency of realizing revenue (Davies and Crawford, 2011).
Liquidity Analysis
Liquidity analysis helps in determine the ability of a company to meet its short and long-
term financial obligations. The ratio that can be sued for examining the efficiency of the
company to convert its asset to cash can be analyzed through the use of following ratios:

Financial data of BreadTalk for last five years
Particulars 2012 2013 2014 2015 2016 2017
Amount in Singapore dollar
Current Assets
$
148.38
$
168.77
$
179.32
$
211.52
$
230.10
Current
Liabilities
$
213.20
$
263.10
$
262.27
$
215.84
$
256.72
Inventory
$
10.00
$
10.62
$
9.80
$
9.81
$
9.72
Quick Assets
$
138.38
$
158.15
$
169.52
$
201.71
$
220.38
(Breadtalk Group: Annual report, 2017, Breadtalk Group: Annual report, 2015 and Breadtalk
Group: Annual report, 2013)
Financial Ratios of BreadTalk for last five years
Liquidity ratios
Ratios Formula 2013 2014 2015 2016 2017
Current Ratio
Current Assets/Current
Liabilities 0.70 0.64 0.68 0.98 0.90
Quick Ratio
Quick Assets/Current
Liabilities 0.65 0.60 0.65 0.93 0.86

2013 2014 2015 2016 2017
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
Liquidity Analysis
Current Ratio: It is a liquidity ratio that can be sued by a company for measuring the ability of
a company to meet its short and long-term obligations. The current ratio of the company has
improved from the year 2013-2017 which states that the company has adequate resources for
meeting its financial obligations as they become due from its liquid assets. However, the
company’s current ratio is less than 1 which is not healthy for its future good financial results.
Quick Ratio: This depicts the ability of the company to meet its current liabilities with the use
of its most liquid resources such as cash resources. The company’s quick ratio is less than 1 from
the year 2013-2017 which means that its ability to maintain adequate cash for meeting its current
liabilities is not adequate. The quick ratio of the company has depicted an increasing trend form
the year 2013-2017 indicating that its ability to meet its short-term financial obligations has
improved (Damodaran, 2011).
Section B
Part 1: Corporate Governance Policies & Its Impact on Brand Reputation
The company together with its subsidiaries known as Group is highly committed in
establishing effective set of corporate governance practices as per the Code of Corporate
Governance established in the year 2012. The code has provided the structure for ensuring the
protection of interest of the shareholders and creating long-term value for them. It has compiled
effectively with all the principle of corporate governance such as establishing an effective board

for conducting its operations, internal audit and remuneration committee and protection of
shareholder’s rights and responsibilities policies to ensure that all the business operations are
carried out in an ethical manner (Corporate Governance, 2016).
The development and implementation of good corporate governance practices has
enabled the company to achieve accountability and integrity in its overall business structure. This
has enabled it to achieve effective communication and engagement with its stakeholders and the
investment community centers. All the relevant financial and non-financial information is
disclosed to them through conducting investor meetings, tele-conferences and announcements
made on the company website. The maintenance of an effective corporate governance structure
has enabled the company in promoting its long-term growth and development by seeking fund
from the investors and support from its all other stakeholders. The positive goodwill maintained
by the company has largely facilitated it to gain customer attraction and thus improving its sale
and profitability position. The company vibrant growth has been largely accredited due to its
strong corporate governance framework that has enabled it to conduct its business a sustainable
and responsible way by addressing effectively all the social and environmental concerns. It has
received various awards and recognitions in these areas such as Most Transparent Company
Awards in the year 2005, Regional Brand Award in the year 2006, super-brand status and most
promising brand form the year 2002-2005. This indicates that its effective corporate governance
practice has largely helped it to achieve a positive impact on its brand and goodwill (Vibrant
Growth: BreadTalk Group Limited, 2017).
Part 2: Discussion of the Proposed Medium Term Financial Strategies for Selected
Company
The development of medium-term financial strategy will enable the company in
clarifying its short-term goals with consideration of its long-term objectives to be attained. The
medium-term financial strategy of the selected company is developed for promoting its
sustainable growth in the coming 5 years so that it can achieve dominant position within its
respective industry. As such, the financial strategy proposed for the company is to promote its
growth through making strategic investments. The company should establish its business units in
other parts of country making property investment that will drive its sales and thus improved
revenue realized worldwide. The strategy will support the sustainable financial growth of the

company by promoting sales in major countries across the world. The company should divest its
stake in the business units that are not turning to be profitable and emphasize on promoting
investment in establishing the new strategic units those results in improving its profitability. The
strategy proposed will prove to be largely beneficial for the company in achieving capital
appreciation and reducing the financial risk by diversifying its business operations across the
world ((Breadtalk Group: Annual report, 2017)
Conclusion
Ratio analysis shows that profitability performance was very strong in year 2017 as
compared to previous years but management has to work on the net profit percentage to provide
shareholders with maximum earnings. Asset management efficiency of management was good
but still needs to improve. Liquidity was improving but short term assets needs to higher than
short term liabilities. Corporate governance strategies of companies were excellent and it is
recommended to company to purpose the medium term financial strategies.

References
Breadtalk Group: Annual report. 2013. [Online]. Available at:
http://breadtalk.listedcompany.com/misc/ar2013.pdf [Accessed on: 29 September, 2018].
Breadtalk Group: Annual report. 2015. [Online]. Available at:
http://breadtalk.listedcompany.com/misc/ar2015.pdf [Accessed on: 29 September, 2018].
Breadtalk Group: Annual report. 2017. [Online]. Available at:
http://breadtalk.listedcompany.com/misc/ar2017.pdf [Accessed on: 29 September, 2018].
Company Overview of BreadTalk Group Limited. 2018. [Online]. Available
at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=7729564 [Acces
sed on: 29 September 2018].
Corporate Governance. 2016. BreadTalk Group Limited. [Online]. Available
at: http://breadtalk.listedcompany.com/misc/ar2016/index.html#34/z[Accessed on: 29 September
2018].
Damodaran, A, 2011. Applied corporate finance. John Wiley & sons.
Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.
Krantz, M. 2016. Fundamental Analysis for Dummies. John Wiley & Sons.
Lumby,S and Jones,C. 2007. Corporate finance theory & practice. Thomson.
Vibrant Growth: BreadTalk Group Limited. 2017. [Online]. Available
at: https://docplayer.net/19944086-Vibrant-growth-breadtalk-group-limited.html [Accessed on:
29 September 2018].