What is happening with BreadTalk Group? | ZUU Singapore Stock Focus

Resignation by BreadTalk’s group CEO

BreadTalk Group’s group CEO Henry Chu announced his resignation on Aug 15, citing personal and health reasons. The resignation will be effective from the end of the year.

BreadTalk’s founder and executive chairman George Quek will take over as interim CEO until another candidate is found.

This would be the shortest tenure among BreadTalk’s past group CEOs. Oh Eng Lock – whom Chu succeeded – served as group CEO from Jan 2011 to Jun 2017. Goh Tong Pak – Oh’s predecessor – served as group CEO from Jan 2008 to Jan 2011, and still remains as President of Special Projects under the Chairman’s office of BreadTalk.

Chu was appointed to the current position as group CEO in July 2017, taking over Oh Eng Lock as part of BreadTalk Group’s leadership renewal process.

Prior to that, Chu had worked as BreadTalk’s group managing director from Oct 2016 to Jun 2017, and as the CEO of the bakery division from May 2010 to April 2012. Between May 2012 and Sep 2016, Chu was a general manager at Maxim’s Caterers, a Hong Kong based Japanese restaurant chain in China.

As BreadTalk’s group MD, Chu had overseen the group’s global food and beverage (F&B) operations which included the Bakery, Food Atrium, and Restaurants core business segments, and all F&B-related investments. He also led the team responsible for rebranding RamenPlay to speciality ramen restaurant chain So Ramen, and opened the group’s first BreadTalk outlet in Yangon, Myanmar.

As group CEO, he was responsible for overseeing BreadTalk’s global operations in the areas of strategic planning, investments, business development and region expansion. The partnership with Wu Pao Chun Bakery and Song Fa Bak Kut Teh, and the expansion into London and Cambodia had happened during his tenure.

Chu was also involved in setting up BreadTalk’s 4orth division, which comprises of food concepts and both self-owned and franchised brands, including So Ramen.

Weak financial performance in 2Q2019

Chu’s resignation may have come at a bad time for the F&B group.

BreadTalk Group’s 2Q 2019 results were lacklustre, to say the least. Earnings fell 58% y-o-y to $1 million, even as revenue rose 9.8% y-o-y to $163.3 million.

The earnings drag resulted from losses at its bakery operations and higher than anticipated startup costs at its 4orth division. The bakery division incurred losses of $1.9 million due to the consolidation of its loss-making Thailand bakery business, and the persistently weak China operations.

The 4orth division’s losses widened further with the opening of new stores. Of its 5 brands – So Ramen, Song Fa, Tai Gai, Nayuki, and Wu Pao Chun – only So Ramen is profitable.

The group’s bright spots were its Food Atrium and Restaurants business segments.

RHB research analyst Juliana Cai thinks the group will need “a few more quarters to revive the stale bread”. “Despite a disappointing set of result, we maintain our Neutral call as we see potential for earnings to recover next year, led by the expected turnaround at its 4orth division and contributions from new Din Tai Fung restaurants.” RHB has a target price of 71 cents for BreadTalk Group.

Filling the leadership vacuum at Breadtalk Group

With Chu due to leave the company in 2020, it will be up to Quek to fill that leadership vacuum once again. Quek has told media that he plans to find the new group CEO from both within the organisation and outside of it.

Quek was known for making some unique hiring decisions in the past, particularly when he appointed Goh Tong Pak – a senior educator – for the group CEO position in 2008. Goh was 61 at that time, and had over 3 decades of professional and educational management experience, including holding senior positions at the Ministry of Education.

Goh was the Deputy Director for the Schools Appraisal Branch of MOE, where he did the system monitoring, evaluation & improvements of more than three hundred schools in Singapore. He was also well known for turning Xinmin Secondary School around, during his time there from 1992 to 1997.

Goh was hired for his experience in administering the schools monitoring system to enhance BreadTalk’s quality control procedures. Quek – also a Xinmin alumnus – said at the time that Goh’s unique background would bring new perspectives to the F&B group. ‘I need someone to think outside the box,’ Quek had said.

It remains to be seen if Quek might do the same this time around.

(By Gwyneth Yeo)

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