breadtalk ar'09
TRANSCRIPT
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Annual Report
~ 2009 ~
Vibrant Growth
BreadTalk Group Limited
171 Kampong Ampat#05-01 to 06 KA FoodLinkSingapore 368330Tel : (65) 6285 6116Fax: (65) 6285 1661Website: www.breadtalk.comEmail: [email protected]
Creative Rationale
It’s been said that good food ends with good talk, and it is this optimistic philosophy that saw us through a year of ups and downs. Despite changes in the global economy, we remained confi dent and continued to hone in on our expertise to create greater value for our customers and shareholders, thereby reinforcing our growth and success.
The BreadTalk Group Limited Annual Report 2009 creatively depicts the idea of “Vibrant Growth” through an illustrative approach that
evokes this optimism, and how good food will always provide comfort even in challenging times. As a leading player in Singapore’s food & beverage industry, BreadTalk’s growing portfolio of innovative products and establishments will continue to inspire and change the way people think about food. If good food ends with good talk, then we aspire to create a world where good food starts at BreadTalk.
Our FlosssophyAs a leading player in the food & beverage industry, BreadTalk’s growing portfolio of innovative products and establishments will continue to inspire and change the way people think about food.
Vi b r a n t G r o w t h
“ “
Vi b r a n t G r o t h
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 1
1 Corporate Profile / 2 Financial Highlights / 4 At A Glance / 6 Chairman’s Statement / 9 Brand Accolades
10 Board Of Directors / 12 Senior Management / 13 Geographical Reach / 14 Group Structure
16 Bakery / 20 Food Atrium / 24 Restaurant / 28 Corporate Information / 29 Corporate Governance
43 Financial Statements / 127 Statistics of Shareholdings / 129 Notice of Annual General Meeting / Proxy Form
Contents
Corporate Profi le
Founded in 2000, BreadTalk changed the face of the humble bun with our innovative fl avours and quirky names. Our endeavour to surprise and delight customers has earned us numerous awards and growing popularity with customers here and in international markets. In 2003, BreadTalk Group Limited was listed on the SGX.
In the short span of a decade, BreadTalk has left an indelible mark on Singaporeans as one of Asia’s most promising brands. We have extended
our footprint across 12 countries and territories with more than 300 bakery outlets (including franchises), 33 food courts and 8 restaurants, supported by a global staff strength in excess of 4,000.
BreadTalk holds fast to our shared vision of becoming an international, trend-setting, lifestyle brand. To this end, we have taken bold strides in introducing new food cultures with revolutionary changes and ingenious differentiation.
Vi b r a n t G r o w t h2
Financial Highlights
Profi t Before Tax ($ Million)
Revenue Mix By Business SegmentFY2009
Bakery Franchise Food Atrium Restaurant
44.8%
15.8%31.7%
7.7%
Revenue Mix By Geographical SegmentFY2009
Singapore Hong Kong People’s Republic of China Others
47.9%
34.7%
5.6%
11.8%
Revenue ($ Million)
250
200
150
100
50
0
246.5
212.2
156.6
123.6
20092008200720062005
95.3
6.5
2.7
11.212.0
20062005 2007 2008 2009
15.6
20
15
10
5
0
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 3
(1) The basic and diluted earnings per ordinary share for FY2009 are computed based on the weighted average number of ordinary shares (excluding treasury shares) in issue during the year 234,102,107 and 234,702,034 respectively.
(2) Net assets per share and net tangible assets per share as at end of fi nancial year 2009 are computed based on the share capital of 233,941,034 ordinary shares, representing shares issued and fully paid (excluding treasury shares) as at end of the year.
(3) Gearing is computed based on total borrowings divided by total equity.(4) Return on shareholders’ funds is the profi t after taxation and minority interests expressed as a percentage of the average shareholders’ funds.
BreadTalk Group Limited & its Subsidiaries – Group Financial Highlights
Financial Results ($'000) FY2005 FY2006 FY2007 FY2008 FY2009
Revenue 95,297 123,569 156,610 212,249 246,493
Operating profi t 3,582 7,394 12,150 13,227 16,253
Profi t before tax 2,666 6,466 11,228 12,001 15,615
Profi t attributable to equity holders of the Company
164 3,476 7,319 7,770 11,092
Financial Positions ($'000) FY2005 FY2006 FY2007 FY2008 FY2009
Property, plant and equipment 24,571 34,141 44,893 58,156 64,352
Investment in associate / joint ventures 2,644 2,877 1,333 422 284
Intangible assets 8,881 8,427 9,665 9,205 9,097
Other non-current assets 38 625 710 2,026 3,890
Current assets 28,492 36,833 59,089 77,348 94,462
Current liabilities (35,097) (47,488) (62,996) (82,866) (97,197)
Non-current liabilities (4,793) (6,417) (5,428) (8,158) (8,722)
Minority interests (1,938) (3,058) (3,170) (3,623) (5,504)
Shareholders' equity 22,798 25,940 44,096 52,510 60,662
Ratios FY2005 FY2006 FY2007 FY2008 FY2009
Earnings per share (cents) - Basic(1) 0.09 1.73 3.23 3.31 4.74
Earnings per share (cents) - Diluted(1) 0.09 1.73 3.23 3.31 4.73
Net asset per share (cents)(2) 11.35 12.91 18.77 22.35 25.93
Net tangible asset per share (cents)(2) 6.93 8.72 14.66 18.43 22.04
Gearing (times)(3) 0.39 0.46 0.25 0.30 0.24
Return on shareholders' fund (%)(4) 0.9 14.3 20.9 16.1 19.6
Vi b r a n t G r o w t h4
$246.5M Revenue+ 16.1% over FY2008
Our efforts to create and redefi ne consumer perceptions have struck a chord with consumers, enabling us to achieve double digit revenue growth for the ninth consecutive year.
$16.3MOperating Profi t+ 22.9% over FY2008
During the year, we seized opportunities offered by the economic downturn to drive costs down. By negotiating attractive rentals, tightening cost effi ciencies and productivity, as well as capitalising on our growth to reap economies of scale, we are able to improve on our profi t margins without compromising on quality.
Spreading our Food Prints
We have spread our wings to 12 countries and territories in Asia and the Middle East. In 2009, we awarded the Master Franchise rights to Pan Arabian Gourmet to operate BreadTalk across 12 Middle Eastern countries, including Turkey, Egypt and Lebanon. In China, we have increased our presence
to 28 cities, sharing the BreadTalk experience through 134 outlets across cities such as Urumuqi, Shi Jia Zhuang
and Wuhan.
ean
ce h ng
At a Glance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 5
Info Bites
BreadTalk’s signature Flosss have remained our best-seller to date! 1 Flosss is sold every 10 seconds around the world… Have you fl osssed today?
Signature Flosss – 32 million and counting!
The Group is proud to open the doors to our fi rst Carl’s Jr. outlet in Shanghai. Carl’s Jr. is an exciting premium burger brand that Shanghainese have eagerly embraced.
We see the potential of our latest Japanese ramen store RamenPlay, specialising in authentic Japanese ramen recipes through a joint parternership with Japanese F&B group, Sanpou Co Ltd.
Brand New Me
BreadTalk was a fi nalist at the international World Retail Awards 2009, Emerging Market Retailer of the Year category held in Barcelona, Spain. This brand oscar recognises retailers for their entrepreneurship and originality in retail development.
On the local front, Toast Box was the Overall Winner
in the Promising Brand Award category of the Singapore Prestige Brand Awards. This is a strong testament to Toast Box’s brand
potential, triumphing over 14 other local
brands to clinch this prestigious accolade.
Brand Accolades
19.6%Return on Shareholders’ Fund+ 3.5 Percentage Points over FY2008
Our bold strides to establish the BreadTalk Group as a global brand in both new and existing territories have fuelled our rapid growth throughout the region. Through franchises, acquisitions and joint ventures, our brands are strengthening their market penetration in key regional markets, particularly in China.
Vi b r a n t G r o w t h6
Chairman’s Statement
our business success in other countries. Today, more than half of BreadTalk’s revenue is generated from operations outside Singapore.
During the year, we have increased our focus on the China market. As an early mover into the China market, we have the advantage of being able to develop an extensive network and leverage on our partners to propel the business forward. As at 31 December 2009, there were 134 BreadTalk and Toast Box outlets in China, and this number is set to multiply substantially by 2012.
A breakthrough was made in the Middle East when we signed a Master Franchise Agreement in 2009 with Pan Arabian Gourmet of Bahrain, allowing them to sub-franchise BreadTalk outlets to 12 countries in the Middle East, including Syria, Egypt and Lebanon. This is a fi rst for BreadTalk and the decision was derived from our need to leverage on a partner with a strong network and established presence in the region, for more effective penetration into the market. Pan Arabian Gourmet has businesses in a diverse scope of industries in the Middle East, such as leisure, aviation, retail and real estate. Their wealth of experience will help anchor the BreadTalk brand in the region.
performance of the Group for FY 2009. Despite operating in a year marked by economic uncertainty, BreadTalk managed to turn in our best fi nancial results to date.
Group revenue rose by 16.1% from 2008 to S$246.5 million in 2009, supported by strong growth across all business segments. This is the ninth consecutive year that the Group has achieved double digit growth. Group operating profi t also surged by 22.9% to reach S$16.3 million. Net profi t attributable to shareholders leapt by 42.8% to S$11.1 million, on higher revenue base and improved profi t margins. Earnings per share on fully diluted basis soared 42.9% to 4.73 cents.
Cementing Our Global Presence
The BreadTalk Group today is a global entity operating in 12 countries and territories.
The strategic intent to expand across the globe was there from the beginning. We have always aimed to be more than a local company – we wanted to become a household name in different parts of the world, particularly in Asia. Having established a solid presence in Singapore and parts of Asia over the past few years, we are now in an accelerated phase of expansion where we can replicate
Dear Shareholders
A Year of Growth
I look back on 2009 satisfi ed with the Group’s commendable achievements against a backdrop of challenges that faced the Food & Beverage (F&B) industry. We not only survived but thrived.
Consumers remained cautious in their spending amidst the backdrop of a global economy on the slow path to recovery. However, the mass market F&B saw a healthy growth in consumer appetites, partly due to the shift from higher end dining in a general effort to maintain more modest lifestyles.
What remained strong was the demand for more creative F&B concepts as consumers sought different experiences to excite the palate. This is where BreadTalk commands a competitive edge. By deviating from the typical run-of-the-mill concepts in all three of our core divisions – Bakery, Food Atrium and Restaurant – we continually redefi ne perceptions of these traditional businesses in the F&B sector, hence differentiating ourselves from our competitors.
Our efforts to surprise and add a touch of the unexpected have struck a chord with consumers, evident in the strong
This is the ninth consecutive year that the Group has achieved double digit growth.
“ “
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 7
Franchises currently contribute 7.7% to the overall revenue and will be the preferred route of expansion as they allow for quick and effective inroads into new markets. 60 per cent of our bakery outlets are currently franchised and we intend to increase this proportion gradually to 70 per cent. Our sound franchising teams in charge of sourcing and training franchisees ensure that the BreadTalk brand philosophy, Standard Operating Procedures (SOPs) and system setup are properly translated on the ground.
On the food atrium front, 2009 saw the much anticipated opening of Food Opera at ION Orchard and Food Republic at 313 Somerset, both strategically located along Orchard Road, Singapore’s premier shopping belt.
The year ahead will see our food atrium business make signifi cant forays with the opening of the Integrated Resorts in Singapore. Outside of Singapore, we will continue to expand our operations and strengthen our presence, particularly in China.
Our restaurant business successfully rolled out the fi rst RamenPlay restaurant in 2009. In 2010, more RamenPlay outlets are expected especially in Singapore and China. We also successfully established the fi rst Carl’s Jr outlet in China in 2009. The roll out plan for Carl’s Jr restaurants will continue in earnest and pick up
momentum over the immediate few years. Preparation for the fi rst Din Tai Fung outlet in Thailand is underway and will open its door in 2010.
Optimising Cost and Operational Effi ciencies
Being able to capitalise on opportunities that present themselves is pivotal in any enterprise. Instead of lamenting over the economic downturn in the past year, we seized the opportunity to drive costs down. Taking advantage of modest rental rates, we negotiated for attractive rentals for some of our properties, contributing to medium-term cost savings.
Sound procurement practices are also key in managing costs. The Group’s procurement department negotiates food contracts both for our own operations and our franchisees. Such bulk orders give us the leverage to negotiate for and lock in the best prices without compromising on quality. During the year, we managed to negotiate favourable food contracts to curb against rising commodity prices. This has helped us improve profi t margins as well as enabled us to maintain our retail prices for the past two years.
An Enterprise Resource Planning (ERP) system was implemented during the year as part of our efforts to streamline processes and improve reporting. Integration between the supply chain and fi nancial modules allows for more effective monitoring of inventory purchases and consumption.
In 2010, the ERP system will be outfi tted with recipe costing, enabling it to monitor and assess production effi ciency of the central kitchen with regards to yields and consumption of raw materials. When fully operational, the system will allow for more effective management and control of food costs.
Dividend
The Board of Directors has proposed a fi rst and fi nal one-tier dividend of 1.0 cents per ordinary share, subject to shareholders’ approval at the AGM.
Looking Ahead
We are bracing ourselves for the next phase of expansion and are optimistic about the market outlook. We are making bold strides towards marking the presence of the brands under the BreadTalk Group as global brands in both new and existing territories.
Vi b r a n t G r o w t h8
On behalf of the Board, I would like to thank our directors, management, staff and business partners for their advice and efforts over the past year. Last, but not least, the Board is also grateful to our loyal shareholders and customers. We look forward to your continued support in the year ahead.
With this perspective, we are ever mindful of the multitude of risks in each market. We are acutely aware that familiarity with new markets is critical and our expansion plans are always carefully considered and mapped out. To sustain future growth, our emphasis to increase depth in key markets will strengthen existing brands. With this focused strategy, we expect to reap signifi cant economies of scale as the Group achieves greater scale in each of the brand’s offerings and stronger market penetration especially in our key Greater China markets among others. The senior management team is stepping up its involvement in these markets to provide greater strategic thrusts.
Within Singapore, opportunities for growth abound, especially in light of the highly anticipated Integrated Resorts (IRs) at Marina Bay Sands and Resorts World Sentosa.
Our investment in people will continue unabated as they represent the largest key reason behind the Group’s success. Our
Chairman’s Statement
Continued
George QuekChairman
staff will receive continuous training and development so that they are equipped to contribute towards BreadTalk’s high standards of service and quality. The construction of a new manufacturing facility cum training academy at Paya Lebar is underway to provide a fully integrated research, manufacturing, logistic, and training headquarter to cater to the Group’s expansionary needs for the next decade.
Our financial performance for FY2009 augurs well for our future as they indicate that we are on the right track. Moving forward, we expect to reap economies of scale as we expand our scale and reach. We will continue to seek companies and partners that enhance our core business through franchises, acquisitions and joint ventures, as we progress on our journey of growth.
In Appreciation
In recognition of the continuing support of our shareholders, and as an expression of our gratitude, the Company will issue one (1) bonus share for every fi ve (5) existing ordinary shares in the capital of the Company.
Our investment in people will continue unabated as they represent the largest key reason behind the Group’s success.
“ “
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 9
Brand Accolades
Toast BoxOverall Winner, Promising Brands CategorySingapore Prestige Brand Award 2009Association of Small and Medium Enterprises (ASME) and Lianhe Zaobao
BreadTalkFinalist, World Retail Awards 2009Emerging Market Retailer of the Year Category
Food RepublicOverall Winner, Promising Brands CategorySingapore Prestige Brand Award 2008Association of Small and Medium Enterprises (ASME) and Lianhe Zaobao
Davey AwardsSilver Winner Best Annual Report 2007International Academy of the Visual Arts
Most Transparent Company Award (SIAS)2004 and 2005 - Sesdaq Category Runner-Up2007 - Sesdaq Category Winner2008 - Catalist Category Runner-Up
George Quek Entrepreneur of the Year 2006Emerging Entrepreneur CategoryErnst & Young
Five Star Diamond Brand Award 2006 Five Star Diamond BrandShanghai, PRC
Regional Brand Award 2006Singapore Promising Brand AwardAssociation of Small and Medium Enterprises (ASME) and Lianhe Zaobao
Finalist in Franchisor of the Year Award 2005Franchising and Licensing Association of Singapore (FLA)
Most Promising Brand 2002 to 2005Most Popular Brand 2002, 2005Most Distinctive Brand 2003 to 2005Silver Award 2004Gold Award 2005Singapore Promising Brand Award - ASME and Lianhe Zaobao
Design for Asia Award 2004Hong Kong Design Centre
Superbrand StatusSingapore version 2002/2003Singapore Superbrands Council
Ranked Number 1Enterprise 50 Start Up Award 2002Accenture and The Business Times
George Quek
Entrepreneur of the Year 2002ASME and The Rotary Club
Vi b r a n t G r o w t h10
Board of Directors
L–R: Chen Kuo Hua Ong Kian Min George Quek Meng Tong Katherine Lee Lih Leng Chan Soo Sen
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 11
George Quek Meng TongChairman
George, founder of the Group, was appointed to the Board on 6 March 2003 and re-elected on 28 April 2008. Having led and grown the Company to its outfi t today, George continues to drive our strategic direction and development.
George started his food and beverage business in Taiwan in 1982, successfully growing it into a chain of 21 Southeast Asia food outlets within a decade. Returning to Singapore in 1992, he founded Topwin Singapore and subsequently Megabite China in 1996, establishing the food court businesses.
In 2000, he started the bakery business with BreadTalk Pte Ltd and eventually brought it to list on the SGX in 2003. To facilitate expansion plans, the bakery and food court businesses were strategically merged in 2005. A natural progression from BreadTalk’s bakery expertise, Toast Box was introduced in Dec 2005 as a local toast concept that combines nostalgia and familiar Southeast Asian flavours.
George holds a Doctorate in Business Administration (Honorary) from Wisconsin International University, USA. Amongst other awards, he won the Ernst & Young “Entrepreneur of the Year 2006” (Emerging Entrepreneur Category) and “Entrepreneur of the Year 2002” organised by the Association of Small and Medium Enterprises and The Rotary Club of Singapore.
Katherine Lee Lih LengDeputy Chairman
Katherine was appointed to the Board on 6 March 2003 and last re-elected on 30 April 2007. She oversees the Group’s research and development, as well as pioneers new ideas and concepts. Responsible for product development and enhancement of our various brands both locally and globally, Katherine also formulates product training and technical skill upgrade programmes to
ensure proper transfer of knowledge and skills to our franchisees in line with our local operations so as to sustain product quality. In addition, Katherine spearheads product costing, which is an integral part of strategic pricing. Katherine has more than 15 years of experience in the industry. She was previously the Finance Director of Topwin Singapore prior to which she was in charge of the human resource and operations of more than 20 food and beverage outlets in Taiwan.
Chen Kuo HuaNon-Executive Director
Kuo Hua was appointed to the Board on 30 April 2003 and last re-elected on 27 April 2006. He sits in the Audit Committee, Nominating Committee and Remuneration Committee of the Company and is also the President of the Group’s China operations.
Kuo Hua has more than 20 years of industry experience in providing consultation and strategic planning in various countries such as the PRC, Hong Kong, Taiwan and Singapore. He has held various senior positions in Topwin Singapore and Megabite China prior to joining the Group, whereby the food court businesses were merged into the Group.
Kuo Hua holds a degree in Drama and Mass Communication from the Chinese Culture University, Taipei, Taiwan.
Ong Kian MinIndependent Director
Kian Min was appointed to the Board on 30 April 2003 and last re-elected on 30 April 2007. He is the Lead Independent Director, Chairman of the Audit Committee and Nominating Committee, and member of the Remuneration Committee of the Company.
He was called to the Bar of England and Wales in 1988 and to the Singapore Bar the following year. In addition to
practising as a consultant with Drew & Napier LLC, a leading Singapore law fi rm, he is a senior adviser of Alpha Advisory Pte. Ltd. (a corporate advisory fi rm). He also serves as an independent director and chairs most of the audit committees of several other SGX-ST listed companies.
Kian Min was awarded the President’s Scholarship and Police Force Scholarship in 1979. He holds a Bachelor of Laws (Honours) external degree from the University of London and a Bachelor of Science (Honours) Degree from the Imperial College of Science and Technology in England. He has been a Member of Parliament of Singapore since January 1997.
Chan Soo SenIndependent Director
Soo Sen was appointed to the Board on 14 August 2006. He is the Chairman of the Remuneration Committee, as well as member of the Audit Committee and Nominating Committee of the Company.
Mr Chan is currently Executive Vice President of Singbridge International Singapore Pte Ltd, a company owned by Temasek Holdings to undertake major international projects. He also holds directorships for a few listed companies in Singapore.
Soo Sen is a Member of Parliament for Joo Chiat Constituency. He was previously a Minister of State and had served in several ministries including the Ministry of Community Development, Youth and Sports, Ministry of Education, and Ministry of Trade and Industry. Before entering the political scene, he was involved in the starting up of the China-Singapore Suzhou Industrial Park as its founding chief executive offi cer in 1994, laying the foundation and framework for infrastructure and utilities development for the industrial park. He holds a Master in Management Science from the University of Stanford, USA.
Vi b r a n t G r o w t h12
Senior Management
Catherine Lee Khia YeeChief Financial Offi cer
Catherine oversees Finance, Corporate Secretarial, Investment, Risk Management and Investor Relations.
A non-practicing Certifi ed Public Accountant by training with more than 18 years of fi nancial management experience in various industries, Catherine is an experienced banker and investment professional with a strong corporate fi nance and private equity background.
Prior to joining the Group in 2004, Catherine worked for Transpac Capital where she managed an investment portfolio of public-listed companies and private companies in the USA, Singapore, Malaysia, Indonesia and Australia. She was concurrently fi nancial controller and business development manager to companies from a spectrum of industries. She also sat on the board of several companies to assist in implementing good corporate governance practices and participated in strategic planning.
Catherine holds a Bachelor of Accountancy (Honours) degree from the Nanyang Technological University, Singapore.
Goh Tong PakChief Executive Offi cer
Tong Pak joined the Company on 1 January 2008. As Group CEO, Tong Pak oversees the Group’s global operations, focusing on strategic planning and business development. One of his main roles is to strategise on systems and talent development.
Prior to joining the Company, Tong Pak was a well known veteran in the education sector, having spent 37 years with the Ministry of Education (MOE). He started out as a teacher and was promoted through the ranks to the position of deputy director for MOE’s school appraisal branch. With his years of professional and management experience, Tong Pak helps to spearhead the Group’s expansion globally. His background and expertise in administrating monitoring systems stand him in good stead as he works towards improvement of the Group’s quality control procedures and enhancement of the business operation systems.
Tong Pak who holds an honours degree in arts from the former Nanyang University and a post graduate diploma in education from the National Institute of Education (NIE) also lectures part-time for the Master’s degree course in Education Administration at NIE, Singapore.
Frankie Quek Swee HengChief Operating Offi cer
Frankie assists the Chairman in overseeing the development and growth of the Group, focusing on the Group’s expansion into China. As CEO of BreadTalk China, Frankie has been based in Shanghai since January 2005 where he oversees the fast expanding bakery operations in Shanghai and Beijing. His expertise has led to the successful export of the BreadTalk brand name through a franchise model system run by the in-house franchise team. Currently, there are about 140 BreadTalk outlets in 30 cities in China.
Prior to joining the Group in 2001, Frankie held various positions in Topwin Singapore. He holds a Master of Business Administration (Honorary) from the American University of Hawaii, USA.
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 13
Geographical Reach
Bakery
PRC 134 / Indonesia 56 / Singapore 52 / Philippines 16 / Malaysia 12 Hong Kong 9 / India 6 / Kuwait 6 / Thailand 4 / Korea 3
Bahrain 2 / Oman 1
Food Atrium
PRC 22 / Singapore 5 / Hong Kong 5 / Malaysia 1
Restaurant
Singapore 6 / PRC 2
PRC
SINGAPORE
MALAYSIA
PHILIPPINESINDIA
THAILAND
HONG KONG
OMANBAHRAIN
KUWAIT
INDONESIA
Asia
Middle East
Number of Outlets Worldwide
Vi b r a n t G r o w t h14
Group Structure
As At 31 December 2009
100% 100% 100% 100%
100%
30%
Investment HoldingBakeryFood Court
RestaurantOthersDormant
60%70%
75%
100%
100%
100%
100%
90%
25%
Shanghai BreadTalk Co. Ltd
Ramen Play Pte Ltd
Shanghai BreadTalk Gourmet Co. Ltd
Beijing BreadTalk Restaurant Management
Co. Ltd
Beijing BreadTalk Co. Ltd
BreadTalk (Thailand)Company Limited
ML BreadWorks Sdn. Bhd
Hong KongBreadTalk Ltd
BreadTalkInternational Pte Ltd
BreadTalk Group Limited
Imagine Properties Pte Ltd BreadTalk Pte Ltd
Taster Food Pte Ltd
Charcoal Pte Ltd
Together Inc.Pte Ltd
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 15
Out Of The BoxPte Ltd
Chongquing Food Republic
Food & BeverageCo., Ltd
BreadTalk ConceptHong Kong Limited
100% 60%
30%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
30%
85%
100%
100%
100%
Topwin InvestmentHolding Pte Ltd Star Food Pte Ltd Shanghai Star Food F&B
Management Co., Ltd
Beijing Star Food F&B Management Co., Ltd
Apex Excellent Sdn Bhd
Beijing Da Shi Dai Food & Beverage Co., Ltd
Megabite Hong KongLimited
Food RepublicPte Ltd
Megabite (S) Pte Ltd
Megabite Eateries (M)Sdn Bhd
Food Republic(Shanghai) Co., Ltd
Shanghai Ramen PlayCo., Ltd
Shanghai Hong Bu RangFood & Beverage
Management Co. Ltd
MWA Pte Ltd
Food Art Pte Ltd
Vi b r a n t G r o w t h16
Contribution to FY09 revenue
119Owned Outlets as of
31 Dec 09
52.5 %
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 17
Bakery
Financial Performance
The Bakery business and franchisees maintained its anchor position in the Group, contributing 52.5% to overall revenue. It enjoyed another profi table year, registering sales of S$129.4 million (including S$19.0 million from franchise income), up 16.7% from 2008. Operating profi t escalated by 83.2% to S$7.9 million.
The healthy growth can be attributed to increase in transactions and the opening of new outlets. Expansion in Singapore and Hong Kong led the growth fi gures, offset by deconsolidation of bakery sales from J.Co Donuts following its disposal in January 2009.
In 2009, the Group opened 21 new outlets, bringing the current count to 119 outlets. Out of these, 67 are outside of Singapore. Our number of bakery franchises also grew by 41 from the previous year to 182 in 2009. Franchised outlets constituted approximately 60 per cent of total bakery outlets and the bulk of them are located in China and Indonesia.
Strategies and Initiatives
Innovative offerings are what set BreadTalk apart from our competitors. In 2009, we continued to build on these strengths. New products are launched at our bakeries twice yearly, keeping the refreshing and surprising essence that symbolises the BreadTalk brand. To extend our market reach, we launched a newly-created cafe called the Tea Loft at Ion Orchard. The Tea Loft is a sub-brand of Toast Box, in a creative twist to marry the tradition of English afternoon tea with local tastes.
Quality remains one of the key hallmarks of BreadTalk. Signifi cant
Operation Marginfor FY09
...we will intensify our store roll out plans by securing strategic choiced locations and work on operational models that are highly scalable.”
“
6.1 %
Vi b r a n t G r o w t h18
quality initiatives were undertaken during the year, including re-training and re-certifying all our bakers, conducting quality checks at our outlets, and re-calibrating our quality, service and cleanliness standards for all our outlets.
Targeting the discerning customer who enjoys her daily bread, Bread Society was a new bread boutique conceptualised with its range of premium dough creations. Its Euro-inspired recipes boasts of a team of Japanese Masterchefs behind more than 100 unique recipes.
The Icing Room – the fi rst-ever Design-It-Yourself patisserie was also expanded. Its delectable range of pastries and unique service inspiring customers to create their own cake décor will change the way customers express themselves.
Looking Ahead
The bakery industry is extremely competitive with low barriers to entry. For the Group to stay ahead of our competitors, we will intensify our store roll out plans by securing strategic choiced locations and work on operational models that are highly scalable. We are in the process of beefi ng up our real estate efforts as well as upgrading and expanding our manufacturing facilities in Singapore and China. Meanwhile, R&D efforts will also need to keep up with the business. In this regard, we hope to leverage on the various incentives under the new Productivity and Innovation Credit Scheme announced in the Singapore Budget 2010 where possible.
Bakery
Continued
The Icing Room – The fi rst Design-It-Yourself patisserie allows creative customers to personalise their own cake creations
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 19
Bread Society at ION Orchard boasts a premium Euro-inspired range of delectable dough creations
BreadTalk brings its innovative creations to 12 countries and territories worldwide
Bread Society at ION Orchard boasts a premium
Vi b r a n t G r o w t h20
Contribution to FY09 revenue
Owned Outlets as of31 Dec 09
33 31.7 %
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 21
Food Atrium
Financial Performance
During the year, the Food Atrium business recorded a 12.9% increase in sales revenue from S$69.2 million in 2008 to S$78.2 million in 2009, representing 31.7% of Group revenue. This increase can be attributed to contributions from new outlets regionally and improved food court operations in Hong Kong.
However, operating profi t fell by 20.0% to S$4.9 million due to underperformance of the food courts in China as well as start-
up losses from the new food court at 313@Somerset and temporary closure of our largest food court in Beijing for renovations. Meanwhile, we succeeded in turning around the Hong Kong operations which recorded creditable results.
As of end 2009, the Group operated fi ve food courts in Singapore and 28 outlets in the rest of Asia, of which 22 are located in China.
Strategies and Initiatives
Food Republic anchors the Group’s Food Atrium business, setting itself apart from other food courts with its distinctive fl avours, creative presentations and conducive dining ambience. Not merely a random gathering of hawkers under one roof, Food Republic brings a deliberate selection of local and street food to excite consumers in this traditionally functional business.
Our marketing teams scoured Singapore, Malaysia, Hong Kong and China to hand pick operators based on the authenticity of their recipes, traditional fl avours and track records.
The Group sees abundant business opportunity in its existing key markets in Singapore, Hong Kong and China.”
“
Operation Marginfor FY09
6.1 %
Vi b r a n t G r o w t h22
The most eagerly anticipated developments for the business were the opening of Food Opera at ION Orchard and Food Republic at 313 Somerset, entrenching our presence in the heart of Singapore’s premier shopping district.
During the year, we upgraded our largest food court in Beijing to inject more vibrant food offerings and interesting dining experience for our customers. Although the closure for upgrading had inadvertently affected the fi nancial performance, we view this as a necessary strategic move to continually keep the competitive edge of Food Republic.
Looking Ahead
The coming year will be heralded by the opening of the Integrated Resorts (IRs) in Singapore. The Food Republic outlet there will cement our reputation in this business as a premier player in the food atrium business. Once again
Food Atrium
Continued
largemoreintercustoupgrathe fi this acontiedge
Look
The cthe o(IRs)outlein thithe fo
Food Republic introduces the world’s 1st Ice-Mobile at 313@Somerset, Singapore, serving beverages to diners in a stylish and effi cient manner
Food Opera at ION Orchard, Singapore elevates hawker fare to premium status
packaged with a difference, Food Republic at the IR will wow both locals and tourists with its innovative fl avours, consistent quality and excellent customer service.
Outside of Singapore, we will continue to expand our operations and strengthen our presence, particularly in China. Recognizing the underperformance of the food court business in China in 2009, measures are being put in place to strengthen the local team and increase competitiveness. A thorough review on the retail portfolio and tenant offerings will be conducted to benchmark Food Republic against the other players in the competitive landscape.
The Group sees abundant business opportunity in its existing key markets in Singapore, Hong Kong and China. We will consolidate our resources and focus on growing our roots in these markets to reap the economies of scale of the business.
d
c n
measures are being put in place to strengthen the local team and increase competitiveness. A thorough review on the retail portfolio and tenant offerings will be conducted to benchmark Food Republic against the other players in the competitive landscape.
The Group sees abundant business opportunity in its existing key markets in Singapore, Hong Kong and China. We will consolidate our resources and focus on growing our roots in these markets to reap the economies of scale of the business.
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 23
Food Republic spreads its wings to Asia, bringing a new level of thematic dining to consumers
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 2
Vi b r a n t G r o w t h24
Contribution to FY09 revenue
Owned Outlet as of31 Dec 09
8 15.8 %
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 25
Financial Performance
The Restaurant business turned in a sterling performance for the year, registering S$39.0 million in sales, a 21.1% increase from the previous year’s S$32.2 million. This represented 15.8% of the Group’s total revenue. Operating profi t grew 2.1% to $3.1 million, driven by profi t growth from the Din Tai Fung restaurants, but were offset by start-up losses from RamenPlay and Carl’s Jr.
As of end 2009, the Group operated six Din Tai Fung restaurants in Singapore, one Carl’s Jr. restaurant and one RamenPlay restaurant in China.
Strategies and Initiatives
For many years, the restaurant business has been driven by the Din Tai Fung brand alone. We focused on growing this brand in Singapore where its franchise territory belongs from one outlet in 2003 to six in 2009. We successfully develop a chain store strategy for Din Tai Fung. With this commitment and track record, we won another territory in Thailand, opening up a whole new market for us to replicate our success there.
Not contented with just with one franchised restaurant brand, we secured another world class brand, Carl’s Jr. for the biggest potential
Operation Marginfor FY09
Restaurant
In the coming year, we will continue to explore opportunities to grow the Group’s market share in the restaurant business.”
“
World-renowned Din Tai Fung Taiwan received a Michelin-star accolade, ranking it one of the world’s best!
7.9 %
Vi b r a n t G r o w t h26
market – China. The attractiveness of Carl’s Jr. lies not just in its vast China market potential but also its scalability and strong franchise support from its American franchisor.
Lastly, our aspiration to create our own restaurant label was fulfi lled through a joint venture with an experienced Japanese F&B player. RamenPlay, a brand owned by the joint venture company was born by marrying authentic Japanese ramen recipes with our team’s strength in retail and brand management. The concept was fi rst launched in Shanghai and Singapore in 2009. While there is no territory restriction in developing RamenPlay, we choose to build our base in China and Singapore first before expanding to other markets.
Looking Ahead
In the coming year, we will continue to explore opportunities to grow the Group’s market share in the restaurant business. We will focus on the existing three brands to create critical mass. Our newly launched brands – Carl’s Jr. and RamenPlay – will be progressively rolled out in 2010.
Apart from opening more outlets in Singapore, we have set our sights on China as our next engine of growth. The Group aims to have at least 100 Carl’s Jr. restaurants in China by 2016, spanning Beijing, Shanghai, Tianjin and the provinces of Zhejiang and Jiangsu. Plans are also underway to launch our fi rst Din Tai Fung outlet in Thailand in 2010.
Restaurant
Continued
Din Tai Fung’s delicious variety of exquisite dian xin and dishes are true comfort food that will warm your soul
other
Lrea Jaa coauomlainrew ao
Din Tai Fung’s delicious vavarierietyty ofof exquisite dian xin and dishes are true comfort food that will warm
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 27
We launched the fi rst Carl’s Jr. franchise in Shanghai, exciting consumers with its range of premium burgers
RamenPlay – A joint venture that will see the proliferation of Japanese ramen culture in Asia
Our signature Sanpou Tonkatsu Ramen is a delicious soup brew of yummy noodles and
braised meats
Vi b r a n t G r o w t h28
Corporate Information
Board Of Directors
George Quek Meng TongChairman
Katherine Lee Lih LengDeputy Chairman
Chen Kuo HuaNon-Executive Director
Ong Kian MinIndependent Director
Chan Soo Sen Independent Director
Company Secretary
Tan Cher Liang
Registered Offi ce
171 Kampong Ampat#05-05 KA FoodLinkSingapore 368330Tel : (65) 6285 6116Fax: (65) 6285 1661
Share Registrar
Boardroom Corporate & Advisory Services Private Limited50 Raffl es Place#32-01 Singapore Land TowerSingapore 048623
Auditors
Ernst & Young LLPPublic Accountants and Certifi ed Public AccountantsOne Raffl es Quay North Tower Level 18Singapore 048583
Partner-in-charge : Philip Ling (appointed since fi nancial year ended 31 December 2006)
Principal Bankers
DBS Bank Limited
Malayan Banking Berhad
Overseas-Chinese Banking Corporation Limited
Standard Chartered Bank
United Overseas Bank Limited
Investor Relations
Spin Capital Asia22 Malacca Street#11-03 Royal Brothers BuildingSingapore 048980Tel: (65) 6 227 7790
Michael TanEmail : [email protected]
Dawn SooEmail : [email protected]
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 29
Corporate Governance
This report sets out BreadTalk Group Limited’s corporate governance processes and structures that were in place throughout the fi nancial year ended 31 December 2009, with specifi c reference made to the principles and guidelines of the Code and the Best Practice Guide issued by the Singapore Exchange Securities Trading Limited (the “SGX-ST”).
The Board of Directors (the “Board”) is pleased to confi rm that for the fi nancial year ended 31 December 2009, the Company has generally adhered to the framework as outlined in the Singapore Code of Corporate Governance 2005 (the “Code”) and where there are deviations from the Code, the reasons for which deviation are explained accordingly.
A. Board Matters
Board’s Conduct of its Affairs
Principle 1: Every company should be headed by an effective board to lead and control the company. The board is collectively responsible for the success of the company. The board works with management to achieve this and the management remains accountable to the board.
The primary function of the Board is to protect and enhance long-term value and returns for its Shareholders. Besides carrying out its statutory responsibilities, the Board’s roles include:
1. Providing entrepreneurial leadership, set strategic directions and overall corporate policies of the Group;
2. Supervising and monitoring the performance of the management team;3. Ensuring the adequacy of internal controls, risk management and periodic reviews of the
Group’s fi nancial performance and compliance;4. Setting the Company’s values and standards, ensuring that the necessary human resources are
in place;5. Approving annual budget, major investments and divestment proposals;6. Assuming responsibility for good corporate governance practices; and7. Approving corporate or fi nancial restructuring, share issuance, dividends and other returns to
Shareholders, Interested Person Transactions of a material nature and release of the Group’s results for the fi rst 3 quarters and full year results.
To assist in the execution of its responsibilities, the Board has established three (3) Board committees, namely the Audit Committee (“AC”), Nominating Committee (“NC”) and Remuneration Committee (“RC”), to which the Board has delegated decisions on certain Board matters to the specialised Board committees.
Guideline 1.1 of the Code:
The Board’s role
Guideline 1.3 of the Code:
Disclosure on delegation of
authority by Board to Board
Committees
The Board met four (4) times during the fi nancial year to discuss the key activities and business strategies of the Group. All Directors were furnished with relevant information beforehand in order to enable them to obtain further explanation where necessary, and be adequately briefed prior to the respective meetings. Minutes of the meetings are also available to the respective Board members. Ad-hoc and non-scheduled meetings are convened by Board members to deliberate on urgent and substantive matters.
The Company’s Articles of Association provides for telephone, videoconferencing, audio-visual or other electronic means of communication to facilitate meetings of the Board.
Guideline 1.4 of the Code:
Board to meet regularly
Vi b r a n t G r o w t h30
Details of Directors’ attendance at Board and Board Committee meetings held during the fi nancial year ended 31 December 2009 are summarised as follows:
Attendance At Board And Board Committee Meetings
Name of Director Board Audit Committee Nominating Committee Remuneration Committee
Number of Meetings Held 4 4 1 1
Attendance
George Quek Meng Tong 4 NA NA NA
Katherine Lee Lih Leng 3 NA NA NA
Chen Kuo Hua 3 3 1 1
Ong Kian Min 4 4 1 1
Chan Soo Sen 3 4 1 1
Matters that are specifi cally reserved to the Board for approval are:
(a) matters involving a confl ict of interest for a substantial Shareholder or Director;(b) material acquisitions and disposal of assets;(c) corporate or fi nancial restructuring;(d) share issuances, dividends and other returns to Shareholders;(e) matters which require Board approval as specifi ed in the Company’s Interested Person
Transactions policy; and(f) substantial expenditures exceeding a prescribed limit.
Guideline 1.5 of the Code:
Matters requiring Board
approval
All Directors are appointed to the Board by way of a formal letter of appointment indicating the amount of time commitment required and scope of duties.
The Company provides a comprehensive orientation programme to familiarise new Directors with the Company’s businesses and governance practices, as well as the Group’s history, core values, strategic direction and industry-specifi c knowledge so as to assimilate them into their new roles.
Directors also have the opportunity to visit the Group’s operational facilities and meet with the management team to gain a better understanding of the Group’s business operations. Each Director is provided with an annually updated manual containing Board and Company policies relating to the disclosure of interests in securities and confl icts of interests in transactions involving the Company, prohibition on dealings in the Company’s securities, as well as restrictions on the disclosure of price sensitive information.
Board members are encouraged to attend seminars and receive training to improve themselves in the discharge of their duties as Directors. In addition, the Company works closely with professionals to provide Directors with updates on risk management and key changes to relevant regulatory requirements and accounting standards.
Guideline 1.7 of the Code:
Formal appointment letter
Guidelines 1.6 and 1.8 of the
Code: Directors to receive
appropriate training
Corporate Governance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 31
Board Composition and Guidance
Principle 2: There should be a strong and independent element on the board, which is able to exercise objective judgement on corporate affairs independently, in particular, from management. No individual or small group of individuals should be allowed to dominate the board’s decision-making.
The Board comprises fi ve (5) members with more than one third majority of independent Directors: two (2) Independent Directors, one (1) Non-executive Director and two (2) Executive Directors. They are as follows:
Dr George Quek Meng Tong (Chairman)Ms Katherine Lee Lih Leng (Deputy Chairman)Mr Chen Kuo Hua (Non-executive Director)Mr Ong Kian Min (Lead Independent Director)Mr Chan Soo Sen (Independent Director)
The Board has two (2) Independent Directors whose independence is reviewed by the NC annually. The NC considers an “independent” Director as one who has no relationship with the Company, its related companies or its offi cers that could interfere or be reasonably perceived to interfere, with the exercise of the Director’s independent judgement of the conduct of the Group’s affairs, and is not a substantial Shareholder, or a partner (with 5% or more stake) or an executive offi cer, or a director of any for profi t business organisation to which the Company or any of its subsidiaries has made or received signifi cant payments (aggregated in excess of S$200,000 per year) in the current or immediate past fi nancial year. Moreover, the Chairman of the NC is not associated, directly or indirectly, with a substantial Shareholder to enhance an independent view to the best interests of the Company. As a result of the NC’s review for fi nancial year 2009, the NC is of the view that the Independent Directors are independent of the Company’s management as contemplated by the Code.
Guideline 2.1 of the Code:
Independence of Board
Guideline 2.2 of the Code:
Independent Directors
The Board, in view of the nature and scope of business operations, considers that though small, the present Board size and composition facilitate effi cient and effective decision-making with a strong independent element.
Guideline 2.3 of the Code:
Appropriate Board size
Each Director has been appointed on the strength of his calibre, experience, grasp of corporate strategy and potential to contribute to the Company and its businesses. As each of the Directors brings valuable insights from different perspectives vital to the strategic interests of the Company, the Board considers that the Directors possess the necessary competencies to provide Management with a diverse and objective perspective on issues so as to lead and govern the Company effectively.
Guideline 2.4 of the Code:
Board to comprise Directors
with core competencies
Once a year, a formal session is arranged for the Non-executive Director and Independent Directors to meet without the presence of Management or executive Directors to review any matters that must be raised privately. The session is chaired by the Lead Independent Director, Mr Ong Kian Min, who is also the chairman of the NC and AC.
Guidelines 2.5 and 2.6 of
the Code: Role of NEDs and
regular meetings of NEDs
Corporate Governance
Vi b r a n t G r o w t h32
Chairman and Chief Executive Offi cer
Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.
The Company adopts a dual leadership structure whereby the positions of chairman and chief executive offi cer are separated. There is a clear division of responsibilities between the Company’s executive Chairman and Group Chief Executive Offi cer, which provides a balance of power and authority.
As Chairman, Dr George Quek Meng Tong is responsible for ensuring Board effectiveness and conduct, as well as strategic development of the Group in addition to which, he shall assume duties and responsibilities as may be required from time to time. The Group Chief Executive Offi cer, Mr Goh Tong Pak, has overall responsibility of the Group’s operations, organisational effectiveness and implementation of Board policies and decisions.
Notwithstanding the above, the Independent Directors fulfi ll a pivotal role in corporate accountability. Their presence is particularly important as they provide unbiased and independent views, advice and judgement to take care of the interests, not only of the Company but also of Shareholders, employees, customers, suppliers and the many communities in which the Company conducts business. The Board had on 14 August 2006 appointed Mr Ong Kian Min as the Lead Independent Director to act as an additional channel available to Shareholders.
Guideline 3.1 of the Code:
Chairman and chief executive
offi cer should be separate
persons
Guideline 3.2 of the Code:
Chairman’s role
Guideline 3.3 of the Code:
Appointment of Lead
Independent Director
Board Membership and Board Performance
Principle 4: There should be a formal and transparent process for the appointment of new directors to the board. As a principle of good corporate governance, all directors should be required to submit themselves for re-nomination and re-election at regular intervals.
Principle 5: There should be a formal assessment of the effectiveness of the board as a whole and the contribution by each director to the effectiveness of the board.
The NC comprises the two (2) Independent Directors and the Non-executive Director who have been tasked with the authority and responsibility to devise an appropriate process to review and evaluate the performance of the Board as a whole as well as each individual Director on the Board. The chairman of the NC is an Independent Director, and is not a substantial Shareholder or directly associated with a substantial Shareholder.
The composition of the NC is as follows:
Mr Ong Kian Min – chairmanMr Chen Kuo Hua – memberMr Chan Soo Sen – member
Guideline 4.1 of the Code:
NC composition
Corporate Governance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 33
At least one-third (1/3) of the Board shall retire from offi ce by rotation and be subject to re-election at every Company annual general meeting, and the primary responsibilities of the NC are:
1. To make recommendations to the Board on the appointment of new Executive Directors and Non-executive Directors (“NED”), including making recommendations on the composition of the Board generally and the balance between Executive and Non-executive Directors appointed to the Board, as well as ensuring there are procedures in place for the selection and appointment of NEDs.
2. To regularly review the Board structure, size and composition and make recommendations to the Board with regards to any adjustments that are deemed necessary.
3. To be responsible for assessing nominees or candidates for appointment or election to the Board, determining whether or not such nominees have the requisite qualifi cations and whether or not they are independent.
4. To make plans for succession, in particular for the Chairman and key executives.
5. To determine, on an annual basis, if a Director is independent. If the NC determines that a Director, who has one or more of the relationships mentioned under the Code is in fact independent, the NC would disclose in full, the nature of the Director’s relationship and bear responsibility for explaining why he should be considered independent.
6. To recommend Directors who are retiring by rotation to be put forward for re-election.
7. To decide whether or not a Director is able to and has been adequately carrying out his duties as a Director of the Company, particularly when he has multiple board representations.
8. To be responsible for assessing the effectiveness of the Board as a whole and for assessing the contribution of each individual Director to the effectiveness of the Board and disclosing annually, this assessment process.
Guidelines 4.2 to 4.6 of the
Code: Duties of the NC
For the year under review, with the Board’s approval, the NC has decided on how the Board’s performance is to be evaluated as a whole and proposed objective performance criteria including Board composition, size and expertise, Board information and timeliness, as well as Board commitment and accountability. In assessing each individual Director’s contribution and performance to the effectiveness of the Board, the NC takes into consideration factors such as attendance, preparedness, participation and candour.
The NC has met once during the fi nancial year under review on 26 February 2009. Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-nomination as a Director. Details of Board members’ qualifi cations and experience including the year of initial appointment are presented in this Annual Report under the heading “Board of Directors”.
Guidelines 5.1 to 5.4 of the
Code: Assessing the Board’s
effectiveness
Corporate Governance
Vi b r a n t G r o w t h34
Access to Information
Principle 6: In order to fulfi ll their responsibilities, board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.
The Board receives complete and adequate information on an on-going basis. The Management provides the Chairman and Deputy Chairman with monthly management accounts and the rest of the Board members with quarterly management accounts. The agenda for Board meetings is prepared in consultation with the Chairman and it will be circulated at least one (1) week in advance to Board members of each meeting.
Furthermore, the Board has separate and independent access to the Company Secretary and senior executives, and there is no restriction of access to the senior Management team of the Company or Group at all times in carrying out its duties.
The Company Secretary attends all formal Board meetings to respond to the queries of any Director and ensures that Board procedures are followed and that all applicable rules and regulations are complied with.
Where decisions to be taken by the Board require specialised knowledge or expert opinion, the Board takes independent professional advice as and when necessary to enable it or the Independent Directors to discharge their responsibilities effectively.
Guidelines 6.1 and 6.2 of
the Code: Information to
the Board
Guideline 6.3 of the Code:
Access to and role of the
Company Secretary
Guideline 6.5 of the Code:
Access to independent
professional advice
B. Remuneration Matters
Procedures for Developing Remuneration Policies
Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fi xing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
The RC, established for the purpose of ensuring that there is a formal and transparent procedure for fi xing the remuneration packages of individual Directors, comprises the two (2) Independent Directors and the Non-executive Director. The chairman of the RC is an Independent Director.
The RC comprises the following:
Mr Chan Soo Sen – chairmanMr Chen Kuo Hua – memberMr Ong Kian Min – member
The overriding principle is that no Director should be involved in deciding his own remuneration. The RC has adopted a written term of reference that defi nes its membership, roles, functions and administration.
Guideline 7.1 of the Code:
RC to consist entirely
of NEDs and majority,
including RC chairman, must
be independent
Corporate Governance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 35
During the fi nancial year under review, the RC had held one (1) meeting. The primary responsibilities of the RC are as follows:
1. To review and recommend to the Board in consultation with the Chairman of the Board, a framework of remuneration and to determine the specifi c remuneration packages and terms of employment for each of the executive Directors and senior executives or divisional Directors (those reporting directly to the Chairman or Group Chief Executive Offi cer) and those employees related to the Executive Directors and controlling Shareholders of the Group.
2. To review and recommend to the Board in consultation with the Chairman of the Board, any long term incentive schemes which may be set up from time to time and to do all acts necessary in connection therewith.
3. To administer the BreadTalk Group Limited Employees’ Share Option Scheme (the “Scheme”) and shall have all the powers as set out in the Rules of the Scheme.
4. To administer the BreadTalk Group Limited Restricted Share Grant Plan (the “RSG Plan”) and shall have all the powers as set out in the Rules of the RSG Plan.
5. To carry out its duties in the manner that it deems expedient, subject always to any regulations or restrictions that may be imposed upon the RC by the Board from time to time.
6. As part of its review, the RC shall ensure that:
(i) all aspects of remuneration including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefi ts-in-kind should be covered.
(ii) the remuneration packages should be comparable within the industry and comparable companies and shall include a performance-related element coupled with appropriate and meaningful measures of assessing individual executive Directors’ and senior executives’ or divisional Directors’ performance.
(iii) the remuneration package of employees related to the Directors or controlling Shareholders are in line with the Group’s staff remuneration guidelines and commensurate with their respective job scopes and levels of responsibility.
Level and Mix of Remuneration
Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A signifi cant proportion of remuneration, especially that of executive directors, should be structured so as to link rewards to corporate and individual performance.
The Company advocates a performance based remuneration system for executive Directors and key executives that is fl exible and responsive to the market, comprising a base salary and other fi xed allowances, as well as variable performance bonus and participation in an employee share award or Scheme based on the Company’s performance and linking it to the individual’s performance.
Guideline 7.2 of the Code:
RC’s responsibilities
Guidelines 8.1 to 8.5 of the
Code: RC to recommend
remuneration of Directors
and review remuneration of
key executives
Corporate Governance
Vi b r a n t G r o w t h36
In determining such remuneration packages, the RC will ensure that they are adequate by considering, in consultation with the Chairman or Group Chief Executive Offi cer amongst other things, the respective individuals’ responsibilities, skills, expertise and contribution to the Company’s performance, and whether they are competitive and suffi cient to ensure that the Company is able to attract and retain the best available executive talent, meanwhile keeping tabs that they are not excessive.
At an Extraordinary General Meeting held on 28 April 2008, the shareholders of the Company had approved the adoption of the RSG Plan. Under the RSG Plan, the aggregate number of shares to be issued shall not exceed fi fteen per cent (15%) of the total issued share capital excluding treasury shares of the Company and will be in force for a maximum period of 10 years commencing from 28 April 2008.
The award of shares under the RSG Plan can be either performance-based awards or time-based awards. For performance based awards, entitled participant will be allotted fully paid shares upon satisfactory achievement of pre-determined performance targets. As for time-based awards, entitled participant will be allotted fully paid shares upon satisfactory completion of time-based service conditions that is, after the participant has served the Company or as the case may be, the relevant associated company, for a specifi ed duration, as may be determined by the RC.
The adoption of the RSG Plan is consistent with the continuing efforts of the existing Scheme in rewarding, retaining and motivating employees to achieve superior performance standards and afford the Company greater fl exibility to align the interests of employees with those of the shareholders. To date, the Company has not issued any shares under its RSG Plan.
The RC has adopted a framework which consists of a base fee to remunerate non-executive Directors based on their appointments and roles in the respective Committees, as well as the fees paid in comparable companies. Fees for the non-executive Directors will be tabled at the forthcoming Annual General Meeting to be held on 27 April 2010 (the “AGM”) for Shareholders’ approval.
The Company has entered into a service agreement with the Chairman, Dr George Quek Meng Tong, for an initial period of three (3) years commencing 2003 and renewable thereafter unless otherwise terminated by either party by giving six (6) months’ notice in writing. The RC has reviewed the existing terms and conditions of all service agreements and recommended to the Board any changes to such terms and conditions at the expiry of such service agreements.
All recommendations by the RC are submitted for endorsement by the entire Board. The Company confi rms that there is no onerous removal clause in any of the service contracts.
Guideline 8.6 of the Code:
Notice periods in service
contracts to be six (6) months
or less
Disclosure on Remuneration
Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedures for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.
A breakdown showing the level and mix of each Director’s and key Executives remuneration for the year ended 31 December 2009 is set out below:
Guidelines 9.1 to 9.3 of
the Code: Directors’, key
executives’ and related
employees’
remuneration
Corporate Governance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 37
Remuneration Of Directors And Key Executives
Name of Director Salary(1)
Bonus /Profi t-Sharing
Share-basedCompensation(3)
Benefi ts-In-Kind Directors’ Fees(2) Total
S$600,000 to below S$700,000
% % % % % %
George Quek Meng Tong 47 44 2 7 0 100
S$500,000 to below S$600,000
Katherine Lee Lih Leng 55 43 2 0 0 100
S$400,000 to below S$500,000
Chen Kuo Hua 90 10 0 0 0 100
Below S$100,000
Ong Kian Min 0 0 0 0 100 100
Chan Soo Sen 0 0 0 0 100 100
Name of Key Executives (who are not Directors) Designation Salary(1)
Bonus /Profi t-Sharing
Share-basedCompensation(3)
Benefi ts-In-Kind Total
S$500,000 to below S$600,000
% % % % %
Goh Tong Pak Chief Executive Offi cer
51 45 4 0 100
S$250,000 to below S$500,000
Frankie Quek Swee Heng(4)
Chief Operating Offi cer
64 34 2 0 100
Catherine Lee Khia Yee Chief Financial Offi cer
62 35 3 0 100
Chen Poh On Chief Executive Offi cer, Megabite China
94 6 0 0 100
Jenson Ong Chin Hock Managing Director, Megabite Hong Kong
89 8 0 3 100
Notes:(1) Salary is inclusive of fi xed allowance and CPF contribution.(2) Directors’ fees are only payable after approval by Shareholders at the AGM.(3) Share-based compensation is based on fair value of the restricted shares granted conditionally under the RSG
Plan in 2009 which is estimated based on the market price of the shares on grant date less the present value of expected future dividends during the vesting period.
(4) Frankie Quek is the brother of Dr George Quek.
No other employee whose remuneration exceeded S$150,000 during the year is the immediate family of any of the members of the Board.
Corporate Governance
Vi b r a n t G r o w t h38
C. Accountability And Audit
Accountability
Principle 10: The board is accountable to the shareholders while the management is accountable to the board. The board should present a balanced and understandable assessment of the company’s performance, position and prospects.
For all announcements (including fi nancial performance reporting) made to the public via SGXNET and the annual report to Shareholders, as required by the SGX-ST, the Board has a responsibility to present a fair assessment of the Group’s position, including the prospects of the Group.
To enable effective monitoring and decision-making by the Board, Management provides the Board with a continual fl ow of relevant information on a timely basis as well as quarterly management accounts of the Group. Particularly, prior to the release of quarterly and full year results to the public, Management will present the Group’s fi nancial performance together with explanatory details of its operations to the AC, which will review and recommend the same to the Board for approval and authorisation for the release of the results.
Guideline 10.1 of the Code:
Board’s responsibility to the
public
Guideline 10.2 of the Code:
Management’s responsibility
to the Board
Audit Committee
Principle 11: The board should establish an audit committee with written terms of reference, which clearly set out its authority and duties.
The role of the AC is to assist the Board in the execution of its corporate governance responsibilities within the established Board’s references and requirements. The fi nancial statements, accounting policies and system of internal accounting controls are responsibilities that fall under the ambit of the AC. The AC has its set of written terms of reference defi ning its scope of authority and further details of its major functions are set out below and also in the Report of the Directors.
The AC comprises three (3) members who are all Non-executive Directors, two (2) of whom are also independent. The chairman of the AC is an Independent Director.
The members of the AC are:
Mr Ong Kian Min – chairmanMr Chen Kuo Hua – memberMr Chan Soo Sen – member
The members of the AC collectively have expertise or experience in fi nancial management, and are qualifi ed to discharge the AC’s responsibilities.
Guidelines 11.1, 11.2 and
11.8 of the Code: Board to
establish AC and composition
of AC
In performing its functions, the AC confi rms that it has explicit authority to investigate any matter within its terms of reference, full access to and co-operation from the Management, and has been given full discretion to invite any Director or executive offi cer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly.
Guideline 11.3 of the Code:
AC’s authority
Corporate Governance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 39
The main functions of the AC are as follows:
1. Review the audit plan of the Company’s external auditors and adequacy of the system of internal accounting control;
2. Discuss and review external auditors’ reports;3. Review signifi cant fi nancial reporting issues and judgements so as to ensure the integrity
of the fi nancial statements and any formal announcements relating to the Company’s or Group’s fi nancial performance;
4. Review and recommend the nomination of the external auditors for appointment or re-appointment;
5. Review the Interested Person Transactions; and6. Review the scope and result of the internal audit procedures.
The AC held four (4) meetings during the fi nancial year under review. It has reviewed the fi nancial statements of the Group for the purpose of the fi rst 3 quarters and annual results release before they were submitted to the Board for approval. It has also met with the Company’s internal and external auditors to review their audit plans and results, and has separate and independent access to the auditors. Upon reviewing the non-audit services provided by the external auditors which comprise tax services, the AC is satisfi ed that the independence of the external auditors is not impaired.
Where there is any suspected fraud or irregularity, or failure of internal controls, or infringement of any Singapore law, rule or regulation which has a material impact on the Company’s operating results, the AC will commission and review the fi ndings of internal investigations into the matters. Endorsed by the AC, the Company has in place a whistle-blowing framework which provides an avenue for staff of the Company to access the AC chairman to raise concerns about improprieties and independent investigation of such matters by the AC. Contact details of AC have been made available to all staff.
Guideline 11.4 of the Code:
Duties of AC
Guidelines 11.5 and 11.6
of the Code: Meeting with
auditors and review of their
independence
Guideline 11.7 of the Code:
Whistle-blowing arrangements
Internal Control
Principle 12: The board should ensure that the management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.
The Internal Auditors carried out internal audit on the system of internal controls and report the fi ndings to the AC. The Group’s External Auditors, Ernst & Young LLP have also carried out, in the course of their statutory audit, a review of the Group’s material internal controls. Material non-compliance and internal control weaknesses and recommendations for improvements noted during their audit are reported to the AC. The AC has reviewed the effectiveness of the actions taken by the management on the recommendations made by the Internal and External Auditors in this respect.
For the fi nancial year ended 31 December 2009, the Board believes that in the absence of any evidence to the contrary, the system of internal controls maintained by the Group’s management that was in place throughout the fi nancial period up to the date of this report, provides reasonable, but not absolute assurance against material fi nancial misstatements or loss.
The Board notes that no system of internal control could provide absolute assurance against the occurrence of material errors, poor judgement in decision-making, human errors, losses, fraud or other irregularities.
Guideline 12.1 of the Code:
AC to review adequacy of
the fi nancial, operational and
compliance controls and risk
management policies.
Guideline 12.2 of the Code:
AC to comment on the
adequacy of internal controls
Corporate Governance
Vi b r a n t G r o w t h40
Internal Audit
Principle 13: The company should establish an internal audit function that is independent of the activities it audits.
The Group outsourced its internal audit function to Stone Forest Consulting Pte Ltd since 2006. The Internal Auditor adopted the Standards for Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The Internal Auditors report directly to the Chairman of the AC. The AC reviews the scope of internal audit function, internal audit fi ndings and the internal audit plan.
Guidelines 13.1 to 13.4 of
the Code: IA to report to AC
chairman
Communication with Shareholders
Principle 14: A company should engage in regular, effective and fair communication with its shareholders.
Principle 15: A company should encourage greater shareholder participation at annual general meetings and allow its shareholders the opportunity to communicate their views on various matters affecting the company.
The Board has adopted a policy of openness and transparency in the conduct of the Company’s affairs while preserving the commercial interests of the Company. Financial results and other price sensitive information are disseminated to Shareholders via SGXNET, press releases, the Company’s website, and through media and analyst briefi ngs.
The Board strives to ensure that all material information is disclosed to the shareholders on an adequate and timely basis. The Board informs and communicates with shareholders through annual reports, announcement released through SGXNET, press releases, advertisements of notice of general meetings in local newspapers.
Notices of general meetings are despatched to shareholders, together with the annual report or circulars within the time notice period as prescribed by the regulations. At general meetings, shareholders are given opportunities to voice their views and direct their questions to directors or management regarding the Company. The chairman of the AC, NC and/or RC are present and available to address questions at general meetings. The External Auditors are also present to assist the Board.
In preparation for the annual general meeting, shareholders are encouraged to refer to SGX’s investor guides, namely ‘An Investor’s Guide To Reading Annual Reports’ and ‘An Investor’s Guide To Preparing For Annual General Meetings’. The guides, in both English and Chinese versions are available at the SGX website via this link : http://www.sgx.com/wps/portal/marketplace/mp-en/investor_centre/investor_guide
The Company has in place an investor relations programme to keep investors informed of material developments in the Company’s business and affairs beyond that which is prescribed, but without prejudicing the business interests of the Company.
The Company’s Articles of Association do not restrict the number of proxy a shareholder can appoint to attend and vote on his/her behalf at all general meetings. There are separate resolutions at the general meetings for each distinct issue. The Board and Management are on hand at general meetings to address questions by shareholders.
Guidelines 14.1 to 14.2 of
the Code: Regular, effective
and fair communications with
shareholders
Guideline 15.3 of the Code:
Chairman and external
auditors present at general
meetings
Guideline 15.1-15.2
and 15.4 of the Code:
Shareholders should be
allowed to vote in absentia,
avoid bundling of resolutions
and limit on proxy.
Corporate Governance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 41
Minutes of general meetings are prepared and made available to shareholders upon their requests by the Company Secretary.
Guideline 15.5 of the Code:
Minutes of general meetings
Dealing in Securities
The Company has adopted and implemented an Insider Trading (Prevention) Policy (the “Policy”). The Policy is to ensure that the Company’s Directors, offi cers, employee of the Group as well as consultants or contractors to the Group (collectively the “Covered Persons”) and immediate family members of Covered Persons are aware of their legal obligations in relation to the dealing of securities in the Company. Covered Persons who are in possession of unpublished material price sensitive information and use such information for their own material gain in relation to those securities is an offence. The Company, while having provided the window periods for dealing in the Company’s securities, has its own internal compliance code in providing guidance to its offi cers with regards to dealing in the Company’s securities including reminders that the law on insider trading is applicable at all the times.
The Company has on 28 May 2009 formed a Disciplinary Committee (“DC”) to conduct inquiry on possible breach of the Policy. The role of the DC is to report its fi nding to the Board and make recommendation as to the penalty if applicable. The Board will decide based on the DC’s recommendation.
The DC comprises three (3) members, a majority of whom are Independent Directors. The chairman of the DC is an Independent Director.
The DC consists of:
Mr Ong Kian Min – chairmanDr George Quek Meng Tong – memberMr Chan Soo Sen – member
Interested Person Transactions
When a potential confl ict arises, the Directors concerned do not participate in discussions and refrains from exercising any infl uence over other members of the Board.
The AC has reviewed the Interested Person Transactions (“IPT”) entered into during the fi nancial year by the Group and the aggregate value of IPT entered during the fi nancial year ended 31 December 2009 is as follows:
Corporate Governance
Vi b r a n t G r o w t h42
Name of Interested PersonAggregate value (S$’000) of all IPTs during the fi nancial year under review
Aggregate value of all IPTs conducted during the fi nancial year under review under shareholders’ mandate pursuant to Rule 920 (excluding transactions
less than S$100,000)
Sky One Art Investment Pte Ltd- Purchase of Furniture and
Fittings 71
Not applicable - the Company does not have a shareholders’ mandate under
Rule 920
Material Contracts
Except as disclosed in Interested Person Transactions, there is no material contract or loan entered between the Company and any of its subsidiaries involving interests of any Director or controlling shareholder during the fi nancial year ended 31 December 2009.
Risk Management
The Group regularly reviews and improves its business and operational activities to identify areas of signifi cant business risks as well as taking appropriate measures to control and mitigate these risks. The Group reviews all signifi cant control policies and procedures and highlights all signifi cant matters to the AC and the Board. The fi nancial risk management objectives and policies are outlined in the fi nancial statements. Use of Proceeds from Share Placement
The Company refers to the net proceeds raised in April 2007 from the share placement of 34,000,000 new ordinary shares in the capital of the Company at an issue price of S$0.36 per share.
As at 31 December 2009, the Company has utilised the net proceeds as follows:
Intended Use Amount allocatedS$’000
Amount utilisedS$’000
BalanceS$’000
(a) Food and beverage outlet expansion 5,000 4,600 400(b) New market development 2,000 3,871 (1,871)(c) Repayment of bank loans 500 500 –(d) Working capital 1,290 1,198 92(e) Upgrading of factory 3,000 500 2,500
Total 11,790 10,669 1,121
Corporate Governance
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 43
Financial Statements
44 Directors’ Report / 49 Statement By Directors / 50 Independent Auditors’ Report
51 Consolidated Statement of Comprehensive Income / 52 Balance Sheets
54 Statements of Changes in Equity / 56 Consolidated Cash Flow Statement
59 Notes To The Financial Statements / 127 Statistics of Shareholdings
129 Notice of Annual General Meeting / Proxy Form
Vi b r a n t G r o w t h44
The directors are pleased to present their report to the members together with the audited fi nancial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the fi nancial year ended 31 December 2009.
Directors
The directors of the Company in offi ce at the date of this report are:
George Quek Meng Tong (Chairman)Katherine Lee Lih Leng (Deputy Chairman)Chen Kuo Hua (Non-Executive Director)Ong Kian Min (Independent Director)Chan Soo Sen (Independent Director)
Arrangements to enable directors to acquire shares and debentures
Except as disclosed in this report, neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose objects are, or one of whose object is, to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares or debentures of the Company or any other body corporate.
Directors’ interests in shares and debentures
The following directors, who held offi ce at the end of the fi nancial year, had, according to the register of directors’ shareholdings required to be kept under section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company as stated below:
Direct interest Deemed interest
Name of director
As at1 January
2009
As at31 December
2009
As at21 January
2010
As at1 January
2009
As at31 December
2009
As at21 January
2010
The Company(Ordinary shares)
George Quek Meng Tong 79,590,384 79,590,384 79,590,384 43,550,850 43,550,850 43,550,850Katherine Lee Lih Leng 43,550,850 43,550,850 43,550,850 79,590,384 79,590,384 79,590,384Chen Kuo Hua 11,443,100 9,689,100 9,539,100 – – – Ong Kian Min 100,000 100,000 100,000 – – –
(Conditional award of restricted shares)
George Quek Meng Tong – 82,000 82,000 – 55,000 55,000Katherine Lee Lih Leng – 55,000 55,000 – 82,000 82,000Chen Kuo Hua – 83,000 83,000 – – –
Directors’ Report
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 45
Directors’ Report
Directors’ interests in shares and debentures (cont’d)
By virtue of Section 7 of the Companies Act, Cap. 50, George Quek Meng Tong and Katherine Lee Lih Leng are deemed to be interested in the shares held by the Company in its subsidiaries.
Except as disclosed in this report, no other director who held offi ce at the end of the fi nancial year had interest in shares or debentures of the Company, or of related corporations, either at the beginning or the end of the fi nancial year or on 21 January 2010.
Directors’ contractual benefi ts
Except as disclosed in the fi nancial statements, since the end of previous fi nancial year, no director of the Company has received or become entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with the director, or with a fi rm of which the director is a member, or with a company in which the director has a substantial fi nancial interest.
Share Option and Share Plans
The Company has a Share Option Scheme and a Restricted Share Grant Plan which are administered by the Remuneration Committee comprising three Directors namely Messrs Chan Soo Sen (Chairman), Ong Kian Min (Member) and Chen Kuo Hua (Member). Details of the Share Option Scheme and the Restricted Share Grant Plan are as follows:
(a) The BreadTalk Group Limited Employees’ Share Option Scheme
The BreadTalk Group Limited Employees’ Share Option Scheme (“ESOS”) was approved at an Extraordinary General Meeting held on 30 April 2003. The following persons are eligible to participate in the ESOS at the absolute discretion of the Remuneration Committee:
(i) Employees and Directors
Employees, executive directors and non-executive directors of the Group who are not on probation and have attained the age of 21 years on or before the Offering Date.
(ii) Controlling Shareholders and their Associates
Controlling Shareholders or their Associates whose participation and actual number of shares issued to them must be approved by independent shareholders in general meeting.
Size of ESOS
The total number of new shares over which options may be granted pursuant to the ESOS shall not exceed fi fteen per cent (15%) of the issued share capital of the Company on the date preceding the grant of an option.
The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the ESOS shall not exceed twenty fi ve per cent (25%) of the Shares available under the ESOS. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the ESOS.
Vi b r a n t G r o w t h46
Share Option and Share Plans (cont’d)
(a) The BreadTalk Group Limited Employees’ Share Option Scheme (cont’d)
Grant of ESOS
Options may be granted from time to time during the year when the ESOS is in force, except that options shall be granted on or after the second market day on which an announcement of any matter involving unpublished price sensitive information is released.
Acceptance of ESOS
The grant of an option shall be accepted not more than 30 days from the offering date of that option and accompanied by payment to the Company of a nominal consideration of $1 or such other amount as required by the Remuneration Committee.
Since the commencement of the ESOS up to the end of the fi nancial year, there were no options granted to any person. Any options granted under the ESOS do not entitle the holders of the options, by virtue of such holdings, to any right to participate in any share issue of any other company.
(b) The BreadTalk Restricted Share Grant Plan
The BreadTalk Restricted Share Grant Plan (“RSG Plan”) was approved at an Extraordinary General Meeting held on 28 April 2008.
The RSG Plan is centred on the accomplishment of specifi c pre-determined performance objectives and service conditions, which is the prerequisite for the contingent award of fully paid Shares (“Award”). The reward structure allows the Company to target specifi c performance objectives and incentivise the Participants to put in their best efforts to achieve these targets.
The following persons shall be eligible to participate in the RSG Plan subject to the absolute discretion of the Remuneration Committee:
(i) Employees
Employees who are confi rmed in their employment with the Company or any subsidiary, or employees of associated companies who hold such rank as may be designated by the Committee from time to time and who, in the opinion of the Committee, have contributed or will contribute to the success of the Group; and
(ii) Directors
Executive and non-executive directors of the Company and its subsidiaries, provided always that any of the aforesaid persons:
– have attained the age of twenty-one (21) years on or before the Award Date; and – not undischarged bankrupts.
Directors’ Report
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 47
Share Option and Share Plans (cont’d)
(b) The BreadTalk Restricted Share Grant Plan (cont’d)
Controlling Shareholders and their Associates within the above categories are eligible to participate in the RSG Plan. Participation in the RSG Plan by Controlling Shareholders or their Associates must be approved by the independent shareholders. A separate resolution shall be passed for each such Participant and to approve the number of Shares to be awarded to the Participant and the terms of such Award.
There shall be no restriction on the eligibility of any Participant to participate in any other share option or share incentive schemes implemented or to be implemented by the Company or another company within the Group.
Size of RSG Plan
The aggregate number of Shares available to eligible Controlling Shareholders and their Associates under the RSG Plan shall not exceed twenty fi ve per cent (25%) of the Shares available under the RSG Plan. In addition, the number of Shares available to each Controlling Shareholder or his Associate shall not exceed ten per cent (10%) of the Shares available under the RSG Plan.
The aggregate number of Shares to be awarded pursuant to the RSG Plan when added to the number of Shares issued and issuable in respect of such other Shares issued and/or issuable under such other share-based incentive schemes of the Company, including but not limited to the ESOS, shall not exceed fi fteen per cent (15%) of the total issued share capital excluding treasury shares of the Company on the day preceding the relevant Award Date.
Grant of RSG Plan
The grant of Awards under the RSG Plan may be made from time to time during the year when the RSG Plan is in force.
While Awards may be granted at any time in the year, it is anticipated that Awards under the RSG Plan would be made once a year, after the Company’s annual general meeting. It will be administered by the Remuneration Committee.
Acceptance of RSG Plan
On 15 May 2009, 899,000 restricted shares were granted conditionally under the RSG Plan. The fi nal number of restricted shares awarded will depend on the achievement of pre-determined targets over a one year period. On meeting the performance conditions for the performance period, one-third of the restricted shares will vest. The balance will vest equally over the subsequent two years with fulfi lment of service requirements.
The details of the shares awarded under the RSG Plan since its commencement are as follows:
Date of grant At date of grant Vested CancelledBalance at
31 December 2009
15 May 2009 899,000 – – 899,000
Directors’ Report
Vi b r a n t G r o w t h48
Share Option and Share Plans (cont’d)
(b) The BreadTalk Restricted Share Grant Plan (cont’d)
The details of restricted shares granted to participants (who are Directors of the Company, Controlling Shareholders and their Associates) of the Company are as follows:
Name of Participant
Conditional awards granted during
the fi nancial year under review
Awards released during the fi nancial year under review
Aggregate awards not released at end of the fi nancial year
under review
George Quek Meng Tong * 82,000 – 82,000Katherine Lee Lih Leng * 55,000 – 55,000Chen Kuo Hua 83,000 – 83,000Frankie Quek Swee Heng** 55,000 – 55,000
* Director and controlling shareholder ** Associate of George Quek Meng Tong
Audit Committee
The Audit Committee performed the functions specifi ed in the Companies Act. The functions performed are detailed in the Report on Corporate Governance.
Auditors
Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.
On behalf of the board of directors:
George Quek Meng TongDirector
Katherine Lee Lih LengDirector
Singapore18 March 2010
Directors’ Report
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 49
We, George Quek Meng Tong and Katherine Lee Lih Leng, being two of the directors of BreadTalk Group Limited, do hereby state that, in the opinion of the directors,
(i) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity, and consolidated cash fl ow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results of the business, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date, and
(ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
On behalf of the board of directors:
George Quek Meng TongDirector
Katherine Lee Lih LengDirector
Singapore18 March 2010
Statement by Directors
Vi b r a n t G r o w t h50
We have audited the accompanying fi nancial statements of BreadTalk Group Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 51 to 126, which comprise the balance sheets of the Group and the Company as at 31 December 2009, the statements of changes in equity of the Group and the Company, the statement of comprehensive income and cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes.
Management’s responsibility for the fi nancial statements
Management is responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profi t and loss account and balance sheet and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion,
(i) the consolidated fi nancial statements of the Group, and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date; and
(ii) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
Ernst & Young LLPPublic Accountants and Certifi ed Public Accountants Singapore18 March 2010
Independent Auditors’ Report
To the members of BreadTalk Group Limited
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 51
Notes 2009 2008$’000 $’000
Revenue 3 246,493 212,249Cost of sales (112,334) (96,803)
Gross profi t 134,159 115,446Other operating income 4 9,760 7,784Distribution and selling expenses (93,468) (77,942)Administrative expenses (34,198) (32,061)
Profi t from operations 5 16,253 13,227
Interest income 7 89 167Interest expense 7 (592) (851)
Financial expenses, net (503) (684)
Profi t before taxation and share of results of associates and joint ventures 15,750 12,543Share of results of associates (200) (496)Share of results of joint ventures 65 (46)
Profi t before taxation 15,615 12,001Taxation 8 (3,975) (3,643)
Profi t for the year 11,640 8,358
Other comprehensive income/(loss): Net gain on available-for-sale fi nancial assets – 1,178Foreign currency translation (408) 758Share based compensation reserve 90 –
Other comprehensive (loss)/income for the year, net of tax (318) 1,936
Total comprehensive income for the year 11,322 10,294
Profi t attributable to:Equity holders of the Company 11,092 7,770Minority interests 548 588
11,640 8,358
Total comprehensive income attributable to:Equity holders of the Company 10,774 9,706Minority interests 548 588
11,322 10,294
Earnings per share (cents)Basic 9 4.74 3.31
Diluted 9 4.73 3.31
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2009
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
Vi b r a n t G r o w t h52
Notes Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Non-current assetsProperty, plant and equipment 10 64,352 58,156 101 69Intangible assets 11 9,097 9,205 – –Investment securities 12 1,494 1,494 – –Investment in subsidiaries 13 – – 26,522 23,739Investment in associates 14 – 200 – –Investment in joint ventures 15 284 222 – –Other receivables 18 839 – – –Prepayments 19 685 – 685 –Deferred tax assets 8 872 532 – –
77,623 69,809 27,308 23,808
Current assets
Inventories 16 4,838 3,925 – –Trade receivables 17 3,868 4,761 – –Other receivables and deposits 18 24,526 17,884 321 9Prepayments 2,323 2,558 23 24Tax recoverable 12 – – –Amount due from subsidiaries (non-trade) 20 – – 10,738 7,853Amount due from joint ventures (non-
trade) 20 469 343 – –Cash and cash equivalents 21 58,426 47,877 3,020 6,459
94,462 77,348 14,102 14,345
Current liabilities
Trade payables 22 14,044 11,630 – –Other payables 23 37,919 34,898 224 149Other liabilities 23 29,817 21,072 1,764 1,475Provision for reinstatement costs 23 3,061 1,809 – –Amount due to subsidiaries (non-trade) 20 – – 2,027 8Amount due to joint ventures (non-trade) 20 105 99 – –Amount due to landlord (non-trade) 28 88 90 – –Finance lease obligations, secured 25 173 191 – –Loans from minority shareholders of
subsidiaries 24 – 276 – –Short-term loans, secured 26 4,959 4,855 – –Current portion of long-term loans, secured 27 3,815 4,844 – –Tax payable 3,216 3,102 32 45
97,197 82,866 4,047 1,677
Net current (liabilities)/assets (2,735) (5,518) 10,055 12,668
Balance Sheets
As at 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 53
Notes Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Non-current liabilitiesLong-term loans, secured 27 6,968 6,407 – –Finance lease obligations, secured 25 216 430 – –Amount due to landlord (non-trade) 28 127 197 – –Deferred tax liabilities 8 1,411 1,124 – –
8,722 8,158 – –
Net assets 66,166 56,133 37,363 36,476
Equity attributable to equity holders of the Company
Share capital 29 33,303 33,303 33,303 33,303Treasury shares 29 (283) – (283) –Accumulated profi ts 30 24,782 16,408 4,253 3,173Statutory reserve fund 30 1,455 1,076 – –Translation reserve 30 137 545 – –Fair value adjustment reserve 30 1,178 1,178 – –Share based compensation reserve 90 – 90 –
60,662 52,510 37,363 36,476Minority interests 5,504 3,623 – –
Total Equity 66,166 56,133 37,363 36,476
Balance Sheets
As at 31 December 2009
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
Vi b r a n t G r o w t h54
Attributable to equity holders of the Company
2008Group
Share capital
Treasury shares
Accumulated profi ts
Statutory reserve fund
Translationreserve
Fair value adjustment
reserve
Share based compensation
reserve Total Minorityinterests
Total equity
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 29) (Note 29) (Note 30) (Note 30) (Note 30) (Note 30)
At 1 January 2008 33,303 – 10,394 612 (213) – – 44,096 3,170 47,266
Profi t for the year – – 7,770 – – – – 7,770 588 8,358Other comprehensive income
for the year – – – – 758 1,178 – 1,936 – 1,936
Total comprehensive income for the year – – 7,770 – 758 1,178 – 9,706 588 10,294
Dividends paid (Note 37) – – (1,292) – – – – (1,292) (985) (2,277)Transfer to statutory reserve – – (464) 464 – – – – – –Issuance of new shares to
minority shareholders – – – – – – – – 850 850
At 31 December 2008 33,303 – 16,408 1,076 545 1,178 – 52,510 3,623 56,133
Attributable to equity holders of the Company
2009Group
Share capital
Treasury shares
Accumulated profi ts
Statutory reserve fund
Translationreserve
Fair value adjustment
reserve
Share based compensation
reserve Total Minorityinterests
Total equity
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000(Note 29) (Note 29) (Note 30) (Note 30) (Note 30) (Note 30)
At 1 January 2009 33,303 – 16,408 1,076 545 1,178 – 52,510 3,623 56,133
Profi t for the year – – 11,092 – – – – 11,092 548 11,640Other comprehensive (loss)/
income for the year – – – – (408) – 90 (318) – (318)
Total comprehensive income/(loss) for the year – – 11,092 – (408) – 90 10,774 548 11,322
Dividends paid (Note 37) – – (2,339) – – – – (2,339) (1,312) (3,651)Transfer to statutory reserve – – (379) 379 – – – – – –Disposal of a subsidiary – – – – – – – – (193) (193)Purchase of treasury shares – (283) – – – – – (283) – (283)Issuance of new shares to
minority shareholders – – – – – – – – 2,838 2,838
At 31 December 2009 33,303 (283) 24,782 1,455 137 1,178 90 60,662 5,504 66,166
Statements of Changes in Equity
For the year ended 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 55
Share capitalTreasury shares
Accumulated profi ts
Share based compensation
reserve Total equity$’000 $’000 $’000 $’000 $’000
(Note 29) (Note 29)
2008Company
1 January 2008 33,303 – 2,219 – 35,522
Profi t for the year – – 2,246 – 2,246
Total comprehensive income for the year – – 2,246 – 2,246
Dividends paid (Note 37) – – (1,292) – (1,292)
At 31 December 2008 33,303 – 3,173 – 36,476
2009Company
1 January 2009 33,303 – 3,173 – 36,476
Profi t for the year – – 3,419 – 3,419Other comprehensive income for the
year – – – 90 90
Total comprehensive income for the year – – 3,419 90 3,509
Purchase of treasury shares – (283) – – (283)Dividends paid (Note 37) – – (2,339) – (2,339)
At 31 December 2009 33,303 (283) 4,253 90 37,363
Statements of Changes in Equity
For the year ended 31 December 2009
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
Vi b r a n t G r o w t h56
Notes 2009 2008$’000 $’000
Cash fl ows from operating activitiesProfi t before taxation 15,615 12,001Adjustments for:
Depreciation of property, plant and equipment 10 16,178 13,147Amortisation of intangible assets 11 523 582Impairment of property, plant and equipment 10 419 465Intangible assets written off – 7(Gain)/loss on disposal of property, plant and equipment (9) 19Property, plant and equipment written off 435 799Share of results of associates 200 496Share of results of joint ventures (65) 46Interest expense 592 851Interest income (89) (167)Write-down of inventories 10 –Write-off of inventories 13 –Impairment/(write back) of trade receivables 86 (10)Impairment of other receivables 298 13Write back of amount due from associates (non-trade) – (107)Impairment of investment in associate – 385Bad debts written off 577 –Loss on disposal of a subsidiary 61 –Loss on liquidation of an associate – 32Share based payment expenses 90 –Unrealised foreign exchange gain – (57)Translation difference 344 (426)
Operating profi t before working capital changes 35,278 28,076(Increase)/decrease in:
Inventories (1,224) (1,419)Trade receivables 752 (1,724)Other receivables and deposits (2,583) (4,831)Prepayments 234 (760)Amount due from associates (non-trade) – 114Amount due from joint ventures (trade) – 64Amount due from joint ventures (non-trade) (126) (106)
Increase/(decrease) in:Trade payables 2,588 2,769Other payables and other liabilities 11,646 13,849Amount due to associates (trade) – (5)Amount due to joint ventures (non-trade) 6 88
Cash fl ows generated from operations 46,571 36,115Tax paid (3,945) (3,372)
Net cash fl ows from operating activities 42,626 32,743
Consolidated Cash Flow Statement
For the year ended 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 57
Notes 2009 2008$’000 $’000
Cash fl ows from investing activitiesInterest income received 89 167Purchase of property, plant and equipment A (24,119) (25,603)Acquisition of intangible assets (449) (129)Deposits for subscription of junior bonds 18 (5,000) –Proceeds from sale of property, plant and equipment 128 135Advance payment for land premium (685) –Net cash infl ow on disposal of a subsidiary B 125 –
Net cash fl ows used in investing activities (29,911) (25,430)
Cash fl ows from fi nancing activitiesInterest paid (568) (826)Dividends paid to shareholders of the Company (2,339) (1,292)Dividends paid to minority shareholders of subsidiaries (1,312) (985)Purchase of treasury shares (283) –Proceeds from long-term loans 5,897 7,531Repayment of long-term loans (6,187) (4,214)Proceeds from short-term loans 9,784 6,994Repayment of short-term loans (9,540) (5,527)Capital injection from minority shareholders of subsidiaries 2,661 850Repayment of fi nance lease obligations (232) (266)Loans from minority shareholders of subsidiaries 44 150Decrease in fi xed deposits pledged – 107Repayment of amount due to landlord (91) (196)
Net cash fl ows (used in)/from fi nancing activities (2,166) 2,326
Net increase in cash and cash equivalents 10,549 9,639Cash and cash equivalents at the beginning of the year 47,877 38,238
Cash and cash equivalents at the end of the year 21 58,426 47,877
Consolidated Cash Flow Statement
For the year ended 31 December 2009
The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.
Vi b r a n t G r o w t h58
Note A. Purchase of property, plant and equipment
During the year, the Group acquired property, plant and equipment with an aggregate cost of approximately $25,399,000 (2008: $26,201,000). The additions were by way of cash payments of $24,119,000 (2008: $25,603,000), fi nance leases of $Nil (2008: $276,000) and increase in provision for reinstatement costs of $1,280,000 (2008: $322,000).
Note B. Disposal of a subsidiary
Disposal of a subsidiary, Twin Peaks Venture Singapore Pte Ltd
With effect from 1 January 2009, BreadTalk Pte Ltd (“BTPL”), a wholly-owned subsidiary of the Company, disposed of its 70% shareholding interest in Twin Peaks Venture Singapore Pte Ltd (“Twin Peaks”) for a cash consideration of $390,000.
The value of assets and liabilities of Twin Peaks recorded in the consolidated fi nancial statements as at 31 December 2008 and the cash fl ow effect of the disposal were:
$’000
Property, plant and equipment 1,018Franchise rights 20Inventories 289Trade receivables 12Deposits 236Prepayments 2Cash on hand and at bank 265Trade payables (174)Other payables and other liabilities (414)Provision for reinstatement costs (28)Amount due to holding company (432)Loan from a minority shareholder (150)
Carrying value of net assets 644
Less: Minority interest (193)
Carrying value of net assets disposed 451
Total consideration 390Less: Cash on hand and at bank of the subsidiary (265)
Net cash infl ow on disposal of a subsidiary 125
Consolidated Cash Flow Statement
For the year ended 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 59
1. General
1.1 Corporate information
BreadTalk Group Limited (the “Company”) is a limited liability company, which is incorporated in the Republic of Singapore and listed on the Singapore Exchange Securities Trading Ltd.
The registered offi ce and principal place of business of the Company is located at 171 Kampong Ampat, #05-05 KA FoodLink, Singapore 368330.
The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are shown in Note 13 to the fi nancial statements.
1.2 Fundamental accounting assumption
The fi nancial statements of the Group have been prepared on a going concern basis. The Group’s net current liabilities position as at 31 December 2009 was $2,735,000 (2008: $5,518,000).
Included in current liabilities are food court tenant and stored value card deposits of $8,539,000 (2008: $7,141,000) and deferred revenue of $8,161,000 (2008: $3,589,000) respectively. Deferred revenue relates to the unutilised value on the food court stored value cards, unredeemed cash vouchers sold and unearned franchise fees received. These current liabilities, because of their nature, are not expected to result in signifi cant cash outfl ow from the Group within the next 12 months.
In addition, the Group has unutilised banking facilities available for future use. The directors are confi dent that the Group will be able to pay its debts as and when they fall due.
2. Summary of signifi cant accounting policies
2.1 Basis of preparation
The consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).
The fi nancial statements have been prepared on a historical cost basis, except as disclosed in the accounting policies below.
The fi nancial statements are presented in Singapore Dollars (SGD or $) and all values are rounded to the nearest thousand ($’000) except when otherwise indicated.
2.2 Changes in accounting policies
The accounting policies adopted are consistent with those of the previous fi nancial year except as follows:
On 1 January 2009, the Group adopted the following standards and interpretations mandatory for annual fi nancial periods beginning on or after 1 January 2009:
Notes to the Financial Statements
31 December 2009
Vi b r a n t G r o w t h60
2. Summary of signifi cant accounting policies (cont’d)
2.2 Changes in accounting policies (cont’d)
• FRS 1 Presentation of Financial Statements (Revised)• Amendments to FRS 23 Borrowing Costs• Amendments to FRS 107 Financial Instruments: Disclosures• FRS 108 Operating Segments• Improvements to FRSs issued in 2008
Adoption of these standards and interpretations did not have any effect on the fi nancial performance or position of the Group. They did however give rise to additional disclosures, including, in some cases, revisions to accounting policies.
The principal effects of these changes are as follows:
FRS 1 Presentation of Financial Statements – Revised presentation
The revised FRS 1 separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with all non-owner changes in equity presented in the statement of other comprehensive income. In addition, the Standard introduces the statement of comprehensive income which presents income and expense recognised in the period. This statement may be presented in one single statement, or two linked statements. The Group has elected to present this statement as one single statement.
Amendments to FRS 23 Borrowing Costs
FRS 23 has been revised to require capitalisation of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset. The Group’s previous policy was to expense borrowing costs as they were incurred. The Group has amended its accounting policy based on the revised FRS 23. In accordance with the transitional provisions of the Standard, the Group has adopted this as a prospective change. Therefore, borrowing costs will be capitalised on qualifying assets with a commencement date on or after 1 January 2009. No changes have been made for borrowing costs incurred prior to this date that have been expensed. During the fi nancial year, no borrowing cost has been capitalised on property, plant and equipment.
Amendments to FRS 107 Financial Instruments: Disclosures
The amendments to FRS 107 require additional disclosure about fair value measurement and liquidity risk. Fair value measurements are to be disclosed by source of inputs using a three hierarchy for each class of fi nancial instrument. In addition, reconciliation between the beginning and ending balance for Level 3 fair value measurements is now required, as well as signifi cant transfer between Level 1 and Level 2 fair value measurements. The fair value measurement disclosures and liquidity risk disclosures are presented in Note 34 and Note 33 to the fi nancial statements respectively.
FRS 108 Operating Segments
FRS 108 requires disclosure of information about the Group’s operating segments and replaces the requirement to determine primary and secondary reporting segments of the Group. The Group determined that the reportable operating segments are the same as the business segments previously identifi ed under FRS 14 Segment Reporting. Additional disclosures about each of the segments are shown in Note 36, including revised comparative information.
Notes to the Financial Statements
31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 61
2. Summary of signifi cant accounting policies (cont’d)
2.3 Future changes in accounting policies
The Group has not adopted the following FRS and INT FRS that have been issued but not yet effective:
Description
Effective forannual periodsbeginning on
or after
Amendments to FRS 27 Consolidated and Separate Financial Statements 1 July 2009Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible
Hedged Item1 July 2009
Revised FRS 103 Business Combinations 1 July 2009Amendments to FRS 105 Non-current Assets Held for Sale and Discontinued Operations 1 July 2009INT FRS 117 Distributions of Non-cash Assets to Owners 1 July 2009Improvements to FRSs issued in 2009:– Amendments to FRS 38 Intangible Assets 1 July 2009– Amendments to FRS 102 Share-based Payment 1 July 2009– Amendments to FRS 108 Operating Segments 1 July 2009– Amendments to INT FRS 109 Reassessment of Embedded Derivatives 1 July 2009– Amendments to INT FRS 116 Hedges of a Net Investment in a Foreign Operation 1 July 2009– Amendments to FRS 1 Presentation of Financial Statements 1 January 2010– Amendments to FRS 7 Statement of Cash Flows 1 January 2010– Amendments to FRS 17 Leases 1 January 2010– Amendments to FRS 36 Impairment of Assets 1 January 2010– FRS 39 Financial Instruments: Recognition and Measurement 1 January 2010– Amendments to FRS 105 Non-current Assets Held for Sale and Discontinued Operations 1 January 2010– Amendments to FRS 108 Operating Segments 1 January 2010– Amendment to FRS 32 – Classifi cation of Rights Issues 1 February 2010– INT FRS 119 – Extinguishing Financial Liabilities with Equity Instruments 1 July 2010– Amendments to FRS 24 – Related Party Disclosures 1 January 2011– Amendments to INT FRS 114 – Prepayments of a Minimum Funding Requirement 1 January 2011
Except for the revised FRS 103 and the amendments to FRS 27, the directors expect that the adoption of the other standards and interpretations above will have no material impact on the fi nancial statements in the period of initial application. The nature of the impending changes in accounting policy on adoption of the revised FRS 103 and amendments to FRS 27 are described below.
Notes to the Financial Statements
31 December 2009
Vi b r a n t G r o w t h62
2. Summary of signifi cant accounting policies (cont’d)
2.3 Future changes in accounting policies (cont’d)
Revised FRS 103 Business Combinations and Amendments to FRS 27 Consolidated and Separate Financial Statements
The revised standards are effective for annual periods beginning on or after 1 July 2009. The revised FRS 103 introduces a number of changes in the accounting for business combinations occurring after 1 July 2009. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. The Amendments to FRS 27 require that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. Other consequential amendments were made to FRS 7 Statement of Cash Flows, FRS 12 Income Taxes, FRS 21 The Effects of Changes in Foreign Exchange Rates, FRS 28 Investments in Associates and FRS 31 Interests in Joint Ventures. The changes from revised FRS 103 and Amendments to FRS 27 will affect future acquisitions or loss of control and transactions with minority interests. The standards may be early applied. However, the Group does not intend to early adopt.
2.4 Signifi cant accounting estimates and judgements
Estimates, assumptions concerning the future and judgements are made in the preparation of the fi nancial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year are discussed below.
(i) Impairment of goodwill
The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill are allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash fl ows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash fl ows. The carrying amount of the Group’s goodwill at 31 December 2009 was $6,173,000 (2008: $6,173,000). More details are given in Note 11.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 63
2. Summary of signifi cant accounting policies (cont’d)
2.4 Signifi cant accounting estimates and judgements (cont’d)
(ii) Valuation and estimated useful life of brand value arising from acquisition of a subsidiary, Topwin Investment Holding Pte Ltd (“Topwin”)
Brand value arising from the acquisition of Topwin was separately identifi ed and recognised by management using the “relief from royalty method”. The premise of this valuation method is the assumption that the Group would be compelled to pay the rightful owner of the brand name if the Group did not have the legal right to utilise the brand name. The ownership of the brand therefore relieves the Group from making such royalty payments. This requires an estimation of the royalty payments including initial fees and continuing royalty payments based on a percentage of projected revenue. The basis used to determine the revenue projections is the revenue for each food court of Topwin achieved in the fi nancial year ended 31 December 2004 projected into the future. The useful life of the brand value is estimated by the directors to be 15 years as this is the length of time that they expect the benefi ts of the brand to fl ow to the Group. Amortisation of the brand amounted to $213,000 (2008: $213,000) for the fi nancial year ended 31 December 2009 and the carrying amount of the brand value at 31 December 2009 was $2,132,000 (2008: $2,345,000). More details are given in Note 11.
(iii) Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Signifi cant judgement is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s tax payable and deferred tax liabilities at 31 December 2009 were approximately $3,216,000 (2008: $3,102,000) and $1,411,000 (2008: $1,124,000) respectively. The carrying amount of the Group’s tax recoverable and deferred tax assets at 31 December 2009 was $12,000 (2008: $Nil) and $872,000 (2008: $532,000) respectively.
A subsidiary, BreadTalk Pte Ltd (“BTPL”) obtained the Development and Expansion Incentive (“DEI”) which entitles the qualifying income of the company earned during the fi nancial years ended 31 December 2003 to 2007 to be subject to the concessionary tax rate of 10%, subject to certain conditions to be met by year 2007. On 15 August 2006, the company was granted approval by the Economic Development Board (“EDB”) on the amendment of certain conditions laid down in its DEI award letter dated 19 February 2004. In view of the amendments, the company has met all qualifying conditions laid down by the EDB for the DEI incentive by 2007. Accordingly, income from the qualifying DEI activities has been brought to tax at the concessionary tax rate of 10%.
On 24 January 2008, BTPL was granted an extension of the DEI for a period of another 5 years commencing1 January 2008.
Notes to the Financial Statements
31 December 2009
Vi b r a n t G r o w t h64
2. Summary of signifi cant accounting policies (cont’d)
2.4 Signifi cant accounting estimates and judgements (cont’d)
(iv) Depreciation of property, plant and equipment
Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these assets to be within 2 to 20 years. The carrying amount of the Group’s property, plant and equipment as at 31 December 2009 was $64,352,000 (2008: $58,156,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. In particular, renovation costs incurred and capitalised for bakery outlets, food courts and restaurants may be subject to immediate impairment upon their unforeseen closure due to unfavourable operations.
2.5 Functional and foreign currency
(a) Functional currency
The management has determined the currency of the primary economic environment in which the Company operates i.e. functional currency, to be SGD. Sales prices and major costs of providing goods and services including major operating expenses are primarily infl uenced by fl uctuations in SGD.
(b) Foreign currency transactions
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet are recognised in profi t or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under translation reserve in equity. The translation reserve is reclassifi ed from equity to profi t or loss of the Group on disposal of the foreign operation.
Notes to the Financial Statements
31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 65
2. Summary of signifi cant accounting policies (cont’d)
2.5 Functional and foreign currency (cont’d)
(c) Foreign currency translation
The results and fi nancial position of foreign operations are translated into SGD using the following procedures:
• Assets and liabilities for each balance sheet presented are translated at the closing exchange rate ruling at that balance sheet date; and
• Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions.
All resulting exchange differences are taken directly to other comprehensive income.
On disposal of a foreign operation, the cumulative amount of exchange differences recognised in other comprehensive income relating to that particular foreign operation is recognised in profi t or loss.
2.6 Related party
An entity or individual is considered a related party of the Group for the purposes of the fi nancial statements if: i) it possesses the ability (directly or indirectly) to control or exercise signifi cant infl uence over the operating and fi nancial decisions of the Group or vice versa; or ii) it is subject to common control or common signifi cant infl uence.
2.7 Subsidiaries, principles of consolidation and minority interests
(a) Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the fi nancial and operating policies so as to obtain benefi ts from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less any impairment losses.
(b) Principles of consolidation
The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries as at the balance sheet date. The fi nancial statements of the subsidiaries are prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances.
All intra-group balances, transactions, income and expenses and profi ts and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h66
2. Summary of signifi cant accounting policies (cont’d)
2.7 Subsidiaries, minority interests and principles of consolidation (cont’d)
(b) Principles of consolidation (cont’d)
Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.
Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity.
Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill stated in Note 2.11 below.
Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profi t or loss on the date of acquisition.
(c) Transactions with minority interests
Minority interests represent the portion of profi t or loss and net assets in subsidiaries not held by the Group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separately disclosed in profi t or loss of the Group.
On acquisition of minority interests, the difference between the consideration and the book value of the share of the net assets acquired is recognised in goodwill. Gain or loss on disposal to minority interests is recognised in profi t or loss.
2.8 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has signifi cant infl uence. This generally coincides with the Group having 20% or more of the voting power, or has representation on the board of directors.
The Group’s investment in associates is accounted for using the equity method. Under the equity method, the investment in associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of profi t or loss of the associate is recognised in profi t or loss. Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss with respect to the Group’s net investment in the associate. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in profi t or loss. The associate is equity accounted for from the date the Group obtains signifi cant infl uence until the date the Group ceases to have signifi cant infl uence over the associate.
Notes to the Financial Statements
31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 67
2. Summary of signifi cant accounting policies (cont’d)
2.8 Associates (cont’d)
Goodwill relating to an associate is included in the carrying amount of the investment.
Any excess of the Group’s share of the net fair value of the associate’s identifi able assets, liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment and is, instead included as income in the determination of the Group’s share of the associate’s profi t or loss in the period in which the investment is acquired.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.
The fi nancial statements of the associate are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies into line with those of the Group.
2.9 Joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.
The Group’s investment in joint ventures is accounted for using the equity method. Under the equity method, the investment in joint ventures is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. The Group’s share of profi t or loss of the joint venture is recognised in profi t or loss. Where there has been a change recognised directly in the equity of the joint venture, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the joint venture. The joint venture is equity accounted for from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture.
Adjustments are made in the Group’s consolidated fi nancial statements to eliminate the Group’s share of intragroup balances, income and expenses and unrealised gains and losses on transactions between the Group and its jointly controlled entity. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss.
The fi nancial statements of the joint venture are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies into line with those of the Group.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h68
2. Summary of signifi cant accounting policies (cont’d)
2.10 Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefi ts associated with the item will fl ow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful life of the asset as follows:
Leasehold property – 20 yearsMachinery and equipment – 5 - 6 yearsElectrical works – 5 - 6 yearsFurniture and fi ttings – 5 - 6 yearsOffi ce equipment – 3 - 6 yearsRenovation – 2 - 6 yearsMotor vehicles – 5 - 6 years
Construction-in-progress is stated at cost. No depreciation is provided for construction-in-progress as these assets are not yet available for use.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.
The residual values, useful life and depreciation method are reviewed at each fi nancial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefi ts embodied in the items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefi ts are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in profi t or loss in the year the asset is derecognised.
2.11 Intangible assets
(a) Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefi t from the synergies of the combination.
Notes to the Financial Statements
31 December 2009
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2. Summary of signifi cant accounting policies (cont’d)
2.11 Intangible assets (cont’d)
(a) Goodwill (cont’d)
A cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount, an impairment loss is recognised in profi t or loss.
Impairment losses recognised for goodwill are not reversed in subsequent periods.
Where goodwill forms part of a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operation disposed of and the portion of the cash-generating unit retained.
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.5.
Goodwill and fair value adjustments which arose on acquisitions of foreign operations before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition.
(b) Other intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either fi nite or indefi nite. Intangible assets with fi nite lives are amortised on a straight-line basis over the estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a fi nite useful life are reviewed at least at each fi nancial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefi ts embodied in the asset is accounted by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with fi nite lives is recognised in profi t or loss.
Intangible assets with indefi nite useful lives or not yet available for use are tested for impairment annually or more frequently if the events or changes in circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefi nite life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefi nite to fi nite is made on a prospective basis.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h70
2. Summary of signifi cant accounting policies (cont’d)
2.11 Intangible assets (cont’d)
(b) Other intangible assets (cont’d)
Gain or loss arising from derecognition of an intangible asset is measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profi t or loss when the asset is derecognised.
(i) Trade mark
Costs relating to trade mark are capitalised and amortised on a straight-line basis over its estimated fi nite useful life of 5 years.
(ii) Franchise rights
Costs relating to master franchise fees paid are capitalised and amortised on a straight-line basis over the lease/franchise period ranging from 4 to 20 years.
Costs relating to territory reservation fees are capitalised and a fi xed amount is amortised as and when a new outlet starts operation.
(iii) Location premium
Consideration paid to previous tenants to vacate premises in order to secure the lease arrangement are amortised on a straight-line basis over the new lease agreement period of 4 years.
(iv) Brand value
Brand value was acquired through a business combination. The useful life of the brand is assessed to be fi nite and estimated to be 15 years because this is the length of time that the management expects the economic benefi ts of the brand to fl ow to the Group.
Brand value is amortised on a straight-line basis over its estimated economic useful life.
2.12 Impairment of non-fi nancial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefi nite useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash infl ows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in profi t or loss.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 71
2. Summary of signifi cant accounting policies (cont’d)
2.12 Impairment of non-fi nancial assets (cont’d)
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in profi t or loss. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
2.13 Financial assets
Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument.
When fi nancial assets are recognised initially, they are measured at fair value, plus, in the case of fi nancial assets not at fair value through profi t or loss, directly attributable transaction costs.
A fi nancial asset is derecognised where the contractual right to receive cash fl ows from the asset has expired. On derecognition of a fi nancial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that has been recognised in other comprehensive income is recognised in profi t or loss.
(a) Loans and receivables
Non-derivative fi nancial assets with fi xed or determinable payments that are not quoted in an active market are classifi ed as loans and receivables. Subsequent to initial recognition, such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profi t or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
(b) Available-for-sale fi nancial assets
The Group classifi es its investment securities as available-for-sale fi nancial assets.
Available-for-sale fi nancial assets are those non-derivative fi nancial assets that are designated as available-for-sale or are not classifi ed in any of the other categories.
After initial recognition, available-for-sale fi nancial assets are measured at fair value. Any gains or losses from changes in fair value of the fi nancial assets are recognised in other comprehensive income, except that impairment losses are recognised in profi t or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassifi ed from equity to profi t or loss as a reclassifi cation adjustment when the fi nancial asset is derecognised.
Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less impairment losses.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h72
2. Summary of signifi cant accounting policies (cont’d)
2.14 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and at bank, unpledged fi xed deposits and short-term highly liquid investments which are readily convertible to known amounts of cash and which are subject to insignifi cant risk of changes in value.
2.15 Impairment of fi nancial assets
The Group assesses at each balance sheet date whether there is any objective evidence that a fi nancial asset or group of fi nancial assets is impaired.
(a) Assets carried at amortised cost
If there is objective evidence that an impairment loss on fi nancial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows (excluding future credit losses that have not been incurred) discounted at the fi nancial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in profi t or loss.
When the asset becomes uncollectible, the carrying amount of impaired fi nancial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the fi nancial asset.
To determine whether there is objective evidence that an impairment loss on fi nancial assets has been incurred, the Group considers factors such as the probability of insolvency or signifi cant fi nancial diffi culties of the debtor and default or signifi cant delay in payments.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profi t or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
(b) Assets carried at cost
If there is objective evidence that an impairment loss on a fi nancial asset carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the current market rate of return for a similar fi nancial asset. Such impairment losses are not reversed in subsequent periods.
(c) Available-for-sale fi nancial assets
Signifi cant or prolonged decline in fair value below cost, signifi cant fi nancial diffi culties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classifi ed as available-for-sale fi nancial assets are impaired.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 73
2. Summary of signifi cant accounting policies (cont’d)
2.15 Impairment of fi nancial assets (cont’d)
If an available-for-sale fi nancial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profi t or loss, is transferred from equity to profi t or loss.
Reversals of impairment losses in respect of equity instruments are not recognised in profi t or loss. Reversals of impairment losses on debt instruments are recognised in profi t or loss if the increase in fair value of the debt instrument can be objectively related to an event occurring after the impairment loss was recognised in profi t or loss.
2.16 Inventories
Inventories comprise raw materials, consumables, semi-fi nished goods, fi nished goods and base inventory.
Inventories are valued at the lower of cost and net realisable value. Costs comprise purchase costs accounted for on a weighted average cost basis. In the case of semi-fi nished goods, costs also include an appropriate share of production overheads based on normal operating capacity.
Base inventory, comprising mainly cutlery and dining utensils, are written down to 50% of the original cost and all further replacement costs incurred in maintaining the base inventory is expensed.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
2.17 Financial liabilities
Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the fi nancial instrument. Financial liabilities are initially recognised at fair value of consideration received plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in profi t or loss when the liabilities are derecognised and through the amortisation process. The liabilities are derecognised when the obligation under the liability is discharged or cancelled or expired. When an existing fi nancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modifi ed, such an exchange or modifi cation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profi t or loss.
2.18 Borrowing costs
Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset.
Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h74
2. Summary of signifi cant accounting policies (cont’d)
2.19 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at each balance sheet date and adjusted to refl ect the current best estimate. If it is no longer probable that an outfl ow of resources embodying economic benefi ts will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that refl ects, where appropriate, the risks specifi c to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.
2.20 Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfi lment of the arrangement is dependent on the use of a specifi c asset or assets or the arrangement conveys a right to use the asset. For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of INT FRS 104.
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profi t or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profi t or loss on a straight-line basis over the lease term. The aggregate benefi t of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.
2.21 Employee benefi ts
(a) Defi ned contribution plans
The Group participates in the national pension schemes as defi ned by the laws of the countries in which it has operations. Contributions to national pension schemes are recognised as an expense in the period in which the related services are performed.
Singapore
The Group makes contributions to the Central Provident Fund (“CPF”) scheme in Singapore, a defi ned contribution pension scheme. The Group makes monthly contributions based on stipulated contribution rates.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 75
2. Summary of signifi cant accounting policies (cont’d)
2.21 Employee benefi ts (cont’d)
(a) Defi ned contribution plans (cont’d)
People’s Republic of China (“PRC”)
Subsidiaries incorporated and operating in the PRC are required to provide certain staff pension benefi ts to their employees under existing PRC regulations. Contributions are provided at rates stipulated by PRC regulations and are contributed to a pension fund managed by government agencies, which are responsible for administering these amounts for the subsidiaries’ PRC employees.
Hong Kong
Subsidiaries incorporated and operating in Hong Kong pay contributions to publicly or privately administered pension insurance plans on a mandatory basis. The subsidiaries have no further payment obligations once the contributions have been paid. The contributions are not reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(b) Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.
(c) The BreadTalk Restricted Share Grant Plan (“RSG Plan”)
Employees receive remuneration under the RSG Plan in the form of fully-paid shares (“Awards”) of the Company as consideration for services rendered. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the Awards at the date on which the Awards are granted. The cumulative expense recognized at each reporting date until the vesting date refl ects the Company’s best estimate of the number of Awards that will ultimately vest. The charge or credit to profi t or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
In the Company’s separate fi nancial statements, the fair value of the Awards granted to employees of its subsidiaries is recognised as an increase in the cost of the Company’s investment in subsidiaries, with a corresponding increase in equity.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h76
2. Summary of signifi cant accounting policies (cont’d)
2.22 Income recognition
Income is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the income can be reliably measured. The following specifi c recognition criteria must also be met before income is recognised:
(a) Bakery sales, restaurant sales and sales to franchisee
Revenue from the sale of goods is recognised net of goods and services tax and discounts upon the passing of title to the customer which generally coincides with delivery and acceptance of the goods sold.
(b) Franchise income
Initial franchise income is recognised upon the grant of rights, completion of the designated phases of the franchise setup and transfer of know-how to the franchisee in accordance with the terms stated in the franchise agreement. Recurring franchise income is recognised on a periodic basis as a percentage of the franchisees’ revenue in accordance with terms as stated in the franchise agreement.
(c) Food court revenue
Fixed rental income from the sub-lease of food courts is recognised as income in profi t or loss on a straight line basis over the lease term. The variable portion of the rental income which is computed based on a percentage of the food court tenants’ gross sales is recognised when such sales are earned.
Revenue from the sale of food and beverage is recognised upon delivery and acceptance by customers, net of sale discounts.
(d) Management fee
Management fee is recognised on an accrual basis.
(e) Interest income
Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt.
(f) Dividend income
Dividend income is recognised when the Group’s right to receive payment is established.
2.23 Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised in profi t or loss over the period necessary to match them on a systematic basis to the costs that it is intended to compensate. Where the grant relates to an asset, the fair value is recognised as deferred capital grant on the balance sheet and is amortised to profi t or loss over the expected useful life of the relevant asset by equal annual instalments.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 77
2. Summary of signifi cant accounting policies (cont’d)
2.24 Income taxes
(a) Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Current taxes are recognised in profi t or loss except to the extent that the tax relates to items recognised outside profi t or loss, either in other comprehensive income or directly in equity.
(b) Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
• Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profi t nor taxable profi t or loss; and
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:
• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; and
• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profi t will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profi t will allow the deferred tax asset to be utilised.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h78
2. Summary of signifi cant accounting policies (cont’d)
2.24 Income taxes (cont’d)
(b) Deferred tax (cont’d)
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Deferred income tax is recognised in profi t or loss. Deferred income tax relating to items recognised outside profi t or loss is recognised outside profi t or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(c) Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except:
• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
2.25 Segment reporting
For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 36, including the factors used to identify the reportable segments and the measurement basis of segment information.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 79
2. Summary of signifi cant accounting policies (cont’d)
2.26 Share capital and share issue expenses
Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.
2.27 Treasury shares
When shares recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classifi ed as treasury shares and presented as deduction from total equity. No gain or loss is recognised in profi t or loss on the purchase, sale, issue or cancellation of treasury shares.
2.28 Contingencies
A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confi rmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.
Contingent liabilities and assets are not recognised on the balance sheet of the Group.
3. Revenue
Group2009 2008
$’000 $’000
Bakery sales 110,404 94,872Restaurant sales 38,960 32,173Sales to franchisee 10,671 8,106Franchise income 8,297 7,886Food court income 78,161 69,212
246,493 212,249
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h80
4. Other operating income
Group2009 2008
$’000 $’000Management fee income- Food court management 4,816 4,779- Others 306 190Government grant (1) 1,218 775Grant income from Jobs Credit Scheme (2) 1,707 –Income from expired food court stored value cards 278 197Sponsorship income 227 227Sundry sales 91 325Compensation from landlord – 326Rental income 318 280Agency commission 103 78Miscellaneous income 696 607
9,760 7,784
(1) Government grant in relation to business expansion activities undertaken by certain subsidiaries in the PRC.
(2) During the fi nancial year ended 31 December 2009, the Singapore Finance Minister announced the introduction of a Jobs Credit Scheme (“Scheme”). Under this Scheme, the Group received a 12% cash grant on the fi rst $2,500 of each month’s wages for each employee on their Central Provident Fund Payroll. The Group received its grant income of $1,707,000 in four receipts in March, June, September and December 2009. The Scheme has been extended to June 2010 with payouts in March and June 2010 at stepped down rates of 6% and 3% respectively.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 81
5. Profi t from operations
This is determined after charging/(crediting) the following:
Group2009 2008
$’000 $’000
Non-audit fees to auditors of the Company 99 139Amortisation of intangible assets (Note 11) 523 582Bad trade debts written off 577 –Impairment/(write back) of loans and receivables- trade receivables (Note 17) 86 (10)- other receivables (Note 18) 298 13- amount due from associates (non-trade) – (107)Directors’ fees 112 105Depreciation of property, plant and equipment (Note 10) 16,178 13,147Employee benefi ts (Note 6) 68,624 57,277Foreign exchange loss, net 178 26(Gain)/loss on disposal of property, plant and equipment (9) 19Loss on liquidation of an associate – 32Loss on disposal of a subsidiary 61 –Operating lease expenses- fi xed portion 46,313 41,460- variable portion 6,255 4,618Property, plant and equipment written off 435 799Intangible assets written off – 7Impairment of investment in associate – 385Impairment of property, plant and equipment (Note 10) 419 465Write-down of inventories (Note 16) 10 –Write-off of inventories (Note 16) 13 –
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h82
6. Employee benefi ts
Group2009 2008
$’000 $’000
Staff costs (including directors)Salaries and bonuses 51,331 44,049Central Provident Fund and other pension contributions 5,288 4,180Sales incentives and commission 3,020 2,334Share-based payment (RSG Plan) 90 –Other personnel benefi ts 8,895 6,714
68,624 57,277
RSG Plan
Under the RSG Plan, directors and employees receive remuneration in the form of fully-paid shares of the Company as consideration for services rendered. On 15 May 2009, 899,000 restricted shares were granted conditionally and the fi nal number of restricted shares awarded will depend on the achievement of pre-determined targets over a one year period. On meeting the performance conditions for the performance period, one-third of the restricted shares will vest. The balance will vest equally over the subsequent two years with the fulfi lment of service requirements.
The fair value of the restricted shares granted is estimated based on the market price of the shares on grant date less the present value of expected future dividends during the vesting period.
The number of restricted shares outstanding at year end is 899,000 shares.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 83
7. Interest income and interest expense
Group2009 2008
$’000 $’000Interest income from loans and receivables- Bank deposits 89 167
Interest expense- Term loans (540) (792)- Finance lease obligations (28) (35)- Others (24) (24)
(592) (851)
8. Taxation
Major components of income tax expense were:
Group2009 2008
$’000 $’000Current tax- Current year 3,628 3,669- Under/(over) provision in prior year 170 (354)
Deferred tax- Origination and reversal of temporary differences 70 84- (Over)/under provision in prior year (149) 85
Withholding tax 256 159
Taxation expense 3,975 3,643
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h84
8. Taxation (cont’d)
A reconciliation between the tax expense and the product of accounting profi t multiplied by the applicable tax rate for the year ended 31 December is as follows:
Group2009 2008
$’000 $’000
Profi t before taxation 15,615 12,001
Tax at the domestic rates applicable to profi ts in the countries where the Group operates(1) 2,792 2,746
Tax effect of:Expenses not deductible for tax purposes 1,074 1,161Income not subject to taxation (330) (4)Effect of reduction in tax rate (29) 2Share of associates’ and joint ventures’ tax (83) 33Tax savings arising from development and expansion incentive (2) (169) (176)Under/(over) provision in prior years- Current tax 170 (354)- Deferred tax (149) 85Withholding tax expense 256 159Effect of partial tax exemption and tax relief (603) (514)Deferred tax assets not recognised 1,302 724Benefi ts from previously unrecognised deferred tax assets (296) (201)Others 40 (18)
Taxation expense 3,975 3,643
(1) This is prepared by aggregating separate reconciliations for each national jurisdiction.
(2) In February 2004, the Economic Development Board granted the Development and Expansion Incentive under the International Headquarters (IHQ-DEI) Award to a subsidiary. Subject to certain conditions, the subsidiary enjoys a concessionary tax rate of 10% on its qualifying income for a period of 5 years commencing 1 January 2003. On 24 January 2008, the subsidiary was granted an extension of the DEI for another 5 years commencing 1 January 2008.
The corporate income tax rate applicable to Singapore companies of the Group was reduced to 17% for the year of assessment 2010 onwards from 18% for year of assessment 2009. The corporate income tax rate applicable to Malaysian companies of the Group was reduced from 27% to 26% and 25% for the years of assessment 2008 and 2009 respectively.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 85
8. Taxation (cont’d)
Deferred income tax as at 31 December relates to the following:
GroupBalance sheet Profi t or loss
2009 2008 2009 2008$’000 $’000 $’000 $’000
Deferred tax liabilities: Differences in depreciation for tax purposes (1,349) (1,086) 262 136Provisions 43 17 (26) 88Dividend income (105) (55) 50 55
(1,411) (1,124)
Deferred tax assets: Provisions 515 315 (214) 97Differences in depreciation for tax purposes 357 (20) (391) 20Unutilised tax losses – 237 240 (227)
872 532
Deferred income tax (79) 169
In accordance with the “Income Tax Law of the PRC for Enterprises with Foreign Investment and Foreign Enterprises”, Shanghai BreadTalk Co., Ltd (“SHBT”), a wholly-owned subsidiary registered in the PRC, is entitled to full exemption from Enterprise Income Tax (“EIT”) for the fi rst two years and a 50% reduction in EIT for the next three years, commencing from the fi rst profi table year after offsetting all tax losses carried forward from the previous fi ve years. SHBT achieved its fi fth profi table year in the current fi nancial year end.
Unrecognised tax losses and capital allowances
As at 31 December 2009, the Group has tax losses of approximately $8,460,000 (2008: $5,495,000) and unutilised capital allowances of approximately $466,000 (2008: $823,000) that are available for offset against future taxable profi ts, for which no deferred tax assets are recognised on these amounts due to uncertainty of their utilisation. The utilisation of the tax losses is subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.
Tax consequences of proposed dividends
There are no income tax consequences attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the fi nancial statements (Note 37).
9. Earnings per share
Basic earnings per share is calculated by dividing the Group’s profi t for the year attributable to ordinary equity holders of the Company of $11,092,000 (2008: $7,770,000) by the weighted average number of ordinary shares (excluding treasury shares) of 234,102,701 (2008: 234,911,034) in issue during the year.
Diluted earnings per share is calculated by dividing the Group’s profi t for the year attributable to ordinary equity holders of the Company of $11,092,000 (2008: $7,770,000) by the weighted average number of ordinary shares (excluding treasury shares) in issue during the year plus the weighted average number of restricted shares granted conditionally under the “BreadTalk Restricted Share Grant Plan” of 234,702,034 (2008: 234,911,034).
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h86
10. Property, plant and equipment
Leasehold property
Machinery and
equipmentElectrical
worksFurniture
and fi ttingsOffi ce
equipmentGroup $’000 $’000 $’000 $’000 $’000CostAs at 1.1.2008 8,331 12,691 8,591 9,594 3,117Additions – 4,679 4,341 7,501 930Reclassifi cations (269) 93 (38) (671) (97)Write offs – (221) (337) (212) (77)Disposals – (124) – (13) (17)Translation difference 549 188 82 216 74
As at 31.12.2008 and 1.1.2009 8,611 17,306 12,639 16,415 3,930Additions – 5,831 3,729 3,793 1,319Reclassifi cations – 161 359 – 39Write offs – (612) (342) (241) (117)Disposals – (126) (3) (18) (24)Disposal of a subsidiary – (483) (145) (131) (51)Translation difference (220) (208) (165) (322) (56)
As at 31.12.2009 8,391 21,869 16,072 19,496 5,040
Accumulated depreciation and impairment losses
As at 1.1.2008 823 6,674 3,339 3,266 1,526Charge for the year 379 2,195 1,884 2,307 658Reclassifi cations (9) (39) (24) (266) (31)Write offs – (159) (315) (153) (61)Disposals – (93) – (3) (11)Impairment loss for the year – 57 131 38 17Translation difference 69 55 22 47 28
As at 31.12.2008 and 1.1.2009 1,262 8,690 5,037 5,236 2,126Charge for the year 396 2,636 2,381 3,232 782Reclassifi cations – – – 1 (1)Write offs – (529) (308) (158) (110)Disposals – (93) (2) (7) (17)Impairment loss for the year – 72 118 62 14Disposal of a subsidiary – (76) (23) (23) (12)Translation difference (45) (74) (69) (132) (30)
As at 31.12.2009 1,613 10,626 7,134 8,211 2,752
Net book valueAs at 31.12.2008 7,349 8,616 7,602 11,179 1,804
As at 31.12.2009 6,778 11,243 8,938 11,285 2,288
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 87
10. Property, plant and equipment (cont’d)
RenovationMotor
vehiclesConstruction-in-progress Total
$’000 $’000 $’000 $’000GroupCostAs at 1.1.2008 23,548 1,356 3,914 71,142Additions 7,478 (1) 321 951 26,201Reclassifi cations 1,351 – (369) –Write offs (1,781) (38) – (2,666)Disposals (257) (51) – (462)Translation difference 904 26 283 2,322
As at 31.12.2008 and 1.1.2009 31,243 1,614 4,779 96,537Additions 9,840 (1) – 887 25,399Reclassifi cations 1,597 59 (2,215) –Write offs (2,271) – (74) (3,657)Disposals (243) – – (414)Disposal of a subsidiary (405) – – (1,215)Translation difference (634) (17) (75) (1,697)
As at 31.12.2009 39,127 1,656 3,302 114,953
Accumulated depreciation and impairment losses
As at 1.1.2008 10,275 346 – 26,249Charge for the year 5,426 298 – 13,147Reclassifi cations 353 16 – –Write offs (1,145) (34) – (1,867)Disposals (171) (30) – (308)Impairment loss for the year 222 – – 465Translation difference 465 9 – 695
As at 31.12.2008 and 1.1.2009 15,425 605 – 38,381Charge for the year 6,428 323 – 16,178Reclassifi cations – – – –Write offs (2,117) – – (3,222)Disposals (176) – – (295)Impairment loss for the year 153 – – 419Disposal of a subsidiary (63) – – (197)Translation difference (304) (9) – (663)
As at 31.12.2009 19,346 919 – 50,601
Net book valueAs at 31.12.2008 15,818 1,009 4,779 58,156
As at 31.12.2009 19,781 737 3,302 64,352
(1) Amount includes provision for reinstatement costs of $1,280,000 (2008: $322,000).
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h88
10. Property, plant and equipment (cont’d)
Assets held under fi nance leases
As at 31 December 2009, the net book values of property, plant and equipment acquired under fi nance leases are as follows:
Group2009 2008
$’000 $’000
Machinery and equipment 176 236Motor vehicles 281 357
Assets written off
Property, plant and equipment written off during the year arose mainly due to the refurbishment/closure of certain bakery outlets and food courts. The amount written off represents the total carrying value of the property, plant and equipment attributable to the bakery outlets and food courts at the date of refurbishment/closure.
The residual value of these assets has been assessed as nil.
Assets pledged as security
As at 31 December 2008, in addition to assets held under fi nance leases, the Group’s leasehold property with a carrying amount of $4,508,000 was pledged to secure the Group’s bank loans (Note 27). The pledge was discharged during the fi nancial year upon full repayment of the bank loan.
Impairment of assets
During the year, Food Art Pte Ltd, a wholly-owned subsidiary, carried out a review of the recoverable amount of the property, plant and equipment for a particular food and drinks outlet that has been persistently making losses. An impairment loss of $419,000 was recognised, which fully impaired the property, plant and equipment of the outlet.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 89
10. Property, plant and equipment (cont’d)
Furnitureand fi ttings
Offi ceequipment
Construction-in-progress Total
$’000 $’000 $’000 $’000
CompanyCostAs at 1.1.2008 1 19 – 20Additions – 75 – 75
As at 31.12.2008 and 1.1.2009 1 94 – 95Additions – 33 35 68
As at 31.12.2009 1 127 35 163
Accumulated depreciationAs at 1.1.2008 – 5 – 5Charge for the year – 21 – 21
As at 31.12.2008 and 1.1.2009 – 26 – 26Charge for the year – 36 – 36
As at 31.12.2009 – 62 – 62
Net book value
As at 31.12.2008 1 68 – 69
As at 31.12.2009 1 65 35 101
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h90
11. Intangible assets
Group
Goodwill Brand value
Trade Mark
Franchise rights
Location Premium Total
$’000 $’000 $’000 $’000 $’000 $’000
CostAs at 1.1.2008 6,173 3,209 692 751 505 11,330Additions – – 72 57 – 129Write offs – – – (7) – (7)
As at 31.12.2008 and 1.1.2009 6,173 3,209 764 801 505 11,452Additions – – 26 423 – 449Disposal of a subsidiary – – – (28) – (28)Translation difference – – – (14) – (14)
As at 31.12.2009 6,173 3,209 790 1,182 505 11,859
Accumulated amortisationAs at 1.1.2008 – 651 407 339 268 1,665Amortisation – 213 125 108 136 582Write offs – – – * – –
As at 31.12.2008 and 1.1.2009 – 864 532 447 404 2,247Amortisation – 213 95 114 101 523Disposal of a subsidiary – – – (8) – (8)Translation difference – – – * – –
As at 31.12.2009 – 1,077 627 553 505 2,762
Net book valueAs at 31.12.2008 6,173 2,345 232 354 101 9,205
As at 31.12.2009 6,173 2,132 163 629 – 9,097
* Less than $1,000
Brand value, trade mark, franchise rights and location premium are determined to have fi nite useful lives and are amortised on a straight-line basis over their respective estimated economic useful lives and assessed for impairment whenever there is an indication that the intangible assets may be impaired. Brand value, trade mark and franchise rights have remaining useful lives of 10 years, 1 to 5 years and 1 to 5 years as at 31 December 2009 respectively.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 91
11. Intangible assets (cont’d)
Impairment testing of goodwill
Goodwill arising from the acquisition of Topwin Investment Holding Pte Ltd and its subsidiaries in 2005 was allocated to 2 cash-generating units (“CGU”), which represent the 2 geographical segments (i.e. Shanghai and Beijing segments) in which the acquired food courts are located. The food courts located in the same geographical segment are managed by the same management team.
Goodwill arising from the acquisition of ML Breadworks Sdn Bhd in 2007 was allocated to the legal entity acquired which represents the CGU. Meanwhile, goodwill on the acquisition of MWA Pte Ltd in December 2007 was primarily attributable to the food court operations at Wisma Atria, Singapore.
Allocated goodwill based on the CGUs is as follows:
Carrying amount as at 31
December
Basis on which recoverable values
are determinedPre-tax
discount rate$’000
Shanghai segment 3,569 Value in use 10%
Beijing segment 1,009 Value in use 10%
ML Breadworks Sdn Bhd 327 Value in use 8.21%
Food court operation at Wisma Atria, Singapore 1,268 Value in use 8.21%
6,173
The recoverable amount is determined based on a value in use calculation using the cash fl ow projections based on fi nancial budgets approved by management covering a fi ve-year period. The discount rates applied to the cash fl ow projections are derived from cost of capital plus a reasonable risk premium at the date of assessment of the respective cash generating units.
No impairment loss on goodwill was required for the fi nancial year ended 31 December 2009 as the recoverable amount was in excess of the carrying value.
12. Investment securities
Group2009 2008
$’000 $’000
Available-for-sale fi nancial assets- Equity instruments (quoted) 1,494 1,494
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h92
13. Investment in subsidiaries
Company2009 2008
$’000 $’000
Unquoted equity shares at cost 26,489 23,739Share based compensation reserve 33 –
26,522 23,739
Details of the subsidiaries are as follows:
Name Country of
incorporation Principal activitiesProportion of
ownership interest2009 2008
% %Held by the Company
BreadTalk Pte Ltd (1) Singapore Bakers and manufacturers of and dealers in bread, fl our and biscuits
100 100
BreadTalk International Pte Ltd (1) Singapore Investment holding 100 100
Topwin Investment Holding Pte Ltd (1)
Singapore Investment holding 100 100
Star Food Pte Ltd (1)
(Note (a))Singapore Investment holding 60 60
Imagine Properties Pte Ltd (10)(12)
(Note (a))Singapore Investment holding 100 –
Together Inc. Pte Ltd (8)
(Note (a))Singapore Investment holding 100 –
Held through subsidiaries
Taster Food Pte Ltd (1) Singapore Operators of food and drinks outlets, eating houses and restaurants
70 70
Charcoal Pte Ltd (1) Singapore Operators of food and drinks outlets, eating houses and restaurants
75 75
Shanghai BreadTalk Co., Ltd (2) People’s Republicof China
Bakers and manufacturers of and dealers in bread, fl our and biscuits
100 100
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 93
13. Investment in subsidiaries (cont’d)
Name Country of
incorporation Principal activitiesProportion of
ownership interest2009 2008
% %Held through subsidiaries (cont’d)
Shanghai BreadTalk Gourmet Co., Ltd (2)
People’s Republicof China
Management of food and beverage, manufacture and retail of bakery, confectionery products
100 100
Beijing BreadTalk Restaurant Management Co., Ltd (2)
People’s Republicof China
Management of food and beverage, manufacture and retail of bakery, confectionery products
100 100
Beijing BreadTalk Co.,Ltd (2) (Note (a))
People’s Republicof China
Manufacture and sale of bakery and confectionery products
100 –
Food Republic (Shanghai) Co., Ltd (2)
People’s Republicof China
Food court operator 100 100
Beijing Da Shi Dai Food and Beverage Co., Ltd (2)
People’s Republicof China
Food court operator 100 100
Chongqing Food Republic Food & Beverage Co., Ltd (3)
People’s Republicof China
Food court operator 100 100
Megabite Hong Kong Limited (4) Hong Kong Food court operator 85 85
Megabite (S) Pte Ltd (1) Singapore Investment holding and operator of food and beverage outlets
100 100
Food Republic Pte Ltd (1) Singapore Food court operator 100 100
BreadTalk (Thailand) Company Limited (5)
Thailand Management of food and beverage, manufacture and retail of bakery, confectionery products
100 100
Megabite Eatery (M) Sdn Bhd (6) Malaysia Operator of food and beverage outlets
100 100
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h94
13. Investment in subsidiaries (cont’d)
Name Country of
incorporation Principal activitiesProportion of
ownership interest2009 2008
% %Held through subsidiaries (cont’d)
BreadTalk Concept Hong Kong Limited (4)
Hong Kong Management of food and beverage, manufacture and retail of bakery, confectionery products
85 85
ML Breadworks Sdn Bhd (7) Malaysia Bakers and manufacturers of and dealers in bread, fl our and biscuits
90 90
MWA Pte Ltd (1)(11) Singapore Dormant 100 100
Food Art Pte Ltd (1) Singapore Operators of food and beverage outlets
100 100
Twin Peaks Venture SingaporePte Ltd ( Note (b))
Singapore Retail of bakery and confectionery products
– 70
Shanghai Star Food F&B Management Co., Ltd (2)
People’s Republicof China
Operators of restaurants 60 60
Beijing Star Food F&B Management Co., Ltd (9)
People’s Republicof China
Operators of restaurants 60 60
Ramen Play Pte.Ltd. (8) (Note (a))
Singapore Operators of restaurants 60 –
Shanghai Ramen Play Co., Ltd (3) (Note (a))
People’s Republicof China
Operators of restaurants 60 –
(1) Audited by Ernst & Young LLP, Singapore(2) Audited by member fi rms of Ernst & Young Global in the respective countries(3) Audited by Shanghai Xin Gao Xin Certifi ed Public Accountants Co., Ltd, People’s Republic of China(4) Audited by S.F. Kwok & Co. Certifi ed Public Accountants, Hong Kong(5) Audited by CNN & S Co., Ltd, Thailand(6) Audited by RSM Robert Teo, Kuan & Co., Malaysia(7) Audited by C L Chong & Co., Malaysia(8) Audited by Trustnet Alliance, Singapore(9) Audited by Beijing Daxing Certifi ed Public Accountants Co., Ltd, People’s Republic of China(10) Cost of investment is $1 (2008: Nil).(11) The company’s food court operations at Wisma Atria, Singapore, was transferred to a related company,
Food Republic Pte Ltd as at 1 January 2009. The company has since been dormant.(12) The subsidiary was incorporated in November 2009 and an audit is not required for the period ended
31 December 2009.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 95
13. Investment in subsidiaries (cont’d)
(a) New subsidiaries and additional investments
Imagine Properties Pte Ltd
The Company incorporated the wholly-owned subsidiary in November 2009 with a share capital of $1.
Star Food Pte Ltd
During the year, the Company subscribed for 60% of the additional share capital issued by the subsidiary. The Company subscribed a total of 1,800,000 new ordinary shares in Star Food Pte Ltd for a cash consideration of $1,800,000.
Together Inc. Pte Ltd and Ramen Play Pte Ltd
The Company incorporated the wholly-owned subsidiary, Together Inc. Pte Ltd (“Together Inc”) in May 2009 with a share capital of $10, for the purpose of facilitating the Company’s joint investment with Sanpou Co., Ltd.
Together Inc then incorporated a 60% owned subsidiary, Ramen Play Pte Ltd (“Ramen Play”) in May 2009.
In June 2009, the Company increased the paid up capital of Together Inc from $10 to $950,000 by the subscription of an additional 949,990 ordinary shares for $949,990 for the purpose of capital injection in Ramen Play. Subsequently, Together Inc increased its investment in Ramen Play with a subscription of 899,994 ordinary shares for a cash consideration of $899,994.
Beijing BreadTalk Co., Ltd
Beijing BreadTalk Co., Ltd was incorporated as a wholly-owned subsidiary of Beijing BreadTalk Restaurant Management Co., Ltd in February 2009 with a registered and paid up capital of Rmb 500,000 ($113,000).
Shanghai Ramen Play Co., Ltd (“Shanghai Ramen Play”)
The Company’s wholly-owned subsidiaries, Shanghai BreadTalk Co., Ltd (“Shanghai BreadTalk”) and Food Republic (Shanghai) Co., Ltd (“Food Republic Shanghai”), subscribed for 30% each of the registered share capital of Shanghai Ramen Play for a total cash consideration of US$900,000 ($1,280,000). The Company has an effective interest of 60% in Shanghai Ramen Play.
(b) Disposal of a subsidiary
During the year, BreadTalk Pte Ltd, a wholly-owned subsidiary of the Company, disposed of its 70% shareholding interest in Twin Peaks Venture Singapore Pte Ltd (“Twin Peaks”) for a cash consideration of $390,000. The effect on the Group’s cash fl ows arising from the disposal is shown in Note B of the Consolidated Cash Flow Statement.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h96
14. Investment in associates
Group2009 2008
$’000 $’000
Investment in shares, unquotedShares, at cost 1,252 1,252Impairment loss (385) (385)Loan to an associate 614 614Share of post-acquisition results of associates (1,481) (1,281)
At end of year – 200
Loan to an associate is quasi-capital in nature, non-interest bearing and has no fi xed terms of repayment.
Details of the associates are as follows:
NameCountry of
incorporation Principal activitiesProportion of
ownership interest2009 2008
% %Held through subsidiaries
Hong Kong BreadTalk Ltd (“HKBT”) (1), (2)
Hong Kong Dormant 25 25
Out of The Box Pte Ltd (“OOTB”) (1)
Singapore Marketing and distribution of canned drinks
30 30
(1) Not a signifi cant associate and unaudited fi nancial statements have been used for the preparation of the consolidated fi nancial statements of the Group.
(2) HKBT had effectively ceased operations since September 2007.
The Group has not recognised losses relating to HKBT and OOTB where its share of losses exceeds the Group’s interest in these associates. The Group’s cumulative share of unrecognised losses as at 31 December 2009 was $381,000 (2008: $292,000). The Group has no obligation in respect of these losses.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 97
14. Investment in associates (cont’d)
The summarised fi nancial information of the associates, not adjusted for the proportion of ownership interest held by the Group, is as follows:
Group2009 2008
$’000 $’000
Assets and liabilities
Total assets 98 909
Total liabilities 3,647 3,581
Results
Revenue 30 495
Net loss for the year (568) (1,466)
15. Investment in joint ventures
Group2009 2008
$’000 $’000
Investment in shares, unquoted
Shares, at cost 334 334Share of post-acquisition results of joint ventures (33) (98)Exchange difference (17) (14)
284 222
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h98
15. Investment in joint ventures (cont’d)
Details of the joint ventures are as follows:
NameCountry of
incorporation Principal activitiesProportion of
ownership interest2009 2008
% %
Held through subsidiaries
Shanghai Hong Bu Rang Food & Beverage Management Co., Ltd (“Shanghai Hong Bu Rang”)(1)
People’s Republicof China
Operator of food and beverage outlets
50 50
Apex Excellent Sdn Bhd (2) Malaysia Food court operator 50 50
(1) Audited by Shanghai Xin Gao Xin Certifi ed Public Accountants Co., Ltd, People’s Republic of China(2) Audited by RSM Robert Teo, Kuan & Co., Malaysia
The aggregate amounts of each of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses, adjusted for the proportion of ownership interest held by the Group in the joint ventures, are as follows:
Group2009 2008
$’000 $’000
Assets and liabilitiesCurrent assets 1,321 1,170Non-current assets 282 268
Total assets 1,603 1,438
Current liabilities 1,431 1,204Non-current liabilities 9 12
Total liabilities 1,440 1,216
ResultsRevenue 2,622 3,150Other income 433 462Expenses (3,097) (3,658)
Loss for the year (42) (46)
The Group has not recognised losses relating to Shanghai Hong Bu Rang where its share of losses exceeds the Group’s interest in this joint venture. The Group’s cumulative share of unrecognised losses as at 31 December 2009 was $112,000 (2008: $5,000). The Group has no obligation in respect of these losses.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 99
16. Inventories
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000Balance sheet:
Raw materials and consumables, at cost 4,263 3,350 – –Semi-fi nished goods 393 459 – –Finished goods 68 – – –Base inventories (1) 114 116 – –
Total inventories at lower of cost and net realisable value 4,838 3,925 – –
(1) This is stated after writing down 50% of the original cost of base inventories
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Profi t or loss:
Inventories recognised as an expense in cost of sales 61,230 55,599 – –
Inclusive of the following charge:- Write-down of inventories 10 – – –- Write-off of inventories 13 – – –
17. Trade receivables
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Trade receivables 3,868 4,761 – –
Trade receivables are non-interest bearing and are generally on 30 to 90 days terms. They are recognised at their original invoice amounts which represents their fair values on initial recognition.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h100
17. Trade receivables (cont’d)
Receivables that are past due but not impaired
The Group has trade receivables amounting to $716,000 (2008: $1,847,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group2009 2008
$’000 $’000
Trade receivables past due:Lesser than 30 days 190 62230 to 60 days 9 71661 to 90 days 308 20291 to 120 days 63 33More than 120 days 146 274
716 1,847
Receivables that are impaired
The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:
GroupIndividually impaired2009 2008
$’000 $’000
Trade receivables – nominal amounts 86 –Less: Allowance for impairment (86) –
– –
Movement in allowance accounts:
At 1 January – 10Charge/(write back) during the year 86 (10)
At 31 December 86 –
Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in fi nancial diffi culties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 101
18. Other receivables and deposits
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Non-current:Other receivables 913 – – –Less: Allowance for impairment (74) – – –
839 – – –
Current:Other receivables 5,501 5,731 296 9Less: Allowance for impairment (237) (13) – –
5,264 5,718 296 9Deposits 19,262 12,166 25 –
24,526 17,884 321 9
Other receivables are non-interest bearing and are generally on 30 to 180 days terms except for an amount of $913,000 (2008: Nil) which is due after 12 months. Deposits include an amount of $5,000,000 (2008: Nil) for the subscription of junior bonds relating to the Group’s investment in a retail property trust in Singapore.
Other receivables that are past due but not impaired
The Group has other receivables amounting to $1,378,000 (2008: $762,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:
Group2009 2008
$’000 $’000
Other receivables past due:Lesser than 30 days 463 29730 to 60 days 300 12461 to 90 days 165 5891 to 120 days 50 86More than 120 days 400 197
1,378 762
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h102
18. Other receivables and deposits (cont’d)
Other receivables that are impaired
The Group’s other receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:
Group2009 2008
$’000 $’000
Other receivables – nominal amounts 1,150 13Less: Allowance for impairment (311) (13)
839 –
Movement in allowance accounts:
At 1 January 13 –Charge during the year 298 13
At 31 December 311 13
19. Prepayments
This comprises advance payment of land premium for the lease of land from Jurong Town Corporation and related charges. The land is intended for the construction of offi ce building and development of manufacturing facilities in Singapore.
20. Amounts due from/to subsidiaries and joint ventures (non-trade)
The amount due from/to subsidiaries and joint ventures are unsecured, non-interest bearing and generally on 30 to 60 days term except for:
(i) loans to subsidiaries of $7,371,000 (2008: $5,481,000) which are repayable on demand;
(ii) a loan to a subsidiary of $600,000 as at 31 December 2008 which earned an interest of 7.5% per annum and was fully repaid during the fi nancial year; and
(iii) a loan from a subsidiary of $2,000,000 (2008: $Nil) which is repayable on demand.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 103
20. Amounts due from/to subsidiaries and joint ventures (non-trade) (cont’d)
Group
Receivables that are past due but not impaired
Amount due from joint venture (non-trade)
2009 2008$’000 $’000
Lesser than 30 days 16 1530 to 60 days 18 1561 to 90 days 18 –91 to 120 days 4 –
Total as at 31 December 56 30
Company
Receivables that are past due but not impaired
Amount due from subsidiaries (non-trade)
2009 2008$’000 $’000
Lesser than 30 days 13 41430 to 60 days 2 42761 to 90 days 10 41491 to 120 days 11 7More than 120 days – 1
Total 36 1,263
21. Cash and cash equivalents
Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000
Fixed deposits 557 3,187 – 2,550Cash on hand and at bank 57,869 44,690 3,020 3,909
58,426 47,877 3,020 6,459
Fixed deposits of the Group and the Company have maturity periods of 12 months (2008: 3 months to 12 months) with effective interest rates ranging from 0.45% to 2.25% (2008: 0.93% to 4.14%) per annum.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h104
22. Trade payables
Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000
Trade payables 14,044 11,630 – –
Trade payables are non-interest bearing and are normally settled on 30 to 90 days terms.
23. Other payables, other liabilities and provision for reinstatement costs
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Other payables 37,919 34,898 224 149
Other liabilities
Accrued operating expenses 21,656 17,483 1,764 1,475Deferred revenue 8,161 3,589 – –
29,817 21,072 1,764 1,475
Other payables are non-interest bearing and have an average of 30 to 90 days term, except for retention sums included therein which have repayment terms of up to 1 year. Included in other payables are food court tenant and stored value card deposits of $8,539,000 (2008: $7,141,000).
Provision for reinstatement costs
2009 2008$’000 $’000
GroupAt 1 January 1,809 1,487Additions 1,280 322Disposal of a subsidiary (1) (28) –
Total as at 31 December 3,061 1,809
(1) Details are in Note B to the Cash Flow Statement
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 105
24. Loans from minority shareholders of subsidiaries
The loans from minority shareholders of subsidiaries are unsecured, non-interest bearing and have no fi xed terms of repayment.
During the year, the loan from minority shareholder of the subsidiary, Megabite Hong Kong Limited (“MBHK”), amounting to $126,000, was capitalised as equity. The Group’s interest in MBHK remain unchanged at 85%. The remaining loan from minority shareholder, amounting to $150,000, was deconsolidated with the disposal of the subsidiary, Twin Peaks Venture Singapore Pte Ltd during the year.
25. Finance lease obligations, secured
The Group has fi nance leases for certain items of machinery and equipment and motor vehicles (Note 10).
Future minimum lease payments under fi nance leases together with the present value of the net minimum lease payments are as follows:
GroupTotal
minimum lease
paymentsPresent value of payments
Total minimum
lease payments
Present value of payments
2009 2009 2008 2008$’000 $’000 $’000 $’000
Not later than one year 188 173 216 191Later than one year but not later than fi ve years 225 216 458 430
Total minimum lease payments 413 389 674 621Less: amounts representing fi nance charges (24) – (53) –
Present value of minimum lease payments 389 389 621 621
The leases have options to purchase at the end of the lease term. The effective interest rates of the leases range from 4.20% to 6.09% (2008: 4.20% to 6.10%) per annum. Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h106
26. Short-term loans, secured
Group2009 2008
$’000 $’000
Bank loans- USD 845 868- HKD 1,268 2,141- RMB 2,846 846- SGD – 1,000
4,959 4,855
The effective interests on these short-term loans range from 1.70% to 7.88% (2008: 2.03% to 7.88%) per annum. The interest rates of these fl oating rate loans are repriced from time to time at the discretion of the respective banks.
The bank loans are revolving term loans of 3 to 6 months (2008: 3 to 6 months) and are secured by several continuing guarantees by the Company.
27. Long-term loans, secured
GroupTerm loans Maturity 2009 2008
$’000 $’000
SGD loans 2010 - 2012 3,661 2,703
HKD loans 2010 - 2012 4,565 6,934
RMB loans 2012 2,062 1,547
RM loan 2012 306 –
RM loan Note 1 189 67
10,783 11,251
Current 3,815 4,844Non-current 6,968 6,407
10,783 11,251
Note 1 – the loan is repayable by 36 monthly instalments upon full drawdown of the loan to a specifi ed sum.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 107
27. Long-term loans, secured (cont’d)
Other than a SGD loan of $222,000 (2008: $889,000) which is a fi xed rate loan bearing an interest rate of 4.25% per annum, all other loans are fl oating rate loans with effective interest rates ranging from 1.85% to 6.11% (2008: 2.08% to 7.94%) per annum. The interest rates of these fl oating rate loans are repriced from time to time at the discretion of the respective banks.
Securities
As at 31 December 2008, a term loan of $1,547,000 was secured by a charge over a leasehold property held by Shanghai BreadTalk Co., Ltd. During the fi nancial year, the loan was fully repaid and accordingly the security was discharged.
Term loans of $3,520,000 (2008: $2,522,000) are secured by continuing guarantees by the Company and Topwin Investment Holding Pte Ltd, a wholly-owned subsidiary.
All other term loans are secured by continuing guarantees by the Company.
28. Amount due to landlord (non-trade)
The balance is payable to a landlord, who paid renovation costs on behalf of a subsidiary. This amount is unsecured and non-interest bearing.
Group2009 2008
$’000 $’000
Current 88 90Non-current 127 197
215 287
29. Share capital and treasury shares
(a) Share capital
Group and Company2009 2008
Number ofshares $’000
Number ofshares $’000
Issued and fully paid
At beginning and end of the year 234,911,034 33,303 234,911,034 33,303
The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h108
29. Share capital and treasury shares (cont’d)
(b) Treasury shares
Group and Company2009 2008
Number ofshares $’000
Number ofshares $’000
At beginning of the year – – – –Acquired during the fi nancial year (970,000) (283) – –
At end of the year (970,000) (283) – –
Treasury shares relate to ordinary shares of the Company that is held by the Company.
The Company acquired 970,000 (2008: Nil) shares in the Company through purchases on the Singapore Exchange during the fi nancial year. The total amount paid to acquire the shares was $283,000 (2008: $Nil) and this was presented as a component within shareholders’ equity.
30. Accumulated profi ts and other reserves
(a) Accumulated profi ts
Included in the Group’s accumulated profi ts is an amount of $1,432,000 (2008: $1,432,000) which is not distributable by way of dividends. The amount arose from the waiver of inter-company debt in the subsidiary, Beijing BreadTalk Restaurant Management Co., Ltd, which was recognised as capital reserve in accordance with local accounting convention.
(b) Statutory reserve fund
In accordance with the Foreign Enterprise Law applicable to subsidiaries in the People’s Republic of China (“PRC”), the subsidiaries are required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profi ts as determined in accordance with the applicable PRC accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiaries’ registered capital. Subject to the approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for dividend distribution to shareholders.
(c) Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the fi nancial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 109
30. Accumulated profi ts and other reserves (cont’d)
(d) Fair value adjustment reserve
Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale fi nancial assets until they are disposed of or impaired.
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000Net gain on available-for-sale fi nancial
assets:- Net gain on fair value changes during
the fi nancial year – 1,178 – –
31. Commitments and contingencies
(a) Commitments
Expenditure contracted for as at the balance sheet date but not recognised in the fi nancial statements is as follows:
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000Commitment in respect of property,
plant and equipment 5,159 168 4,518 87
Commitment for capital contribution in a subsidiary – – 1,200 3,000
(b) Contracted operating lease commitments
The Group has various operating lease agreements for equipment, offi ce, central kitchen, food court and retail outlet premises. These non-cancellable leases have remaining non-cancellable lease terms of between less than 1 year and 9 years. Most leases contain renewable options. Some of the leases contain escalation clauses and provide for contingent rentals based on percentages of sales derived from assets held under operating leases. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h110
31. Commitments and contingencies (cont’d)
(b) Contracted operating lease commitments (cont’d)
Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows:
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Not later than one year 56,090 39,865 – –Later than one year but not later than
fi ve years 144,833 78,796 – –Later than fi ve years 20,512 11,964 – –
221,435 130,625 – –
(c) Operating lease
The Group has entered into non-cancellable operating leases to sublease its food court and retail outlet premises. Sublease rental receivable as at 31 December is as follows:
Group Company2009 2008 2009 2008
$’000 $’000 $’000 $’000
Not later than one year 31,275 25,209 – –Later than one year but not later than
fi ve years 22,582 12,569 – –
53,857 37,778 – –
(d) Letters of guarantees, secured
As at 31 December 2009, the banks issued letters of guarantees on behalf of the Group to lessors of premises amounting to approximately $5,654,000 (2008: $5,254,000).
(e) Corporate guarantees
The Company has provided corporate guarantees of $21,785,000 (2008: $21,981,000) to fi nancial institutions on its subsidiaries’ borrowings and other banking facilities.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 111
32. Related party disclosures
(a) Sale and purchase of goods and services
In addition to those related party information disclosed elsewhere in the fi nancial statements, the following signifi cant transactions between the Group and related parties took place during the year on terms agreed between the parties:
Group2009 2008
$’000 $’000
Income Sale of goods to associates – 2Management fee income from a joint venture 306 190Rental and miscellaneous income from a party related to a director of the Company – 283Food court income from a company related to a director of a subsidiary 567 636
ExpensesRental expense to a joint venture 228 103Rental expense to a minority shareholder – 8Royalty fees to minority shareholders 1,055 879Management fee to a minority shareholder – 15Staff cost recharged by a minority shareholder – 21Purchase of goods from a company related to a director of a subsidiary 270 196
OthersFranchise fee to minority shareholders 29 29Purchase of furniture and fi ttings from a company related to a director of
the Company71 –
(b) Compensation of key management personnel
Salaries and bonus 5,078 4,940Central Provident Fund contributions and other pension contributions 176 166Share-based payment (RSG Plan) 90 –Directors’ fees 112 105Other personnel expenses 727 627
Total compensation paid to key management personnel 6,183 5,838
Comprise amounts paid to:
Directors of the Company 1,644 1,539Directors of subsidiaries 825 1,051Other key management personnel 3,714 3,248
6,183 5,838
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h112
33. Financial risk management objectives and policies
The Group and the Company is exposed to fi nancial risks arising from its operations and the use of fi nancial instruments. The key fi nancial risks include interest rate risk, foreign currency risk, credit risk, liquidity risk and market price risk. The Audit Committee provides independent oversight to the effectiveness of the risk management process.
The Group’s and Company’s principal fi nancial instruments comprise bank loans, fi nance leases and cash and short term deposits. The main purpose of these fi nancial instruments is to raise fi nance for the Group’s and Company’s operations. The Group and Company has various other fi nancial assets and liabilities such as trade and other receivables, trade and other payables and related company balances, which arise directly from its operations.
It is, and has been throughout the current and previous fi nancial year, the Group’s and Company’s policy that no trading in derivative fi nancial instruments shall be undertaken.
The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned fi nancial risks and the objectives, policies and processes for the management of these risks.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash fl ows of the Group’s and the Company’s fi nancial instruments will fl uctuate because of changes in market interest rates.
The Group’s and the Company’s exposure to interest rates risk arises primarily from its investment portfolio in fi xed deposits and its debt obligations. The Group does not use derivative fi nancial instruments to hedge its investment portfolio. The Group obtains additional fi nancing through bank borrowings and leasing arrangements. The Group’s policy is to obtain the most favourable interest rates available without increasing its foreign exchange exposure.
Surplus funds are placed with reputable banks.
Sensitivity analysis for interest rate risk
GroupEffect on profi t net of tax
100 basis points
increase
100 basis points
decrease$’000 $’000
2009
- Singapore dollar (28) 28- Renminbi (36) 36- Hong Kong dollar (58) 58- US dollar (6) 6- Ringgit (5) 5
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 113
33. Financial risk management objectives and policies (cont’d)
(a) Interest rate risk (cont’d)
GroupEffect on profi t net of tax
100 basis points
increase
100 basis points
decrease$’000 $’000
2008
- Singapore dollar (2) 2- Renminbi (22) 22- Hong Kong dollar (91) 91- US dollar (6) 6
(b) Foreign currency risk
The Group has transactional currency exposures arising from sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, Renminbi (RMB) and Hong Kong Dollar (HKD). The foreign currencies in which these transactions are denominated are mainly US dollars (USD), HKD, RMB and SGD.
Currently, the Chinese government imposes control over foreign currency. RMB, the offi cial currency in the People’s Republic of China (“PRC”), is not freely convertible. Enterprises operating in the PRC can enter into exchange transactions through the People’s Bank of China or other authorised fi nancial institutions. Payments for imported materials or services and remittance of earnings outside of the PRC are subject to the availability of foreign currency which depends on the foreign currency denominated earnings of the enterprises, or exchanges of RMB for foreign currency must be arranged through the People’s Bank of China or other authorised fi nancial institutions. Approval for exchanges at the People’s Bank of China or other authorised fi nancial institutions is granted to enterprises in the PRC for valid reasons such as purchase of imported materials and remittance of earnings. While conversion of RMB into Singapore dollars or other currencies can generally be effected at the People’s Bank of China or other authorised fi nancial institutions, there is no guarantee that it can be effected at all times.
The Group is also exposed to currency translation risk arising from its net investments in foreign operations, in Malaysia, the PRC, Hong Kong and Thailand. The Group’s net investments in these countries are not hedged as currency positions in Ringgit Malaysia, RMB, Hong Kong dollar and Thai Baht are considered to be long-term in nature.
Sensitivity analysis for foreign currency risk
The following table demonstrates the sensitivity of the Group’s profi t net of tax to a reasonably possible change in the USD, HKD, RMB and SGD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h114
33. Financial risk management objectives and policies (cont’d)
(b) Foreign currency risk (cont’d)
GroupEffect on profi t net of tax
2009 2008$’000 $’000
Against SGD:
USD - strengthened 6% (2008: 6%) 130 141 - weakened 6% (2008: 6%) (130) (141)
HKD - strengthened 5% (2008: 5%) 49 64 - weakened 5% (2008: 5%) (49) (64)
RMB - strengthened 5% (2008: 5%) (13) 84 - weakened 5% (2008: 5%) 13 (84)
Against RMB:
USD - strengthened 6% (2008: 6%) 57 (13) - weakened 6% (2008: 6%) (57) 13
SGD - strengthened 5% (2008: 5%) 42 (9) - weakened 5% (2008: 5%) (42) 9
Against HKD:
SGD - strengthened 5% (2008: 5%) (309) (67) - weakened 5% (2008: 5%) 309 67
(c) Credit risk
Credit risk is the risk of loss that may arise on outstanding fi nancial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other fi nancial assets (including investment securities, cash and cash equivalents), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.
The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verifi cation procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not signifi cant.
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 115
33. Financial risk management objectives and policies (cont’d)
(c) Credit risk (cont’d)
Exposure to credit risk
At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by:
– the carrying amount of each class of fi nancial assets recognised in the balance sheets; and
– an amount of $21,785,000 (2008: $21,981,000) relating to corporate guarantees provided by the Company to fi nancial institutions on its subsidiaries’ borrowings and other banking facilities.
Credit risk concentration profi le
The Group determines concentrations of credit risk by monitoring the country profi le of its trade receivables on an on-going basis. The credit risk concentration profi le of the Group’s trade receivables at the balance sheet date is as follows:
Group2009 2008
$’000% oftotal $’000
% oftotal
By country:Singapore 209 6% 559 12%People’s Republic of China 2,946 76% 3,218 68%Indonesia 55 1% 109 2%The Philippines 472 12% 753 16%Thailand 131 3% 94 2%Kuwait 22 1% 21 –Others 33 1% 7 –
3,868 100% 4,761 100%
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable fi nancial institutions or companies with high credit ratings and no history of default.
Financial assets that are either past due or impaired
Information regarding fi nancial assets that are either past due or impaired is disclosed in Notes 17, 18 and 20 above.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h116
33. Financial risk management objectives and policies (cont’d)
(d) Liquidity risk
Liquidity risk is the risk that the Group or the Company will encounter diffi culty in meeting fi nancial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of fi nancial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and fl exibility through the use of stand-by credit facilities.
The Group monitors and maintains a level of cash and cash equivalents deemed adequate by the management to fi nance the operations of the Group.
Short-term funding may be obtained from short-term loans where necessary.
The table below summarises the maturity profi le of the Group’s and the Company’s fi nancial assets and fi nancial liabilities at the balance sheet date based on contractual undiscounted payments:
2009 20081 yearor less
1 to 5 years Total
1 year or less
1 to 5 years Total
Group $’000 $’000 $’000 $’000 $’000 $’000Financial assets :Investment securities – 1,494 1,494 – 1,494 1,494Trade receivables 3,868 – 3,868 4,761 – 4,761Other receivables and deposit 24,526 839 25,365 17,884 – 17,884Amount due from joint ventures
(non-trade)469 – 469 343 – 343
Fixed deposits 557 – 557 3,187 – 3,187Cash on hand and at bank 57,869 – 57,869 44,690 – 44,690
87,289 2,333 89,622 70,865 1,494 72,359
Financial liabilities :Trade and other payables 51,963 – 51,963 46,528 – 46,528Accrued operating expenses
(Note 23)21,656 – 21,656 17,483 – 17,483
Amount due to joint ventures and landlord
193 127 320 189 197 386
Loans and borrowings 9,315 7,413 16,728 10,219 7,230 17,449
83,127 7,540 90,667 74,419 7,427 81,846
CompanyFinancial assets :Other receivables and deposits 321 – 321 9 – 9Amount due from subsidiaries 10,738 – 10,738 7,853 – 7,853Fixed deposits – – – 2,550 – 2,550Cash on hand and at bank 3,020 – 3,020 3,909 – 3,909
14,079 – 14,079 14,321 – 14,321
Financial liabilities :Trade and other payables 224 – 224 149 – 149Accrued operating expenses
(Note 23)1,764 – 1,764 1,475 – 1,475
Amount due to subsidiaries 2,027 – 2,027 8 – 8
4,015 – 4,015 1,632 – 1,632
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 117
33. Financial risk management objectives and policies (cont’d)
(d) Liquidity risk (cont’d)
The table below shows the contractual expiry by maturity of the Company’s contingent liabilities. The maximum amount of the financial guarantee contracts are allocated to the earliest period in which the guarantee could be called.
2009 20081 yearor less
1 to 5 years Total
1 yearor less
1 to 5years Total
Company $’000 $’000 $’000 $’000 $’000 $’000
Financial guarantees 14,969 7,413 22,382 15,472 7,230 22,702
(e) Market price risk
Market price risk is the risk that the fair value or future cash fl ows of the Group’s fi nancial instruments will fl uctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instrument. This instrument is quoted on the SGX-ST in Singapore and is classifi ed as available-for-sale fi nancial asset. The Group does not have exposure to commodity price risk.
Sensitivity analysis for equity price risk
At the balance sheet date, if the share price had been 15% (2008: 15%) higher/lower with all other variables held constant, the Group’s Fair Value Adjustment Reserve in equity would have been $224,000 (2008: $224,000) higher/lower, arising as a result of an increase/decrease in the fair value of equity instruments classifi ed as available-for-sale.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h118
34. Financial instruments
(a) Financial assets and liabilities
The carrying amount by category of fi nancial assets and liabilities are as follows:
Group2009 2008
$’000 $’000Loans and receivables
Trade receivables 3,868 4,761Other receivables and deposits 25,365 17,884Amount due from joint-ventures (non-trade) 469 343Fixed deposits 557 3,187Cash on hand and at bank 57,869 44,690
Total 88,128 70,865
Available-for-sale fi nancial assets
Investment securities 1,494 1,494
Financial liabilities carried at amortised cost
Trade payables 14,044 11,630Other payables 37,919 34,898Accrued operating expenses (Note 23) 21,656 17,483Amount due to joint-ventures (non-trade) 105 99Amount due to landlord (non-trade) (Note 28) 215 287Finance lease obligations, secured (Note 25) 389 621Short term loans, secured (Note 26) 4,959 4,855Long term loans, secured (Note 27) 10,783 11,251Loans from minority shareholders of subsidiaries – 276
Total 90,070 81,400
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 119
34. Financial instruments (cont’d)
(b) Fair values
Financial instruments carried at fair value
The fair value of investment securities is determined by reference to the published market bid price at the balance sheet date.
Financial instruments whose carrying amount approximate fair value
Management has determined that the carrying amounts of cash and bank balances, fi xed deposits, trade and other receivables, trade and other payables, related company balances, amount due to landlord and fl oating rate bank loans, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently.
Fixed interest rate term loan of $222,000 (2008: $889,000) approximates fair value based on available market information on similar loans as at fi nancial year end.
Financial instruments carried at other than fair value
Set out below is a comparison of the carrying amount and fair value of the fi nancial instrument that is carried in the fi nancial statements at other than fair value as at 31 December.
Carrying amount Fair value2009 2008 2009 2008
$’000 $’000 $’000 $’000
Financial assets:Other receivables 839 – 796 –
Financial liabilities:Obligations under fi nance leases 389 621 382 606
Fair value is estimated by discounting expected future cash fl ows at market incremental lending rate for similar types of borrowing or leasing arrangements at the balance sheet date.
No disclosure of fair values are made for the quasi-capital loan to an associate, loans from minority shareholders of subsidiaries and long-term amount due to landlord as it is not practical to determine their fair values with suffi cient reliability since the balances have no fi xed terms of repayment.
Notes to the Financial Statements 31 December 2009
Vi b r a n t G r o w t h120
35. Capital management
The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support business and maximise shareholder value.
The Group manages its capital structure and makes adjustments to it, in the light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2009 and 2008.
As disclosed in Note 30, subsidiaries of the Group operating in the PRC are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the respective subsidiaries for the fi nancial year ended 31 December 2009 and 2008.
The Group monitors capital using gearing ratio (which is total borrowings divided by total equity) and net gearing ratio (which is total borrowings less cash and cash equivalents divided by total equity).
Group2009 2008
$’000 $’000
Total borrowings (1) 16,131 17,003Less: Cash and cash equivalents (58,426) (47,877)
Net cash (42,295) (30,874)
Total equity 66,166 56,133
Gearing ratio (times) 0.24 0.30
Net gearing Net cash Net cash
(1) including bank loans, fi nance lease obligations and loans from minority shareholders of subsidiaries
Notes to the Financial Statements 31 December 2009
B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 121
36. Segment information
For management purposes, the Group is organised into business units based on their products and services, and has three reportable operating segments as follows:
(a) The bakery segment is in the business of manufacturing and retailing of all kinds of food, bakery and confectionary products including franchising.
(b) The food court segment is involved in the management and operation of food courts and operation of food and drinks outlets within the food courts.
(c) The restaurant segment is in the business of operating food and drinks outlets, eating houses and restaurants.
Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profi t or loss.
Transactions between operating segments are generally based on terms determined on commercial basis.
Notes to the Financial Statements 31 December 2009
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36. Segment information (cont’d)
2009Bakery
operations (1)
Restaurant operations
Food court
operations Others (2) Elimination Group$’000 $’000 $’000 $’000 $’000 $’000
RevenueExternal sales 129,372 38,960 78,161 – – 246,493Inter-segment sales (Note A) 282 – 1,853 – (2,135) –
Total revenue 129,654 38,960 80,014 – (2,135) 246,493
ResultsProfi t from operations 7,902 3,075 4,882 394 – 16,253Interest income 47 4 30 22 (14) 89Interest expense (377) (8) (221) – 14 (592)Share of associates’ results – – – (200) – (200)Share of joint ventures’ results – – 65 – – 65
Segment profi t 7,572 3,071 4,756 216 – 15,615Tax expense (3,975)
Profi t for the year 11,640
Assets and liabilitiesSegment assets (Note A) 64,209 32,457 82,006 13,425 (20,884) 171,213Deferred tax assets 872
Total assets 172,085
Segment liabilities (Note A)
42,504 16,216 60,139 4,031 (21,598) 101,292
Tax payable 3,216Deferred tax liabilities 1,411
Total liabilities 105,919
Other informationInvestment in joint ventures – – 284 – – 284
Additions to non-current assets (Note B)
8,235 4,206 13,337 754 – 26,532
Depreciation and amortisation 6,034 1,955 8,675 37 – 16,701Other non-cash expenses
(Note C)500 422 968 90 – 1,980
Notes to the Financial Statements 31 December 2009
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Notes to the Financial Statements 31 December 2009
36. Segment information (cont’d)
2008Bakery
operations (1)
Restaurant operations
Food court
operations Others (2) Elimination Group$’000 $’000 $’000 $’000 $’000 $’000
RevenueExternal sales 110,864 32,173 69,212 – – 212,249Inter-segment sales (Note A) 225 – 1,361 – (1,586) –
Total revenue 111,089 32,173 70,573 – (1,586) 212,249
ResultsProfi t from operations 4,313 3,011 6,106 (201) (2) 13,227Interest income 54 2 70 70 (29) 167Interest expense (415) (2) (466) – 32 (851)Share of associates’ results (61) – – (435) – (496)Share of joint ventures’ results – – (46) – – (46)
Segment profi t/(loss) 3,891 3,011 5,664 (566) 1 12,001Tax expense (3,643)
Profi t for the year 8,358
Assets and liabilitiesSegment assets (Note A) 53,710 19,544 74,468 14,589 (15,686) 146,625Deferred tax assets 532
Total assets 147,157
Segment liabilities (Note A) 36,974 8,757 55,115 1,638 (15,686) 86,798Tax payable 3,102Deferred tax liabilities 1,124
Total liabilities 91,024
Other informationInvestment in associates – – 200 – – 200Investment in joint ventures – – 222 – – 222Additions to non-current assets
(Note B)13,674 1,658 10,923 75 – 26,330
Depreciation and amortisation 4,966 2,115 6,627 21 – 13,729Other non-cash expenses
(Note C)221 434 859 32 – 1,546
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36. Segment information (cont’d)
Notes:
(A) Inter-segment sales, assets and liabilities are eliminated on consolidation.
(B) Additions to non-current assets consist of additions to property, plant and equipment, intangible assets and advance payment for lease of land (Note 19).
(C) Other non-cash expenses consist of:
• impairment/(write-back) of property, plant and equipment, investment in associate, receivables, amount due from associates and inventories;
• write off of property, plant and equipment, bad debts and inventories;
• (gain)/loss on disposals of a subsidiary and property, plant and equipment;
• loss on liquidation of an associate;
• share based payment expenses; and
• unrealised foreign exchange gain.
Geographical information
External sales Non-current assets (3)
2009 2008 2009 2008$’000 $’000 $’000 $’000
Singapore 117,874 103,946 26,961 19,736PRC 85,619 75,260 34,412 32,833Hong Kong 29,172 18,981 10,960 12,662Rest of the world 13,828 14,062 1,801 2,130
Total 246,493 212,249 74,134 67,361
(1) Bakery operations comprise operation of bakery retail outlets as well as that operated through franchising.(2) The business segment “Others” pertains to investment holding activities of the Group and Out of The Box
Pte Ltd, a 30% owned associate which is engaged in the business of marketing and distribution of canned drinks under the “Anything” and “Whatever” trademarks.
(3) Non-current assets information presented above consist of property, plant and equipment, intangible assets and advance payment for lease of land (Note 19).
Notes to the Financial Statements 31 December 2009
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37. Dividends
Group and Company2009 2008
$’000 $’000
Dividends paid during the year:
• First and fi nal exempt (one-tier) dividend for 2008 of 1.0 cent per share(2007: 0.55 per share) 2,339 1,292
Proposed but not recognised as a liability as at 31 December:
Dividends on ordinary shares, subject to shareholders’ approvalat the Annual General Meeting:
• First and fi nal exempt (one-tier) dividend for 2009 of 1.0 cent per share(2008: 1.0 cent per share) 2,339 2,349
38. Events occurring after the balance sheet date
(i) Investment in Retail Property Trust in Singapore
On 27 January 2010, Imagine Properties Pte. Ltd. (“IPPL”), a wholly-owned subsidiary of the Company, entered into a subscription agreement with PRE 1 Investment Pte. Ltd. (“PRE 1”), together with three other investors, whereby IPPL subscribed for $10,750,000 in principal amount of junior bonds to be issued by PRE 1 (the “Junior Bonds”) and the attached 43 redeemable preference shares for $0.10 each in the capital of PRE 1 (the “Preference Shares”). PRE 1 is the sole unitholder of Perennial Katong Retail Trust, which had in November 2009 entered into a sale and purchase agreement to purchase Katong Mall. The subscription of the Junior Bonds and Preference Shares were satisfi ed in part by upfront deposits of $5,000,000 which IPPL had paid to PRE 1 in the last quarter of 2009 with the remaining $5,750,004.30 fully paid up in cash on 28 January 2010. The Junior Bonds and Preference Shares were issued and allotted to IPPL on 29 January 2010.
(ii) Proposed Bonus Share Issue
On 25 February 2010, the Company proposed a bonus issue to its shareholders on the basis of one bonus share for every fi ve existing ordinary shares in the capital of the Company. The bonus shares will be issued and allotted at nil consideration without capitalisation of the Company’s reserves.
The Company has since received an in-principle approval from the Singapore Exchange Securities Trading Limited for dealing in, listing of and quotation for the bonus shares. The issuance of bonus shares will be made pursuant to the Company’s share issue mandate approved by the shareholders at the last annual general meeting held on 27 April 2009.
Notes to the Financial Statements 31 December 2009
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39. Authorisation of fi nancial statements
The fi nancial statements for the year ended 31 December 2009 were authorised for issue in accordance with a resolution of the directors on 18 March 2010.
Notes to the Financial Statements 31 December 2009
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Statistics of Shareholdings As at 18 March 2010
Issued and fully Paid-up Capital : S$33,302,916Number of Ordinary Shares in Issue (excluding treasury shares) : 233,941,034 Number of Treasury Shares held : 970,000Class of Shares : Ordinary SharesVoting rights : One vote per share
Distribution of Shareholdings
No. of Size of Shareholdings Shareholders % No. of Shares %
1 – 999 2 0.18 21 0.001,000 – 10,000 702 63.76 3,864,593 1.6510,001 – 1,000,000 373 33.88 24,993,689 10.681,000,001 and above 24 2.18 205,082,731 87.67
Total 1,101 100.00 233,941,034 100.00
Twenty Largest Shareholders
No. Name No. of Shares %
1 Citibank Nominees Singapore Pte Ltd 30,741,172 13.142 Hong Leong Finance Nominees Pte Ltd 27,765,000 11.873 United Overseas Bank Nominees Pte Ltd 22,419,000 9.584 Mayban Nominees (S) Pte Ltd 19,100,000 8.165 Katherine Lee Lih Leng 17,178,075 7.346 Morgan Stanley Asia (S’pore) Pte Ltd 14,626,000 6.257 HSBC (Singapore) Nominees Pte Ltd 10,615,000 4.548 HL Bank Nominees (S) Pte Ltd 10,150,000 4.349 George Quek Meng Tong 8,567,609 3.6610 Citibank Consumer Nominees Pte Ltd 7,500,000 3.2111 SBS Nominees Pte Ltd 7,000,000 2.9912 Oversea-Chinese Bank Nominees Private Limited 5,872,775 2.5113 DBS Nominees Pte Ltd 5,292,000 2.2614 Raffl es Nominees (Pte) Ltd 2,600,000 1.1115 Pineapples of Malaya Private Limited 2,500,000 1.0716 Tan Kok Kiong 2,020,000 0.8617 Chen Kuo Hua 1,719,100 0.7318 Phillip Securities Pte Ltd 1,542,000 0.6619 Tan Tiang Yong 1,484,000 0.6320 Wong Shaw Seng 1,480,000 0.63
Total 200,171,731 85.54
Based on information available to the Company as at 18 March 2010, approximately 31.21% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of SGX-ST.
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Substantial Shareholders(As recorded in the Register of Substantial Shareholders as at 18 March 2010)
Name of Substantial Shareholders Direct Interest Deemed InterestNumber of
Shares %Number of
Shares %
1. George Quek Meng Tong (1) 79,590,384 34.02 43,550,850 18.622. Katherine Lee Lih Leng (1) 43,550,850 18.62 79,590,384 34.023. Keywise Capital Management (HK) Ltd (2) – – 25,626,000(2) 10.954. Fang Zheng (3) – – 25,626,000(3) 10.95
(1) Katherine Lee Lih Leng is the spouse of George Quek Meng Tong. Saved as disclosed above, there are no family relationship among our Directors and Substantial Shareholders.
(2) Keywise Capital Management (HK) Ltd, as the fund manager, is deemed interested in these shares held by Keywise Greater China Master Fund, Keywise Greater China Opportunities Master Fund and Keywise Asia Master Fund.
(3) Fang Zheng is deemed interested in these shares by virtue of being the sole shareholder of Keywise Capital Management (HK) Ltd.
Statistics of Shareholdings
As at 18 March 2010
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Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of BreadTalk Group Limited (“the Company”) will be held at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 on Tuesday, 27 April 2010 at 9.30 a.m. for the following purposes:
As Ordinary Business
1. To receive and adopt the Directors’ Report and the Audited Financial Statements of the Company for the year ended 31 December 2009 together with the Auditors’ Report thereon. (Resolution 1)
2. To declare a fi rst and fi nal dividend of 1.0 cent per share tax exempt (one-tier) for the year ended 31 December
2009 (2008: 1.0 cent). (Resolution 2)
3. To re-elect the following Directors retiring pursuant to Article 104 of the Company’s Articles of Association: Mr George Quek Meng Tong (Resolution 3) Mr Ong Kian Min (Resolution 4)
Mr Ong Kian Min will, upon re-election as a Director of the Company, remain as the Chairman of the Audit Committee and Nominating Committee, and a member of the Remuneration Committee. Mr Ong will be considered independent for the purposes of Rule 704(8) of Listing Manual of the Singapore Exchange Securities Trading Limited.
4. To approve the payment of Directors’ fees of S$112,000 for the year ended 31 December 2009 (2008: S$105,000). (Resolution 5)
5. To re-appoint Messrs Ernst & Young LLP as the Auditors of the Company and to authorise the Directors of the Company to fi x their remuneration. (Resolution 6)
6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.
As Special Business
To consider and if thought fi t, to pass the following resolutions as Ordinary Resolutions, with or without any modifi cations:
7. Authority to issue shares
That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”), the Directors of the Company be authorised and empowered to:
(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares, at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fi t; and
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(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,
provided that:
(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fi fty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);
(2) (subject to such calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:
(a) new shares arising from the conversion or exercise of any convertible securities;
(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and
(c) any subsequent bonus issue, consolidation or subdivision of shares;
(3) (until 31 December 2010 or such other expiration date as may be determined by SGX-ST), the limit on the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) of fi fty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company set out in sub-paragraph (1) above, shall be increased to one hundred per centum (100%), for purposes of enabling the Company to undertake pro-rata renounceable rights issues;
(4) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association of the Company; and
(5) unless revoked or varied by the Company in a general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (i)] (Resolution 7)
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8. Authority to issue shares other than on a pro-rata basis pursuant to the aforesaid share issue mandate at discounts not exceeding twenty per centum (20%) of the weighted average price for trades done on the SGX-ST
That subject to and pursuant to the aforesaid share issue mandate being obtained, the Directors of the Company be hereby authorised and empowered to issue shares other than on a pro-rata basis to the shareholders of the Company at a discount (“the Discount”) not exceeding ten per centum (10%) to the weighted average price (“the Price”) for trades done on the SGX-ST for the full market day on which the placement or subscription agreement in relation to such shares is executed (or if not available for a full market day, the weighted average price must be based on the trades done on the preceding market day up to the time the placement or subscription agreement is executed), provided that in exercising the authority conferred by this Resolution:-
(a) the Company complies with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST); and
(b) the Company may, until 31 December 2010 or such other expiration date as may be determined by SGX-ST increase the Discount to an amount exceeding ten per centum (10%) but not more than twenty per centum (20%) of the Price for shares to be issued,
unless revoked or varied by the Company in general meeting, such authority shall continue in force until (a) the conclusion of the next Annual General Meeting of the Company, or (b) the date by which the next Annual General Meeting of the Company is required by law to be held whichever is earlier.
[See Explanatory Note (ii)] (Resolution 8)
9. Authority to issue shares under the BreadTalk Group Limited Employees’ Share Option Scheme
That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under the BreadTalk Group Limited Employees’ Share Option Scheme (“the Scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be issued pursuant to the Scheme shall not exceed fi fteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (iii)] (Resolution 9)
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10. Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and
empowered to offer and grant awards in accordance with the provisions of the BreadTalk Group Limited Restricted Share Grant Plan (“the Plan”) and to allot and/or issue from time to time such number of fully-paid shares as may be required to be allotted and/or issued pursuant to the vesting of the awards under the Plan, provided always that the aggregate number of new ordinary shares to be allotted and/or issued pursuant to the Plan, the Scheme and any other share based schemes (if applicable), which the Company may have in place, shall not exceed fi fteen per centum (15%) of the total issued shares excluding treasury shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (iv)] (Resolution 10)
11. Authority to grant awards to Participants pursuant to the Rules of, and issue shares under, the Plan
That, contingent upon the passing of Resolution 10, in order to reward, retain and motivate employees who had met specifi c performance objectives set by the Company, the Directors of the Company be authorised and empowered to grant awards in accordance with the provisions of the Plan to the following participants of the Plan (“the Participants”) and to issue shares in the Company to the Participants of awards granted by the Company under the Plan, provided always that the aggregate number of shares available to Controlling Shareholders and their associates under the Plan shall not exceed twenty fi ve per centum (25%) of all the shares available under the Plan and that the number of shares available to each Controlling Shareholder or his associate shall not exceed ten per centum (10%) of all the shares available under the Plan. Such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
Name of Participants No. of shares to be awarded
Controlling Shareholders Mr George Quek Meng Tong 59,000 (Resolution 11) Ms Katherine Lee Lih Leng 59,000 (Resolution 12)
Associates of Controlling Shareholders Mr Frankie Quek Swee Heng 27,000 (Resolution 13) [See Explanatory Note (v)]
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12. Renewal of Share Purchase Mandate
That for the purposes of Sections 76C and 76E of the Companies Act, Cap. 50, the Directors of the Company be and are hereby authorised to make purchases or otherwise acquire issued shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per centum (10%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as ascertained as at the date of Annual General Meeting of the Company) at the price of up to but not exceeding the Maximum Price as defi ned in paragraph 3.4 of the Appendix to the Annual Report to Shareholder dated 10 April 2010, in accordance with the terms of the Share Purchase Mandate set out in the Appendix, and this mandate shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.
[See Explanatory Note (vi)] (Resolution 14)
By Order of the Board
Tan Cher LiangCompany SecretarySingapore10 April 2010
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Explanatory Notes:
(i) The Ordinary Resolution 7 in item 7 above, if passed, will empower the Directors of the Company, effective until the conclusion of the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant Instruments convertible into shares and to issue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders. The 50% limit referred to in the preceding sentence may be increased to 100% for the Company to undertake pro-rata renounceable rights issues subject to timeline stated below.
For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares) will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.
The 100% renounceable pro-rata rights issue limit is one of the new measures implemented by the SGX-ST as stated in a press release entitled “SGX introduces further measures to facilitate fund raising” dated 19 February 2009 and which became effective on 20 February 2009 until 31 December 2010. The effectiveness of these measures will be reviewed by the SGX-ST at the end of the period. It will provide the Directors with an opportunity to raise funds and avoid prolonged market exposure by reducing the time taken for shareholders’ approval, in the event the need arises. Minority shareholders’ interests are mitigated as all shareholders have equal opportunities to participate and can dispose their entitlements through trading of nil-paid rights if they do not wish to subscribe for their rights shares. It is subject to the condition that the Company makes periodic announcements on the use of the proceeds as and when the funds are materially disbursed and provides a status report on the use of proceeds in the annual report.
(ii) The Ordinary Resolution 8 in item 8 above is pursuant to measures implemented by the SGX-ST as stated in a press release entitled “SGX introduces further measures to facilitate fund raising” dated 19 February 2009 and which became effective on 20 February 2009 until 31 December 2010. The effectiveness of these measures will be reviewed by SGX-ST at the end of the period. Under the measures implemented by the SGX-ST, issuers will be allowed to undertake non pro-rata placements of new shares priced at discounts of up to 20% to the weighted average price for trades done on the SGX-ST for a full market day on which the placement or subscription agreement in relation to such shares is executed, subject to the conditions that (a) shareholders’ approval be obtained in a separate resolution (“the Resolution”) at a general meeting to issue new shares on a non pro-rata basis at discount exceeding 10% but not more than 20%; and (b) that the resolution seeking a general mandate from shareholders for issuance of new shares on a non pro-rata basis is not conditional upon the Resolution.
It should be noted that under the Listing Manual of the SGX-ST, shareholders’ approval is not required for placements of new shares, on a non pro-rata basis pursuant to a general mandate, at a discount of up to 10% to the weighted average price for trades done on the SGX-ST for a full market day on which the placement or subscription agreement in relation to such shares is executed.
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(iii) The Ordinary Resolution 9 in item 9 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in total (for the entire duration of the Scheme) 15% of the total number of issued shares excluding treasury shares in the capital of the Company from time to time, and the aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 9 is independent from Resolution 10 and the passing of Resolution 9 is not contingent on the passing of Resolution 10.
(iv) Resolution 10 in item 10 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting, to offer and grant awards under the BreadTalk Group Limited Restricted Share Grant Plan (“the Plan”) in accordance with the provisions of the Plan and to issue from time to time such number of fully-paid shares as may be required to be issued pursuant to the vesting of the awards under the Plan subject to the maximum number of shares prescribed under the terms and conditions of the Plan. The aggregate number of ordinary shares which may be issued pursuant to the Scheme, the Plan and any other share based schemes (if applicable) is limited to 15% of the total issued share capital of the Company excluding treasury shares from time to time. Resolution 10 is independent from Resolution 9 and the passing of Resolution 10 is not contingent on the passing of Resolution 9.
(v) Resolutions 11, 12 and 13, in item 11 above, if passed, will empower the Directors of the Company to issue shares in the Company to the Controlling Shareholders and their associates, granted by the Company under the Plan. The resolutions in item 11 are independent from each other and the passing of each such resolution is not contingent on the passing of any of the other resolutions in item 11. Resolution 11 is contingent on the passing of Resolution 3. Shareholders who are eligible to participate in the Plan shall abstain from voting on Resolutions 11, 12 and 13.
The rationale for Resolution 11
Mr. George Quek Meng Tong (George Quek), if re-elected, will remain as the Chairman of the Group and he holds an aggregate of 52.64% of the shareholding (direct and deemed interests). He is one of the co-founders of the Group and has been instrumental in the Group’s development over the years. He is responsible for overseeing the overall management of the Group and is pivotal in charting the direction and growth of the Group.
George Quek has been with the Company since the start in 2000 and has played a pivotal role in steering the growth of the Group in their operations locally and in this region and building up a good track record and reputation for the Group.
His knowledge and contacts in the food and beverage industry, of which he has more than 3 decades of experience, are key factors to the success of the Group. His invaluable experience has not only been instrumental in establishing the “BreadTalk” brand name, but also in setting new F&B trends and redefi ning the Asian food scene. He also played a signifi cant role in the Company’s foray into the food court business in Shanghai and Beijing, People’s Republic of China.
George Quek continues to play an instrumental role in charting our Group’s expansion and business development plans. As the Chairman of the Company, he has in-depth knowledge of the needs of the business as it evolved over the years. His ability to anticipate business trend and demand has enabled the Company to grow the business rapidly.
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The Company believes that George Quek will continue to play a key role in the growth and future development of the Group and there are further potential contributions that he can make. The Company intends to have the fl exibility to structure his remuneration package to include such Awards in future if it is in the interest of the Company to do so. By extending the Plan to George Quek, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group.
The Directors are of the view that the remuneration package of George Quek is fair given his contributions to the Group. The extension of the Plan to George Quek is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company. Although George Quek already has a shareholding interest in the Company, the extension of the Plan to him will ensure that he is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefi t from this system of remuneration, thereby enhancing his long term commitment to the Group.
The participation of and grant of the Awards to George Quek under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 11 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 59,000 shares to George Quek in accordance with the Plan.
The rationale for Resolution 12
Ms. Katherine Lee Lih Leng (Katherine Lee) is the Deputy Chairman of the Company and holds an aggregate of 52.64% of the Company’s shareholding (direct and deemed interests). She is one of the co-founders of the Group and has been assisting the Chairman, George Quek in the Group’s development since its inception. She oversees the Research and Development Department where she is responsible for product development for local and overseas markets. She is also responsible for steering the Group’s new concept developments for the various brands, pioneering new ideas and concepts. She has therefore contributed greatly in the increase and development of the range and quality of the Group’s products, which is one of its unique strengths and factors for its success. In the areas of training, Katherine Lee has actively organized product training and technical skill upgrades to ensure systematic transfers of knowledge and skills to the franchisees and their operations teams to maintain their competitive edge.
The Company believes that Katherine Lee will continue to contribute to the success of the Group. The Company intends to have the fl exibility to structure her remuneration package to include such Awards in future if it is in the interests of the Company to do so. By allowing her to participate in the Plan, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link her total remuneration to the performance of the Group.
The extension of the Plan to Katherine Lee is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company. Although Katherine Lee already has a shareholding interest in the Company, the extension of the Plan to her will ensure that she is equally entitled, with the other employees who are not Controlling Shareholders, to take part in and benefi t from this system of remuneration, thereby enhancing her continued commitment to the Group.
The participation of and grant of Awards to Katherine Lee under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 12 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 59,000 shares to Katherine Lee in accordance with the Plan.
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B r e a d Ta l kA n n u a l R e p o r t 2 0 0 9 137
The rationale for Resolution 13
Mr. Frankie Quek Swee Heng (Frankie Quek), the Group’s Chief Operating Offi cer, holds an aggregate of 0.31% of the Company’s shareholding (direct and deemed interests). He is involved in the formulation and implementation of the expansion plans of the Group in the PRC. With his business acumen and extensive knowledge of the local food and beverage industry, he is assisting the Chairman, George Quek, in overseeing the growth and expansion as well as daily operations of the Group, focusing on the Group’s expansion into the PRC. Frankie Quek has been based in Shanghai since 2005 where he has been overseeing the growing bakery and food court operations in Shanghai and Beijing. His expertise has further led to the successful expansion of the BreadTalk brand name to many other PRC cities through a franchise model system managed by the in house franchise team. The Company therefore believes that he has the potential and ability to contribute to the further success of the Group.
By allowing him to participate in the Plan, the Company will have an additional tool to craft a more balanced and innovative remuneration package that will link his total remuneration to the performance of the Group. Frankie Quek will also be able to share in any future appreciation of the Company’s share price that is commensurate with the Company’s future growth through an increase in his shareholdings to a more signifi cant level.
The Directors are of the view that the remuneration package of Frankie Quek is fair given his contributions to the Group. The extension of the Plan to Frankie Quek is consistent with the Company’s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which is vital to the success of the Company.
As the Plan serves as recognition of the past contributions of those eligible to participate in the Plan, as well as to secure future contributions for the Company and the Group from them, the Directors consider it important that Frankie Quek should be included in the Plan. The Directors consider it crucial for the Company to provide suffi cient incentives which will instill a sense of commitment to the Group.
The participation of and grant of Awards to Frankie Quek under the Plan has been approved in principle by shareholders when they approved the Plan at the Extraordinary General Meeting held on 28 April 2008. Resolution 13 seeks for the above stated reasons, shareholders approval for the Directors decision to grant 27,000 shares to Frankie Quek in accordance with the Plan.
(vi) The Ordinary Resolution 14 proposed in item 12 above, if passed, will empower the Directors of the Company effective until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, to repurchase ordinary shares of the Company by way of market purchases or off-market purchases of up to 10% of the total number of issued shares (excluding treasury shares) in the capital of the Company at the Maximum Price as defi ned in Paragraph 3.4 to the Appendix. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of fi nancing and the fi nancial effects of the purchase or acquisition of ordinary shares by the Company pursuant to the Share Purchase Mandate on the audited consolidated fi nancial accounts of the Group for the fi nancial year ended 31 December 2009 are set out in greater detail in the Appendix.
Notes
1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.
2. The instrument appointing a proxy must be deposited at the Registered Offi ce of the Company at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for holding the Meeting.
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Breadtalk Group LimitedCompany Registration No. 200302045G(Incorporated In Singapore)
Proxy Form(Please see notes overleaf before completing this Form)
IMPORTANT:1. For investors who have used their CPF monies to buy BreadTalk Group Limited’s shares, this
Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specifi ed. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specifi ed to enable them to vote on their behalf.
I/We,
of being a member/members of BREADTALK GROUP LIMITED (the “Company”), hereby appoint:
Name NRIC/Passport No. Proportion of ShareholdingsNo. of Shares %
Address
and/or (delete as appropriate)Name NRIC/Passport No. Proportion of Shareholdings
No. of Shares %Address
or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 27 April 2010 at 9.30 a.m. at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specifi c direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.
(Please indicate your vote “For” or “Against” with a tick [√] within the box provided.)
No. Resolutions relating to: For Against1 Directors’ Report and Audited Financial Statements for the year ended 31 December 2009.2 Payment of proposed fi rst and fi nal exempt (one-tier) dividend. 3 Re-election of Mr George Quek Meng Tong as a Director.4 Re-election of Mr Ong Kian Min as a Director.5 Approval of Directors’ fees amounting to S$112,000 for the year ended 31 December 2009.6 Re-appointment of Messrs Ernst & Young LLP as Auditors.7 Authority to issue new shares.8 Authority to issue new shares up to discount of 20%.9 Authority to issue shares under the BreadTalk Group Limited Employees’ Share Option
Scheme.10 Authority to issue shares under the BreadTalk Group Limited Restricted Share Grant Plan.11 Share award under the Plan to Mr George Quek Meng Tong.12 Share award under the Plan to Ms Katherine Lee Lih Leng.13 Share award under the Plan to Mr Frankie Quek Swee Heng.14 Renewal of Share Purchase Mandate.
Dated this day of 2010
Total number of Shares in: No. of Shares(a) CDP Register
Signature of Shareholder(s) (b) Register of Membersor, Common Seal of Corporate Shareholder
Notes :
1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.
2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint such number of proxies as required to attend and vote in his/her stead. A proxy need not be a member of the Company.
3. Where a member appoints more than one proxy, the appointments shall be invalid unless he/she specifi es the proportion of his/her shareholding to be represented by each proxy. If no proportion or number of shares is specifi ed, the fi rst named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the fi rst named.
4. The instrument appointing a proxy or proxies must be deposited at the Registered Office of the Company at 171 Kampong Ampat #05-05, KA FoodLink, Singapore 368330 not less than 48 hours before the time appointed for the holding of the Meeting.
5. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an offi cer or attorney duly authorised or in such manner as appropriate under applicable laws. Where the original instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the original power of attorney or other authority, if any, under which the instrument of proxy is signed or a duly certifi ed copy of that power of attorney or other authority (failing previous registration with the Company) shall be attached to the original instrument of proxy and must be left at the Registered Offi ce, not less than 48 hours before the time appointed for the holding of the Meeting or the adjourned Meeting at which it is to be used failing which the instrument may be treated as invalid.
6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore. The Company shall be entitled to treat an original certifi cate under the seal of the corporation as conclusive evidence of the appointment or revocation of appointment of a representative.
General:
The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding of the Meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.