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Saturday, 13 November 2010

Understanding Stock Market Risks - Financial Fraud Risk is real! (3)

Read? Understanding Stock Market Risks - Financial Fraud Risk is real! (2)

Another one! This type of risk can never be discovered through by any sort of TA or FA.


Scam cheques leave dent on crust of BreadTalk

Malaysian unit discovers issue of RM1.5 million in unauthorised cheques; police report filed


SOMEONE has been skimming the cream off BreadTalk Group. The food and beverage player said yesterday that its Malaysian unit had found that unauthorised cheques had been issued to the tune of RM1.5 million (S$623,000).

BreadTalk spokesman Joyce Koh said that the unit, ML Breadworks, uncovered the misappropriation last week during a routine internal review. ML Breadworks is 90 per cent owned by BreadTalk International, a wholly owned subsidiary of BreadTalk Group.

A police report has been lodged in Malaysia and investigations are underway.

A finance manager from another of BreadTalk's subsidiaries in Malaysia has taken charge of the financial operations of ML Breadworks with immediate effect.

'Right now, we do not have a clear view on who the culprit is, so we are doing this to ensure an independent eye is kept on the (company's) processes, and to ensure that operations continue to run smoothly,' said Ms Koh.

BreadTalk, whose brands include Food Republic, Toast Box and Din Tai Fung, became famous for the pork floss buns sold at its bakeries. According to its website, it has more than 300 boutique bakeries and 40 food atriums and restaurants.

The misappropriation of funds has dented the group's third-quarter results. A $622,000 provision was made - equivalent to about 4 per cent of pre-tax profit for 2009.

Yesterday, after the market closed, BreadTalk reported a 4.8 per cent rise in Q3 net profit to $2.8 million. This translated to earnings per share of one cent.

Pre-operating expenses incurred for its first Din Tai Fung restaurant in Thailand contributed to the lacklustre Q3 showing. For Q3 a year ago, BreadTalk earned $3.2 million.

BreadTalk said: 'Raw materials cost will continue to challenge companies in the food and beverage retail space. The group will continue wherever possible to contract directly with our key materials suppliers to mitigate the impact of price escalation.'

Q3 revenue rose 26.8 per cent to $81.3 million.

The bakery segment of the business registered a 49 per cent decline in operating profit to $0.9 million, mainly due to the provision for loss as a result of the misappropriation of funds, and a lower contribution from Singapore bakery operations. BreadTalk attributed the latter to the removal of the government's Jobs Credit Scheme.

BreadTalk shares closed 0.8 per cent or half a cent higher at 65 cents yesterday.

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