Local fast-food chain Cafe de Coral (0341) saw no dividend was declared for the first time in 20 years as it posted a net profit drop of 87.1 percent year-on-year to HK$73.6 million for the year ending in March.

With business weighed down by deficit recorded in the last quarter, chairman Sunny Lo Hoi-kwong said the board made a hard decision and did not recommend a final dividend for the first time since its listing.

Basic earnings per share plunged 86.7 percent to HK$0.13. However, the company paid out an interim dividend of HK$0.19 per share before. The annual dividend payout ratio was 151.1 percent.

Its revenue dropped 6.2 percent to HK$7.96 billion during the previous financial year. The drop in net profit far exceeded revenue as operating costs only dipped 0.47 percent, while administrative fees rose 8.1 percent year-on-year to HK$481 million. Labor and rental costs accounted for 31.4 percent and 12.4 percent of the revenue, respectively. They were down 2.5 percentage points and 0.7 percentage points, respectively.

The group said the business performance slid further in the second half-year of 2019 and it recorded a loss from January to March. The gross profit margin for the year decreased by 5.2 percentage points to 9.2 percent.

In Hong Kong, revenue for the fiscal year declined 6.4 percent to HK$6.87 billion, with the casual dining sector, such as Spaghetti House, falling 14 percent to HK$779.2 million. Meanwhile, mainland revenues fell 5.4 percent to HK$1.09 billion. Sunny Lo said the mainland business performance was robust before the outbreak.

Chief executive officer Peter Lo Tak-shing said 40 percent of shops received rental cuts. However, overall sales in April and May were not improved despite sales in take-away food rising. He said the virus has changed consumption patterns and the chain could shut down branches with less profitability in the future. The average price per meal fell HK$0.5 as of the end of March, as the company offered discounts to customers dining in.

Peter Lo added that the group has borrowed a HK$1.18 billion mid-to-long term loan for a branch reformation plan.

Although it will postpone its network expansion plan in the second half of the year, the group said it will still seize opportunities to open stores in ideal locations with favorable lease terms.

The group has put a halt to expansion plans for now. SING TAO

Dividend shock as Cafe de Coral net plunges 87pc