Pandemic aid helps Cafe de Coral stay in black

Business | Avery Chen 27 Nov 2020

Chinese fast-food restaurant chain Cafe de Coral (0341) said its net profit rose 8.4 percent to HK$162.3 million for the half year ending September, thanks to pandemic relief and subsidies of HK$338.9 million from the China and SAR governments.

The company declared an interim dividend of 10 HK cents. Basic earnings per share were 28 cents.

Cafe de Coral said it received subsidies of HK$322.5 million under the SAR government's Employment Support Scheme. The subsidies, which were all used to pay salaries and wages, accounted for about 31.6 percent of its staff cost in the local market.

Chief executive Peter Lo Tak-shing said the company is optimistic about profits in the second half of the financial year as monthly sales remain stable at around HK$600 million with healthy operating cash flows. Even without the subsidies, Lo does not expect the company will incur a loss in the annual results.

Revenue fell by 24.3 percent to HK$3.23 billion for the six months ending September. Gross profit margin plunged by 7.3 percentage points to 4.3 percent, but Lo believes the margin has been bottomed out.

Revenue in Hong Kong slumped 26.9 percent to HK$2.67 billion, while the mainland market saw a 9.1 percent drop to HK$555.9 million.

Lo said the company has shifted its focus to takeaway and delivery services amid the pandemic, which could offset the loss of dine-in business.

As of September 2020, the company's total headcount increased by 956 to 19,788 from end-March.

It was operating 285 stores in Hong Kong as of the end of September, down by nine from March. Store numbers in mainland China increased by one to 115, with five new stores opening during the period.

Cafe de Coral said its business and operations in mainland China had begun to recover to pre-pandemic levels. It is planning to expand its store network in the Greater Bay Area during the latter half of the financial year and aims to open 10 new stores by the end of the year.

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