Higher costs eat into Cafe de Coral's earnings

PUBLISHED : Wednesday, 27 June, 2012, 12:00am
UPDATED : Wednesday, 27 June, 2012, 12:00am


Rising rents and higher food and labour costs took a bite out of earnings at Cafe de Coral Holdings, with net annual profit falling almost 8 per cent to HK$474 million - its first annual profit fall in eight years.

The fall came despite a 12 per cent rise in sales to HK$5.96 billion.

Its profit margin fell to 13.7 per cent in the year to March 31, from 15.1 per cent a year earlier, the fast food chain's chief executive, Sunny Lo Hoi-kwong, said yesterday.

Lo blamed the decline on higher expenses, saying food costs rose 10 per cent year-on-year, rents 15 per cent and labour costs 17 per cent.

The group will lift prices by 3 to 4 per cent this year, largely in line with the price rise for the previous corresponding period.

Lo said about 100 leases were renewed this year, with some increasing by up to 20 per cent. But he expected 'reasonable' leasing rates next year.

Lo said the introduction of the minimum wage had affected the retail sector, and the impact would continue to grow, although the group still planned to hire 800 to 1,000 workers to expand in Hong Kong this year.

The group spent HK$785 million developing two new central food processing plants in Guangzhou and Tai Po Industrial Estate, to improve logistics, save time and free up retail space in its outlets.

At the end of March, the group operated 317 restaurants in Hong Kong, up by 32 from the previous period, and 120 on the mainland, including Cafe de Coral, Super Super Congee & Noodles, Oliver's Super Sandwiches, and The Spaghetti House.

Lo said the group would spend HK$150 million opening 50 more outlets this year, 20 in Hong Kong and 30 on the mainland, to satisfy growing demand for fast food restaurants among China's growing middle class.

'We will continue with our multi-brand strategy, and will focus on the mainland China market, especially the eastern and southern part,' chairman Michael Chan Yue-kwong said.

Chan hoped the group could see double-digit growth again.

The group declared a final dividend of 45 HK cents per share, for a total dividend payout ratio of 74.6 per cent for the full year.