Fairwood hunting for acquisitions

PUBLISHED : Friday, 13 July, 2007, 12:00am
UPDATED : Friday, 13 July, 2007, 12:00am

Fairwood Holdings, a Hong Kong-fast-food chain operator expanding on the mainland, is looking for acquisition targets after posting a 45 per cent gain in full-year earnings from its core business.

Net income from restaurant operations totalled HK$84.7 million for the year ended March 31, bolstered by a three-year store and menu revamp. Accounting for a HK$17 million one-off gain from property sales in 2005, net profit rose 12.8 per cent.

Sales advanced 22.1 per cent to HK$1.2 billion on the back of a 9 per cent increase in Hong Kong same-store sales and a 20 per cent jump at comparable outlets in the mainland.

Like rivals Cafe de Coral Holdings and Maxim's, Fairwood has benefited from Hong Kong's improving economy.

Gross profit margins rose 1.5 percentage points to 12.2 per cent after the company added higher-margin dishes to its menus, said chairman Dennis Lo Hoi-yeung.

Mr Lo said the firm had HK$200 million cash on hand and a lending credit of up to HK$300 million.

'We will consider acquisitions in Hong Kong as well as in the mainland,' he said, adding that the company intended to buy a chain that is at the higher end of the market than Fairwood.

Fairwood, which has 79 fast-food outlets in Hong Kong, plans to open up to eight restaurants this year. In the mainland, where it has 11 outlets, it plans to open up to eight more in the southern region.

Although mainland pork prices surged recently, Mr Lo said he expected it would have little impact on earnings as the company had been buying more meat from countries such as Brazil.

Fairwood will pay 24 HK cents a share as a final dividend. Together with its interim dividend of 16 HK cents per share, its payout for last year was 60 per cent of earnings.

Shares of Fairwood, which have risen 41 per cent in the past 12 months, closed up 1.1 per cent at HK$11 yesterday.