Li & Fung

Bakery helps CR Asia net HK$38m

PUBLISHED : Friday, 03 August, 2007, 12:00am
UPDATED : Friday, 03 August, 2007, 12:00am


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Convenience Retail Asia, the Li & Fung unit that operates Circle K stores, said half-yearly net profit rose 15.6 per cent after it acquired bakery firm Saint Honore.

Net profit rose to HK$37.5 million for the six months to June from HK$32.4 million a year ago.

Sales gained 23 per cent to HK$1.32 billion. Earnings per share were 5.3 HK cents from 4.8 HK cents a year ago.

The company, which has 440 stores in Hong Kong and the Pearl River Delta, said earnings included a four-month contribution from Saint Honore, which it bought for HK$629 million in February. Circle K stores accounted for 79 per cent of the group's HK$41.5 million operating profit in the half and Saint Honore contributed 21 per cent.

Chief executive Richard Yeung Lap-bun said profit from Saint Honore was 'not high' in the second quarter because the bakery firm's peak sales seasons were the Lunar New Year and Mid-Autumn Festival, when it offered special items.

'We expect a higher profit contribution from Saint Honore between August and September,' he said, declining to give figures.

Losses in the mainland, where the group has 67 Circle K stores and seven Saint Honore outlets, was 11 million yuan as its operations were still at an investment stage.

'We expect our mainland operations to break even by 2009,' Mr Yeung said, adding the group might open franchised outlets.

Gross margin rose 3.7 percentage points to 37.3 per cent in the second quarter, helped by the bakery business. But higher rents pushed its operating expense to 24.9 per cent on sales, up 0.7 percentage point.

CR Asia will add 18 Circle K stores in Hong Kong, bringing the total to 280 this year, and add 23 Circle K stores in the Pearl River Delta.