Cafe de Coral delivers HK$442m net on low-end fast food growth

PUBLISHED : Thursday, 09 July, 2009, 12:00am
UPDATED : Thursday, 09 July, 2009, 12:00am

Cafe de Coral Holdings delivered a record profit of nearly HK$442 million for last year as people queued to take advantage of its low-end fast food restaurants during the economic downturn.

Shares of the company, which also operates mid-range Oliver's Super Sandwiches and the high-end Spaghetti House on both sides of the border, rose 1.67 per cent after the results announcement yesterday.

The stock closed 0.26 per cent up at HK$15.58, bucking the fall in the overall market.

Chairman Michael Chan Yue-kwong said the firm planned to spend HK$100 million to open 60 restaurants this year, of which 90 per cent would target the mass market, with an average meal price of between HK$30 and HK$50 per person.

'The same-store sales growth for high-end restaurants like the Spaghetti House is less than 1 per cent, and I believe there is a possibility it can drop in the next 12 months,' Mr Chan said.

'So we will focus on developing medium to low-end outlets to take advantage of the consumption trading-down behaviour during the current economic setback.'

Cafe de Coral runs 584 outlets and aims to have 1,000 by 2014.

The chain said it might cut the average selling price of its food at Cafe de Coral, reducing the average meal price by between 50 HK cents and HK$1 from the current HK$30.

Mr Chan said that despite the poor overall sentiment in the Hong Kong retail market, he was confident of hitting a 'record historical high net profit every year'.

For the year to March, net profit climbed 5.15 per cent to HK$441.87 million from HK$420.23 million a year earlier.

Revenue rose 9.11 per cent to HK$4.67 billion from HK$4.28 billion on the back of a 3 per cent increase in the average selling price and 6 per cent growth in traffic volume.

Its North American business produced a turnaround for the year. However, the mainland operation, which accounted for 10.57 per cent of total turnover, saw a 3.71 per cent fall in its operating margin.

Mr Chan said the cost of setting up new outlets had dragged down profitability, but things would be better when the number of mainland Cafe de Coral restaurants rose to 100 from 67. The HK$150 million food processing centre in Guangzhou would also help save costs when production began at the end of the year.

The company has also invested HK$200 million in a similar centre in Tai Po.

A final dividend of 38 HK cents per share was announced.