Café de Coral posts steady growth

Fast-food chain remains optimistic after income rises a slower 8.7pc in challenging environment

PUBLISHED : Saturday, 30 November, 2013, 4:27am
UPDATED : Saturday, 30 November, 2013, 4:27am

Wrestling with a challenging environment at home and abroad, Café de Coral saw a steady 8.7 per cent increase in first-half revenue to HK$3.41 billion while net profit grew 9.8 per cent to HK$243 million, the group's chief executive told a post-results briefing yesterday.

The company, which owns brands such as Spaghetti House, Oliver's Super Sandwiches and its flagship fast-food chain Café de Coral, said it faced a slowing economy on the mainland and "constant pressure" from rising rental costs and labour shortages in Hong Kong.

In the United States, the group's 143 Manchu Wok fast-food outlets suffered from weak customer spending and low consumer confidence as the economy remained sluggish.

"As long as we focus on our competitive edge - keeping prices low and providing good value - we are confident that our customer base will continue to grow as we find new ways to increase shareholder value," Café de Coral chief executive Sunny Lo Hoi-kwong said.

Net profit grew more slowly in the six months to September, compared with the first half of the previous financial year, when it rose 16 per cent to HK$221 million. Revenue grew 8 per cent to HK$3.14 billion during that period.

When it came to gross profit margin, Café de Coral performed more poorly than its competitors. In the six months to September, the group's gross profit margin remained at 12.6 per cent, whereas Tsui Wah Restaurant's stood at 42.8 per cent and Fairwood's was 14 per cent.

Lo said the company expected to reap benefits from its investments on the mainland. Rapid expansion across the border last year squeezed the group's holdings of cash and cash equivalent to HK$772 million from HK$993 million in 2011.

At the end of September, Café de Coral operated 123 outlets on the mainland, and by yesterday it had 331 outlets in Hong Kong. The group aims to open 30 new stores in Hong Kong and 20 on the mainland in the coming year.

Fairwood, in comparison, plans to close several underperforming stores on the mainland in light of double-digit declines in sales during the March-September period.