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Hong Kong company reporting season

Ramen chain Ajisen China hit by 9.8pc drop in profit amid slowing economy

Company seeking to develop a more proactive online strategy while turning more conservative in its new store openings

PUBLISHED : Tuesday, 23 August, 2016, 9:49pm
UPDATED : Tuesday, 23 August, 2016, 10:46pm

Japanese ramen restaurant chain Ajisen China reported a 9.8 per cent fall in its gross profit for the first half of the year as the slowing economy and entry of new players painted a gloomy picture for China’s catering sector.

The Hong Kong-based restaurant chain, founded by billionaire Poon Wai, registered total turnover of HK$1.4 billion, 11.1 per cent down from a year earlier.

With income growth softening and more young Chinese consumers opting to have takeaways or order food online, the bricks-and-mortar catering giant was hit by shrinking consumer spending and is trying to regain lost ground by beefing up its online operations.

Company chairman Poon said the business has been affected by more competitors entering the industry, while growth of the country’s catering industry has significantly slowed compared to last year.

“Faced with ongoing competition pressure and the downward macro economy, the management

of the group proactively explores and seeks approaches for the transformation of the group,” Poon said in a statement.

The group continued to expand the takeout business and strengthened the cooperation with [online takeout] platforms
Poon Wai, Ajisen China chairman

“Over the past half year, the group continued to expand the takeout business and strengthened the cooperation with [online takeout] platforms,” he said.

“Meanwhile, the group also actively prepares for establishing takeout stores for the purpose of providing new drivers for the growth of the company. Considering the sufficient cash flow, the management is proactively seeking investment targets to deliver greater benefit for shareholders.”

Revenue from Ajisen China’s mainland business amounted to HK$1.21 billion, down from HK$1.43 billion in the prior period, while its Hong Kong outletsraked in HK$120 millionfor the first six months of the year, which represented a 12 per cent drop year on year.

Its shares closed Tuesday down 1.81 per cent to HK$3.25. The stock has climbed 14.44 per cent over the last six months.

The company plans to pay an interim dividend of 4.9 HK cents per share, compared with 4.7 HK cents a year earlier.

As of June 30 this year, the company operated a total of 662 restaurants across the mainland and Hong Kong, compared with 664 a year earlier.

oon, who introduced the Ajisen brand to China in 1996 from Japan, has accumulated a multibillion yuan fortune and has been on the Hurun list of China’s richest entrepreneurs running catering companies since 2008.

The company said earlier that it had joined hands with online-to-offline food delivery service Baidu Takeaway as well as Meituan – China’s answer to Groupon – since last year in response to the exponential growth of takeaway services.