Cost control pays off for Fairwood as rentals soar
Restaurant and canteen operator Fairwood Holdings beat off rising rents with improved cost control and increased prices to double first-half net profit before extraordinaries.
In the six months to September, profit from business operations jumped 102 per cent to $24.15 million, the company reported yesterday. After adding an extraordinary gain on property disposal of $16.95 million, earnings were up 93 per cent to $41.09 million.
The company declared an interim dividend of 10 cents per share and a special dividend of eight cents for the property disposal.
Chairman Dennis Lo Hoi-yeung admitted the business environment was becoming challenging, saying some leases signed during the low-rent period of Sars would be renewed early next year and rentals would increase significantly.
High rentals have been blamed for eating into the profits of local retailers. However, double-digit growth in revenue and an improvement in profit margins from 8 per cent to 11.8 per cent helped Fairwood counter the negative impact of rentals, Mr Lo said.
Rentals account for about 17 per cent of the company's revenue, down from 21 per cent two years ago.
Fairwood planned to add 10 more retail outlets in Hong Kong by the end of this financial year, lifting the total to 70. Six of them are due to open soon.
The company said about $70 million was earmarked for capital expenditure this year and half of that had been spent on renovating outlets in the first half.
