Cafe de Coral to trim operating costs, seek rental relief after Covid-19 fuels 87 per cent slump in earnings

Restaurant operator to trim workforce, rental costs to counter dwindling sales amid viral outbreak
Company reports an 87 per cent slide in earnings for the year to March 31

Hong Kong economy

Snow Xia

Published: 9:13pm, 15 Jun 2020

Why you can trust SCMP

Cafe de Coral Holdings, which operates a chain of fast food restaurants in Hong Kong and mainland China, is planning to trim its workforce costs and restructure rental leases after posting its worst earnings since at least 2003.

Hit by the Covid-19 pandemic and weak market sentiment, profit fell 87 per cent to HK$73.6 million (US$9.6 million) for the 12 months to March 31, from HK$570 million a year earlier, the company said in an exchange filing on Monday. It will scrap dividend to preserve cash.

Cafe de Coral has taken measures to “tighten operational expenses” by reducing the manpower cost, negotiating with the landlords to lower rents, and shifting to online food ordering and delivery, it said in the filing.

The drop in business in Hong Kong was driven by months of social unrest and the viral outbreak since late January this year, which sent the city’s economy into its worst contraction on record last quarter. Earnings for Hong Kong’s food and beverage industry shrank 31.2 per cent in the first three months, the biggest year-on-year decline on record,

03:41

Fears of fresh Covid-19 outbreak in Hong Kong after 6 cases reported connected to a building

Hong Kong’s government has launched several subsidy schemes ranging from HK$250,000 to HK$2.2 million in May that would benefit 16,000 catering outlets and their employees. Cafe de Coral has received HK$60.28 million in subsidy from the government in 2020, it disclosed.

The Covid-19 pandemic forced the government to close non-essential businesses, crippling many restaurant owners and fuelling job losses, before restrictions were recently relaxed. The group’s casual dining was hit the hardest, resulting in a 14 per cent year-on-year decline in revenue, it said.

Cafe de Coral is not alone in facing the slump. Fairwood last month warned its profit for the year to March 31 could slide by 65 to 75 per cent. Tai Hing Group also cautioned its first quarter revenue could drop by 20 to 25 per cent year-on-year. Both have yet to publish their annual results todate.

In the mainland, its business shrank by 5.4 per cent. Before the viral outbreak, all of the 114 stores in China had generated growing revenues smoothly. Cafe de Coral expects its business to rebound when sentiment recovers.

“Despite the dark clouds currently hovering over the global economy, I remain resolutely positive about the Group’s long-term prospects,” Chairman Sunny Lo Hoi-kwong said. “People will always need to eat.”

Post