Press Releases

26 Nov 2020

Café de Coral Group Announces Interim Results Announcement for the six months ended 30 September 2020

The unprecedented COVID-19 pandemic and related social distancing measures significantly impacted the Group’s business and operations during the six months ended 30 September 2020.

After recording a deficit at the end of FY2019/20, the Group began FY2020/21 with the full impact of the COVID-19 pandemic in our home market. Despite the significant business impact we faced, we introduced voluntary measures in late March to early April to protect customers and staff by restricting dine-in services after 6:30 p.m. – which substantially affected the Group’s results in the first quarter of the financial year.

After the initial wave of the COVID-19 outbreak subsided in Hong Kong, the Group was able to recover our business and operations. However, subsequent waves of infections saw increasingly tighter government-imposed restrictions, including limiting tables to two diners, and a reduction of 50% of dine-in capacity. We also experienced whole-day bans on dine-in services for a short period of time, in compliance with government requirements. Implementing these rapidly changing measures in Hong Kong has been testing to our business. Social distancing restrictions remained in place as of 30 September 2020.

Dampened consumer sentiment and restrictions on in-restaurant dining led to a 24.3% decrease in revenue during the first half of FY2020/21 to HK$3,225.7 million compared to the same period last year. The Group’s profit attributable to shareholders slightly increased by 8.4% to HK$162.3 million.

During the period, the Group received pandemic relief and subsidies from the Hong Kong and PRC governments totalling HK$338.9 million, which include subsidies of HK$322.5 million under the Employment Support Scheme (“ESS”) and other subsidies of HK$7.9 million under the Anti-epidemic Fund of the Hong Kong Government. All ESS subsidies, which accounted for approximately 31.6% of the Group’s staff cost in Hong Kong during the period, were used for paying salaries and wages to our employees.

Amidst the worst business contraction that the Group has ever experienced, we seized the opportunity to invest in future growth by launching a series of long-term business and operation enhancement initiatives such as product development leveraging on hero dishes, marketing campaigns focusing on value and convenience, and staff training emphasising new hygiene and service measures – implemented in view of the breathing space made available by government subsidies.

We also conducted a few rounds of staff recruitment in order to build and equip the team for business and operations under the “new normal” during and after the pandemic.

Further, the Group put in place different measures to minimise the impact as well as to reduce cost, and especially rental expenses, by liaising with landlords for rental concessions.

From being caught unprepared to now having faced a few waves of COVID-19 in Hong Kong, the Group has quickly learned to adapt to the rhythm of business which has become the “new normal”, and shifted our strategy and operations to ensure effective business continuity and evolution. Although the first six months of FY2020/21 were extremely challenging, the Group has taken significant steps to manage the situation and minimise impact on long-term performance.

Our business and operations in the Mainland China market fared better than Hong Kong during the pandemic. The Central Government moved quickly to implement strict distancing measures in early February, which closed one-third of our stores. The Group responded by vigorously shifting focus to takeaway and Online-to-Offline (O2O) orders. With the pandemic situation largely under control, the Government has relaxed social distancing measures. By the end of the period under review, the Group experienced a V-shaped rebound in its Mainland China business, returning to pre-pandemic levels.

The Group wishes to express its appreciation for the government subsidies and other consumer support measures in Mainland China, as well as support from our stakeholders, which have helped to offset some of the revenue impact during these challenging times.

OUTLOOK
As of the publication of this report, the COVID-19 situation in Hong Kong and around the world remains uncertain, and the outlook for the catering sector is largely dependent on whether the pandemic can be controlled in an effective manner. Although we hope the worst is behind us, the Group remains cautiously optimistic in a more stable market environment going forward. After regaining our footing in the “new normal”, we have adapted our strategies and operations, and are actively taking advantage of our position as a market leader to protect revenue and market share in a rapidly changing business environment.

At present, consumer sentiment is still relatively cost conscious and value-focused, which provides a certain degree of top-line protection for the Group’s QSR and fast casual divisions. To capitalise on changing consumer preferences, we are emphasising speed, takeaway/delivery services and value-focused promotions; and exploring other opportunities for growth. The Group is also actively investing in long-term improvements to the digital customer experience. As catering is a labour-intensive industry, the Group is exploring new applications of technology to improve manpower efficiency. We shall continue to closely monitor the business environment and take other proactive steps to maintain our market leader position in the “new normal”.

Having experienced a V-shaped rebound in the catering industry, the outlook for the Mainland China market is more optimistic – although the strained Sino-US trade relationship continues to create economic uncertainty. However, the Group is well positioned to benefit from government policies to drive domestic consumption.

As the Group already enjoys a strong leadership position in Hong Kong, the ability to consistently add value in a relatively mature market is a challenge. Despite this, the Group remains highly dedicated to our home market and will aggressively pursue meaningful growth in Mainland China – paving the way for the Group’s long-term sustainable growth.


Please click the below link for the announcement:

https://www.cafedecoral.com/eng/investor_relations/announcements/images/Announcements2020/e_20201126.pdf

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