Cafe de Coral, Tsui Wah poised to spread tentacles amid healthier H1 profits as experts see slump bottoming out

Some of Hong Kong's most prominent restaurant chains, battered by a global economic slowdown and dissipating tourist numbers, may be seeing light at the end of the tunnel if their latest corporate data are anything to go by.

Both Cafe de Coral - the city's largest and listed Chinese fast-food group with close to 600 outlets worldwide - and "celebrity teahouse" chain Tsui Wah, which has more than two dozen branches in Hong Kong, Macao and on the Chinese mainland, reported improved half-year results on Monday, reversing a downward slide in earnings.

Industry pundits say the city's gloomy retail business, which has witnessed a lengthy sales slump, exacerbated by falling touristy arrivals, notably from the mainland, may be set for a strong comeback, and expect the food catering business to be back on track next year.

Tsui Wah Holdings Ltd, which runs the Tsui Wah cha chaan teng (Hong Kong-style teahouses) and was the city's first teahouse to float in 2012, snapped a downward trend in the second half of the last fiscal year, bouncing back in the black for the six months ended Sept 30, 2016 , with a net profit of HK$42.2 million.

However, the performance still represented a 48- percent drop, compared with the same period of the previous financial year.

Tsui Wah, whose teahouses are reputed to be popular with local pop and movie stars, also posted a 2.2-percent, year-on-year fall in revenue to HK$931.5 million although the figure was still up 1.78 percent from the second half of 2015. Gross profit margin improved from 70.9 percent for the six months ended March 31 to 71.2 percent for the six months ended Sept 30.

Cafe De Coral Holdings Ltd, which was founded in 1968 and whose Chinese name means "All Happy Together", also put up a promising showing.

The company reported an 11.8-percent growth in net profit to HK$232 million for the six months ended Sept 30, 2016, while revenue climbed 4.29 percent to HK$3.89 billion.

Tsui Wah Holdings Chief Executive Officer Peter Pang Kwing-ho attributed the yearly slip in profit and revenue to the global economic fluctuations, Hong Kong's retail slump and slower growth on the mainland, but stressed that the local economy, as well as the retail sector, are beginning to bottom out.

Confident of a huge scope for improvement in the coming years, he said: "We'll open one more restaurant in Hong Kong in the second half of the year, and are carefully looking for the right places for new outlets. We believe there's still plenty of room for improvement in the mainland market, and mainland business will continue to rise in future."

Cafe de Coral Holdings has mapped out a more aggressive stance, with 25 new restaurants on the cards and slated to open in the second half of next year, creating 800 to 1,000 jobs as growth returns to the local market.

US-based Nielsen - a global information, data and measuring company - said in its 2016 Mainland Tourists Syndicate Report there're still vast opportunities for Hong Kong retailers to tap the demand of mainland travelers, particularly overnight visitors with deeper pockets.

The report notes that an estimated 43 million mainland visitors come to Hong Kong each year, accounting for 75 percent of total tourist arrivals and generating 35 percent of the city's retail sales.

Cafe de Coral Holdings' enriched results bolstered its share price on Monday, chalking up 3.55 percent to close at HK$27.75, while Tsui Wah Holdings' shares surged 0.75 percent to close the day at HK$1.35.

The benchmark Hang Seng Index gained 107 points, or 0.5 percent, to finish the day at 22,830.

cherylin@chinadailyhk.com

(HK Edition 11/29/2016 page9)