<Results First Take> Café de Coral (341.HK) FY3/22 results in-line with earlier profit warning.
Results highlights
- Café de Coral (341.HK) releases FY3/22 results with net earnings drop of 93.5% to HK$21.2m (FY3/21: HK$359.1m), in-line with earlier profit warning. The Group had reported steady recovery in the first three quarters, with sales returning to pre-pandemic levels by December. The outbreak of the fifth wave of COVID 19 pandemic in HK, and lockdown restrictions in Shenzhen and Zhuhai in Mar’22 brought about sales disruption in the last quarter. Second, COVID-19 relief has substantially reduced to HK$128m (FY3/21: HK$639m)
- During the fifth wave of COVID-19, sales were seriously disrupted during February and March, whereby a cumulative loss of 2,755 business days (c.17% of capacity) was totaled. CdC targeted to driving full-day takeaway service in most CdC and Super Super Congee & Noodles outlets. In China, partial lockdowns in Shenzhen and Zhuhai in Mar’22 impacted 53 outlets, which were temporarily closed or only allowed to operate at limited capacity.
- FY2/22 revenue rose 11.8% to HK$7,509m. Of which,
- HK QSR rose 8.2% to HK$4,563.1m
- HK Casual Dining rose 23.9% to HK$770.5m
- HK Institutional Catering rose 30.1% to HK$695.5m
- China rose 11.0% to HK$1,331.6m, with same-store sales decline of 1%
- Gross profit margin expanded 1.7ppt to 7.3%, primarily lifted by business recovery in first three quarters, offset by business disruptions in the last quarter.
- Raw material cost as % of sales maintained stable at 30.0% (FY3/21: 29.9%), staff cost contracted 1.1ppt to 34.1%, and rental costs contracted 1.1ppt to 11.6%.
- During the period, CdC added 12 new outlets to 364 outlets in HK, and added 15 outlets in China, with 136 outlets as of Mar’22.
- CdC fast food opened 11 new stores to 162 outlets
- Super Super Congee Noodle opened 6 new stores to 42 outlets
- Currently 10 new QSR stores are in the pipeline
- Casual dining hosted a total of 63 outlets, with Shanghai Laolao and Oliver’s Super Sandwiches adding new outlets
- In China, the Group opened 21 new stores during the year to 136 outlets, with 16 new stores in the pipeline.
- Despite a significant contraction in earnings, the Company has recommended a final DPS of HK18cents, with dividend payout ratio at 773.6%. (FY3/21: HK28 cents)
- The Company’s financial position remains healthy with cash of HK$1,586m, and borrowing of HK$1,080m.
- Café de Coral has established targets to reach in the next 3 years. In Hong Kong, the Group aims to unlock the potential of its revenue through improving profit margins from low to high single digits. This involves optimizing operations and managing overhead. The Group aims to brand portfolio, refine its business model, increase investment in digital infrastructure, as well as strengthening of loyalty club membership programmes. In China, CdC aims to more than double its retail network to 280 stores (FY2/22: 136 outlets), whilst maintaining healthy profitability and service levels.
- Our last rating was a BUY, with TP at HK$15.5