Fairwood profit up 43% to HK$70.7mln

The Group confident on reaching its target of operating 100 fast food outlets in Hong Kong by the end of this fiscal year.

Leading local fast food operator Fairwood Holdings Limited (“Fairwood” or “the Group”) on Thursday announced its interim results for the six months ended 30 September 2010.

For the six months ended 30 September 2010, the Group achieved a turnover of HK$811.1 million, an increase of 4.4% over the corresponding period of last year. Gross profit margin increased to 15.0%. Profit attributable to equity holders of the Group was HK$70.7 million compared with HK$49.3 million for the same period last year.

Excluding a gain on disposal of non-current assets held for sale of HK$15.6 million, profit for the period amounted to HK$55.1 million. Basic earnings per share were HK56.25 cents (2009: HK39.23 cents), according to a Fairwood report.

The Board of Directors has declared an interim dividend of HK20.0 cents (2009: HK18.0 cents) per share and a special dividend of HK8.0 cents (2009: nil) per share for the six months ended 30 September 2010. Coupled with special dividend, total declared dividends represent a distribution of approximately 50% of the Group’s profit for the period attributable to equity shareholders.

Mr. Dennis Lo, Executive Chairman of Fairwood, said, “During the review period, the Group adopted a series of effective marketing and pricing strategies that raised average spending and increased customer traffic, therefore, maximizing sales in individual segments. Coupled with greater efficiency derived from its central food processing plant, the Group was able to increase its gross profit margin to 15% despite of inflationary pressures led to a surge in food costs and prevailing high rent.”

The Group also strengthened backend production support during the review period.

Leveraging the central food processing plant, the Group now has better control of operating expenses and is able to more efficiently conduct work procedures and allocate resources, resulting in greater economies of scale.
Aside from current restaurant operations, the Group identified an opportunity in the specialty restaurant segment and launched the “Kenting Tea House” on 1 July 2010. The restaurant offers unique interior décor that exudes a hospitable Taiwan-style ambience, and caters for those who fancy casual yet delicate Taiwanese cuisine. Located at Mega Box, a prime and high-traffic mall in Kowloon Bay, the outlet benefits from the patronage of affluent young customers, resulting in satisfactory performance since its opening.

Across the border, the Group was able to gear its menu towards local tastes. Combined with outlets opened alongside high-traffic metro stations and shopping malls, the Mainland China operation achieved satisfactory results during the review period. The Group will continue to closely monitor the local market and expands its network of outlets across the country when opportunities arise.

During the review period, the Group opened three new fast food outlets, including two in Hong Kong and one in Mainland China. As at 30 September 2010, the Group had a total of 100 outlets in operation in Hong Kong, including 95 fast food outlets, two Buddies Cafés and three specialty restaurants, and 16 fast food outlets in Mainland China.

Moving forward, the Group is confident about reaching its target of operating 100 fast food outlets in Hong Kong by the end of this fiscal year. The management will also continue to introduce international cuisine that appeals to affluent consumers. To stimulate higher average spending, new products and segmentation will be the Group’s primary foci. The Group is also looking forward to seeing greater benefits brought about by the central food processing plant. With higher productivity through automation and lower expenditures via effective cost control measures, the Group will be able to raise its level of competitiveness and strengthen its fundamentals in support of long-term business growth.

The legislation on statutory minimum wage in Hong Kong announced recently is another mounting pressure on cost for the Group. To lessen the impact, the management will take a pragmatic approach; to raise productivity and enhance efficiency through automation, as well as to streamline processes at store level and at the central food processing plant. While adopting such measures, the Group will take into consideration the concerns of all our stakeholders including employees, customers and shareholders.

Mr. Lo concluded, “Having experienced and overcome numerous challenges in the past, we are conscious of the need to continuously strengthen our fundamentals as well as adopt new initiatives to stay ahead. Accordingly, we will thoroughly review all facets of the Group’s operation, making adjustments where necessary to maintain long-term sustainable growth.”