Tang Palace first half profit up 2.6% to RMB24mn

Strategic expansion of restaurant network boosted revenue by 35% to RMB369.3mn and drives future growth.

Tang Palace (China) Holdings Limited (“Tang Palace”), a multi-brand group chain restaurant in China targeting mid-to high-end spending class customers as well as young diners, on Friday announced its 2011 interim results for the six months ended 30 June 2011 (“1H 2011”).

During the period under review, the Group’s revenue increased by approximately 35.0% to RMB369.3 million (1H 2010: RMB273.6 million), primarily due to the opening of new restaurants and increased revenue in existing restaurants. As at 30 June 2011, Tang Palace operates 24 restaurants across Beijing, Shanghai, Shenzhen, Dongguan, Suzhou and Hangzhou and one food plant in Shanghai in China, subsequent to the addition of one new Chinese restaurant and three new fast food restaurants Pepper Lunch in Beijing in 1H 2011.

The increase in revenue was mainly attributable to our restaurants in Northern China and Eastern China. Compared to the first half of 2010, the overall average spending per customer during 1H 2011 improved primarily due to the price adjustment of the Group’s menus particularly under the brand of Tang’s Cuisine and Pepper Lunch.

Operating profit rose by 31.7% to RMB210.0 million compared with the corresponding period in 2010, representing an operating profit margin of 56.9%. The Group incurred approximately RMB 13.4 million listing and related expenses in 1H 2011. Excluding this non-recurring expense, the Group’s profit and total comprehensive income slightly increased by 2.6% to RMB 23.9 million.

The Group maintains a strong financial position with cash and cash equivalents amount to approximately RMB 257.7 million as at 30 June 2011. The Group has not incurred any bank loans during the period under review.

Mr Yip Shu Ming, Chairman of Tang Palace, said, “After the successful listing of our shares on the Main Board ofthe Stock Exchange of Hong Kong Limited in April 2011, we are well on track to realize our expansion plans and revenue growth. Our excellent cash position and business strategies ensure that our shareholders can reap the benefit in the years ahead and maximize their returns.

"Looking ahead, the Group will aim to continue to drive revenue growth and diversify income sources within different aspects of the catering businesses. Opening of new restaurants remains the Group’s growth engine. One Chinese restaurant, one Japanese restaurant and five fast food restaurants are planned to be opened in Beijing, Shanghai and Tianjin in the second half of 2011.

Recognizing the booming demand for restaurants targeted at a medium-to-high end spending class customers, the Group has formulated various new initiatives to capture the enormous market potential of this fast-growing sector.

It aims to improve the Group’s turnover by enhancing marketing activities such as internet advertising and other promotional campaigns, introducing special menus for specific occasions and varieties of banquets, as well as catering services. This pre-booking orders strategy should also enable the Group to better estimate the demand for food ingredients, which should in turn boost the centralized procurement system to enhance efficiency in both purchasing and food-producing process, thus lowering the overall costs of goods consumed.