Accounting Analysis: Performance of Cafe de Coral Holdings (2020)

This report presents an accounting analysis of Cafe de Coral Holdings, a Hong Kong-based fast-food restaurant chain. The analysis covers the company's financial performance, including revenue and profit trends, return on assets (ROA), return on equity (ROE), and dividend payout ratios. It examines the company's key strategies, such as cost control, expansion in Mainland China, and the use of technology. The report also compares Cafe de Coral Holdings with Fairwood, another company in the industry, and highlights challenges like rising costs. The analysis is based on financial data from 2019 and earlier, including cash flow information, and references relevant academic sources. The report concludes with a summary of the company's financial position and future outlook.

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ssign entA m
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By student name
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Date: 21st April, 2020.
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Contents
nal sisA y ........................................................................................................................................................2
eferen esR c ...................................................................................................................................................5
Analysis
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Café de Coral Holdings is one of the Hongkong based fast food restaurant chain which is
in the food service industry since 1968. It owns more than 580 outlets round the world and caters
almost 300000 customers each day. It has several brands in the market with its speciality in
Chinese, some of which are Super Super Congee & Noodles, The Spaghetti House, Bravo le
Café, MiXian Sense, Ah Yee Leng Tong and many more. The company revenue as well as the
net profit has been increasing year on year since last few years with the gross margin being
stable. In 2019, the company’s return on assets increased to massive 13.1% and the return on
equity increased to 17.3% which is one of the best in the industries. The company has also been
capable enough of increasing shareholder’s wealth – it’s dividend pay-out ratio has been between
80%-150% for last few years.
In the years to come by, the company has some key pillars in mind, some of which are cost
control, sustainable growth, increased presence in various geographies like Mainland China in
Greater Bay area as well as in home market, maintaining high standards of quality and service as
well. The company has a key focus on using technology in business such as automating mobile
ordering, e-channels of ordering, e-payment and thereby maintaining the market leadership. The
company wants to focus on both casual dining as well as online-to-offline (O2O) sales. As per
the recent news, the group believes that the excellence in brand building, supply chain, people
development and network expansion can help business grow in China despite short term woes in
home market.
In case of Fairwood the total revenue of the company had grown by 4.6%, and the overall profit
had decreased by 16.7% from HK$216.1 million to HK$179.9 million. The company had paid
out a dividend of HK81.0 cents per share, the total dividend paid out was HK118.0 cents, and the
overall pay-out ratio of the company was 8.4%. The revenue of the company had grown leaps
and bounds and the same can be expected in the years to come (Hellmann, Perera, & Patel,
2019). The company has two profit making segments mainly the Hongkong restaurants and the
Mainland China and both are generating revenue though revenue from Hongkong restaurants are
more. In the coming future the company is optimistic about its growth however there are
challenges that are associated with rising cost of the food and cheap labour that the management
needs to deals with. They are looking for sophisticated and better ways that will help in
management of the labour and provide them with the required flexibility, with changes in overall
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operation. The company is financing its operation with the help of internally generated cashflows
and the different banking facilities that are available. At the end of the year the company was
having HK$519.9 million (2018: HK$520.6 million) total cash and that was a decrease from the
Prior year and same trend can be predicted for the years to come (Michaela, 2017).
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References
ell ann erera atel C Conte tual issues of t e on ergen e of nternationalH m , A., P , H., & P , . (2019). x h c v c I
Finan ial e orting tandardsc R p S :.
d an es in ounting in or orating d an es in nternational
A v c Acc , c p A v c I
ounting
Acc , 2(26), 108-116.
Mi aelach , R. (2017).
Conte orar ssues in ounting
mp y I Acc se ond ed ondon ile( c .). L : W y.
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