"Performance" TAO HEUNG HLDGS reported a half-year loss of HKD 36.96 million, with the Hong Kong business suffering a loss of HKD 6.4 million due to the impact of consumption from the mainland

Tao Heung Holdings (00573.HK) announced its interim results for the period ending June this year, with revenue of HKD 1.14 billion, a year-on-year decline of 11.3%. It turned from profit to a loss of HKD 36.957 million, compared to a profit of HKD 4.022 million in the same period last year; the loss per share was HKD 0.0364. No dividend was declared.

Excluding one-time income items recognized during the period and in the same period last year, such as compensation received, government subsidies, and termination lease income, the net loss attributable to equity holders of the company for the period would be HKD 40 million, compared to a net loss of HKD 21.7 million in the same period last year.

The group's Hong Kong business contributed revenue of HKD 787 million during the period, a year-on-year decline of approximately 6.1%; EBITDA fell 5.3% to HKD 112 million. The Hong Kong business turned from profit to a loss of HKD 6.4 million, compared to a profit of HKD 5.5 million in the same period last year. The group stated that the retail and catering industry in Hong Kong will continue to face severe adversity in 2025. During weekends, long weekends, and public holidays, the frequency and number of people leaving the city have increased, while on weekday evenings, most people prefer to dine at home. As a result, restaurant operators continue to suffer losses. The management has been closely monitoring customer preferences and market trends, launching several popular product plans to help drive sales during the period, including offering two-dish meal takeaway sets at selected restaurants.

In the first half of the year, the group's mainland business generated revenue of HKD 353 million, a year-on-year decrease of approximately 21.2%. EBITDA plummeted 65.3% to HKD 22.7 million, with losses widening to HKD 30.5 million, compared to a loss of HKD 1.5 million in the same period last year.

The company indicated that the catering industry in both Hong Kong and the mainland faced severe challenges in the first half of the year; the Hong Kong catering industry was severely impacted by "outbound tourism" (especially consumption in the north). In addition, the local economic downturn, weak real estate market, poor stock market performance, and uncertain employment prospects have all contributed to overall weak consumer confidence. In the mainland, the industry faces challenges such as reduced large corporate banquets and celebrations, intense competition, harsh pricing, and a public preference for takeout rather than dining in.

Given the structural changes in the Hong Kong market and the shift in consumption patterns in the mainland, the second half of the year is bound to be difficult. Under these adverse conditions, the group has implemented various marketing strategies to increase foot traffic. The group has carried out store renovations to enhance the dining atmosphere. Additionally, the group has continuously offered value products and discounts during the period. As a result, the group has been able to maintain relatively stable revenue, with only a slight decline in the Hong Kong region. To cope with operating costs, the group is continuously striving to improve efficiency and control rent, personnel, and food costs, all of which remain at reasonable levels.

The company stated that the business outlook for the remainder of the fiscal year will be overshadowed by multiple factors. In addition to macroeconomic developments, the industry as a whole must also cope with operational difficulties unique to the local market, which will continue to constrain revenue and profit performance. The management is well aware that there are no quick-fix solutions to the current challenges and will adhere to the principle of prudent operation, responding with determination and lasting resilience