Recent filings reveal the true profits of Hongkong Caterers Ltd, the 50% owner of Maxim's run by the Wu family, and how they take out a substantial management fee from Maxim's on top of the 50% of profits. We also estimate that about 1 in 7 dollars of HK restaurant receipts go to the Maxim's group. Annie Wu has only a 0.33% stake of HC, although her parents and siblings control an estimated 18.6%.

A closer look at Maxim's
11 October 2019

There has been, shall we say, quite a lot of attention recently paid to Maxim's Caterers Ltd (Maxim's), HK's largest restaurant group, due to comments on the HK protests by Annie Wu Suk Ching (Ms Wu), a daughter of James Wu Jim Tak (James Wu) who with his late brother Wu Shun Tak (S T Wu) co-founded Maxim's, regarding the HK protests.

Maxim's has taken steps to distance itself from Ms Wu's comments, stating on 24-Sep that she "does not hold any position at the company, nor is she involved in any managerial decisions". She yesterday went further, stating "I absolutely have no links with Maxim's personally because I don’t work at Maxim's".

Well, not quite. She has an indirect financial interest, revealed in recent corporate filings. As at 30-Sep-2019, she was the registered shareholder of 100 shares (0.33%) of Hongkong Caterers Ltd (HC), which owns 50% of Maxim's. It doesn't sound like much, but Maxim's is so large that HC was able to pay dividends of HK$13,000 per share for the year to 31-Mar-2019, so her dividends are HK$1.3m. The other half of Maxim's is owned by Dairy Farm International Holdings Ltd (DF), a Jardine group company.

We note that the largest single shareholder of HC is a company of unknown domicile, JETCO Investment & Management Ltd (JETCO), which holds 3,780 shares (12.6%). The share register puts it at a HK residential address with James Wu (315 shares) and his wife Eugenia (875). Shareholders also at that address are: Wilson Wu (100), Victor Wu Wai Tat (100), Ms Wu (100), Anna Wu Suk Fun (100), Adeline Wu Suk Ki (100) and Anita Wu Suk Yuen (100) who are likely all siblings. So we estimate that this branch of the family has 5,570 shares (18.6%) of HC. We don't know whether Ms Wu has any shareholding in JETCO.

HC is an unlisted but public company, so we have obtained its accounts for the year ended 31-Mar-2019, filed 2 days ago. As Maxim's is by far its biggest asset, Note 4(c) of the HC accounts has to show the key figures of Maxim's. This shows that Maxim's had turnover of HK$20.27bn in the 2018 calendar year, and made a post-tax profit of $1,678m, on net assets of $7.04bn. That's a decent 8.3% net profit margin on revenue, and a 23.8% return on equity.

The management fee and directors' takeout

HC also earned a "catering management fee" from Maxim's of HK$372.6m, or about 1.84% of Maxim's turnover. HC reports "catering managers' operating expenses" of HK$249.7m. However, a large portion of that must be directors' remuneration, which amounted to HK$194.8m for the year, including HK$169.7m of "salaries and allowances" (note 21). There were just 5 directors of HC during the financial year, of which 1 passed away on 16-Jan-2019. 3 of the others are co-founder James Wu, Michael Wu Wei Kuo (Chairman of Maxim's and grandson S T Wu) and Wilson Wu Wai Tsuen (Wilson Wu), also an Executive Director of Maxim's and son of James Wu. So it appears that unlike DF, the Wu family, via directorships of HC, rakes in a substantial annual fee on top of HC's 50% share of Maxim's profits.

After the directors' takeout, overall, HC reported a net profit for the year of HK$893.1m.

Maxim's estimated HK market share

According to the HKSAR Census and Statistics Department, total HK restaurant receipts in 2018 (including restaurants, fast food shops and bars) were HK$119.6bn. Maxim's does have some business in Macau, Malaysia, Thailand, Vietnam, Cambodia, Singapore (including the Starbucks franchise) and Mainland China. No geographic breakdown is available but based on the group web site we assume about 80% of turnover, or $16.2bn, is still in HK. That would give Maxim's a 13.5% market share of HK restaurant receipts. Put another way, about 1 in every 7 HK restaurant dollars go to Maxim's. That would mean HK's citizens spend about HK$44m per day in Maxim's, or about $6 per citizen per day.

By comparison, Cafe de Coral Holdings Ltd (0341) reported HK revenue of HK$7.36bn in the year to 31-Mar-2019, and Fairwood Holdings Ltd (0052) turned over HK$2.84bn at its HK restaurants. So Maxim's is bigger than both combined.

Stop the violence, and return to peaceful protest for democracy

We take this opportunity to urge an end to the violence against any business or person in HK and to return the streets and the protests to the peaceful millions who turned out on 16-Jun-2019. We have already explained how the HKSAR Government can respond to the underlying democratic deficit by proposing local electoral reform, democratising the Legislative Council's small-circle Functional Constituencies and the Chief Executive Election Committee through local legislation to abolish corporate voting and replace it with one-worker-one-vote.

Restuarant workers should of course have that vote, in the Catering sub-sector and Functional Constituency, replacing their corporate employers. We also call on restaurateurs, including Maxim's, to come out in favour of that electoral reform and give up their corporate votes, because it means an economic recovery rather than a hard crackdown that would surely decrease the public appetite for eating at their restaurants.

©, 2019

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