7th October 2020 – (Hong Kong) Employers who have been making contributions to their employees’ MPF accounts or an ORSO Scheme are eligible to participate subsidies under the Employment Support Scheme (ESS). The ESS will also provide a one-off lump-sum subsidy of HK$7,500 to self-employed individuals who have made MPF contributions in the past 15 months.  The amount of the subsidy will be calculated on the basis of 50% of the actual wages paid to employees for any chosen month, irrespective of the way the employee is paid. The subsidy is capped at HK$9,000 per month for each eligible employee for a period of six months (i.e. June to November 2020). 

Taking into account the third batch of employers, the ESS has approved wage subsidies to a total of about 125,000 employers under the second tranche, with subsidies totalling HK$31.8 billion and a total committed headcount of paid employees of about 1.33 million.

However, the ESS does not disqualify companies which are not really impacted by the epidemic. Companies such as Dairy Farm International Holdings, YATA Supermarket and AEON Stores (Hong Kong) Co. Limited which operate grocery stores and supermarkets mobile operator like China Mobile Limited and hospitals should not be allowed to apply under ESS. During the last few months, most citizens have shopped for more groceries due to ban on dine-in services at catering business premises. Some even hoarded household items.

In fact, the government should only allow companies which have recorded a further drop in year-on-year profits or losses of at least two consecutive quarters of over 50% as a minimum threshold to apply under ESS. This is to allocate more funds for those industries which are severely impacted by the epidemic such as retail, cinema operators, travel agencies and the aviation industry. The subsidies provided to these companies could also be used to provide unemployment benefits directly to those who have lost their jobs due to the epidemic. By helping companies which are still in the black, the government is indirectly contributing to their profits by lowering their salary overheads.

In the first round of the Employment Support Scheme (ESS), at least 9 supermarkets applied. Among them, Dairy Farm International Holdings Ltd which has supermarkets such as Wellcome, Market Place by Jasons and Threesixty, etc., received the most subsidies, reaching HK$399 million to pay at least salaried employees as 21,000 people while ParknShop received HK$160 million to pay 8,215 salaried employees.

In addition, AEON Hong Kong, the parent company of AEON supermarket, which mainly sells Japanese goods, was approved for approximately HK$60 million while City Super Limited, the parent company of city’super received HK$43 million. The group also owns LOG-ON and cookedDeli. The other supermarkets that have applied for the first round of ESS also include the parent company of Kai Bo Food Supermarket, China Resources Vanguard(H.K.)Co. Ltd, YATA Supermarket and parent company of M&S, ALF RETAIL Hong Kong LTD. They were each approved subsidies ranging from HK$14 million to HK$29 million.

The government today (7th) announced the list of the first batch of subsidised employers under the second round of the ESS. Gleneagles Hospital received a subsidy of HK$31.09 million to pay 1,151 salaried employees, followed by China Mobile International Ltd. which received HK$18.38 million subsidies to pay 686 employees. The epidemic should have minimal impact on telecommunication companies.

Wellcome  is a supermarket chain owned by British conglomerate Jardine Matheson Holdings via its Dairy Farm International Holdings subsidiary. The Wellcome supermarket chain is one of the two largest supermarket chains in Hong Kong, the other being PARKnSHOP. Wellcome also operates supermarkets in Taiwan and the Philippines under the Wellcome name. The parent company, Dairy Farm, also has other supermarket interests in the Asia Pacific under different brand names.

According to the Half-Yearly Results for the Six Months Ended 30th June 2020 for Dairy Farm International Holdings:

  • Sales from subsidiaries down 9%
  • Underlying profit 40% lower due to reduced contributions from Health and Beauty, Maxim’s and Convenience Stores
  • Strong performances in Grocery Retail and Home Furnishings
  • Ongoing execution of multi-year transformation plan

“Overall profits were significantly lower in the first half due to reduced contributions from Health and Beauty, Maxim’s and Convenience Stores as a result of COVID-19 and its impact on customer behaviours. There were, however, strong performances from the Grocery Retail and Home Furnishings businesses. Trading conditions in the second half are expected to continue to be challenging, but we are confident in the strength of Dairy Farm’s businesses and remain committed to its multi-year transformation plan.”

However, the government has added conditions in the second phase of the ESS , requiring the two major supermarkets, ParknShop and Wellcome which have applied for subsidies to provide customers with various benefits between September and November this year. In response, PARKnSHOP said that will distribute HK$200 food vouchers each in cash to low-income families, the elderly and the disabled. The food vouchers will benefit more than 200,000 people, and the total amount is expected to exceed HK$40 million. The food vouchers do not make sense as PARKnSHOP is not donating HK$40 million directly to them as the beneficiaries have to redeem via food vouchers at their outlets for products sold at MARKET PRICE which includes their margins. The supermarket operators can use the subsidies paid under ESS to help with their cash flow while the 200,000 people will definitely not claim their food vouchers all at the same.

The profits were lower but Dairy Farm International Holdings did not record a year-on-year loss. Hence, it does not make sense for companies which are making less profits or AEON Stores (Hong Kong) Co.Limited which made more profits in the six months ended 30th June 2020 to receive subsidies under ESS.

The revenue for AEON Stores (Hong Kong) Co.Limited increased during the six months ended 30th June 2020 as compared to the same period last year and the losses were lower in 2020. Source: AEON.
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