Mid sized contractor Build King Holdings (0240) saw its annual profit plunge 19 percent despite a government driven construction boom that has brought full order books for many contractors,
In its annual results released last Friday, profit attributable to shareholders for the year to 31 December 2012 was HK$20.7 million, representing a drop of 19 percent compared with a year earlier.
This profit was made up of HK$5 million from construction and HK$15 million from marketable securities.
“The decline of profit from construction was attributable partly to our strategic decision to retreat from UAE market and relocate plants and staff back to Hong Kong where we believe the prospect of marine projects are much promising. The profit from construction was also eroded by few projects where the costs were over-spent as a result of clients’ changes and variations,” company chairman Derek Zen Wai-peu said in a stock exchange statement.
The company was confident it could claim back the cost overruns from its clients.
Turnover including those from jointly controlled entities leaped 24 percent to HK$2.14 billion compared with 2011 turnover.
No final dividend for 2012 was declared.
Currently the company has outstanding value of work worth HK$7 billion with projects such as the Central-Wanchai Bypass at the Hong Kong Conference and Exhibition Centre and various contracts on the Shatin-Central Link and the Express Rail Link.
In 2012 the company secured 10 projects with a total value of HK$3 billion while another project was secured after the 2012 financial year, the Central-Wanchai Bypass at Wanchai West worth HK$3.35 billion and awarded to the China State-Leader Civil joint venture.
Through its subsidiary Leader Civil, the company has a 49 percent stake in the joint venture meaning that its stake in the bypass project is worth about HK$1.7 billion.
Although more projects are in the pipeline, the company said it would continue to pick and choose potential projects carefully to ensure a profit was made at the end.
The company is also looking to diversify away from its previous concentration on civil engineering work to building work.
“The recent change of the government policy to reinvigorate public housing may also provide us with opportunities to further development. The Group is now seriously formulating strategies to develop this public housing sector,” Zen said.
Building projects in progress include Hang Seng Management College in Shatin, a high rise residential block in Tsing Yi and a youth hostel for the Hong Kong University of Science and Technology.