Hotel project costs hits interim bottom line
Casino and hotel developer Louis XIII Holdings (0577), which formerly traded as Paul Y Engineering, has seen its interim profits wiped out as a result of booking of expenditure for its Macau hotel project and rising costs.
In a stock exchange notice last Friday, the company said it made a loss attributable to owners of the company of HK$52 million for the six months to 30 September 2013, compared with a small profit of HK$21 million for the same period in 2012.
This was despite total turnover, including that of associates and subsidiaries, hitting HK$5.06 billion, up 34 percent on the figure of HK$3.44 billion in 2012.
Group turnover, excluding that of associates and joint ventures, edged up by only three percent to HK$3.56 billion.
Gross profit dropped by 25 percent to HK$84 billion which the company attributed to an increase in the portion of its business being conducted through unconsolidated associates and joint ventures.
In its results, the share of results of these associates and joint ventures jumped 280 percent to HK$42 million.
However even this sum could not save the bottom line as the company incurred administrative expenses of HK$160.4 million, up 69.3 percent on the HK$94.7 million recorded in 2012.
Among the items charged to administrative expenses was HK$89.1 million for “staff costs after capitalisation in hotel under development and contracts in progress”.
Last June, the company issued a profit warning saying a loss was expected for the current financial year as it had to book expenditure for the Macau hotel project.
Due to the accounting treatment of the results of associates and joint ventures as well as higher operating costs, gross margin dropped to 2.4 percent compared to 3.3 percent in 2012.
The main business line of construction, which the company refers to as “management contracting”, recorded an operating profit of HK$64 million, unchanged from that for 2012.
The company’s subsidiary Paul Engineering operates the construction business.
Its other main business line is its luxury hotel and casino project in Macau, currently under development, with a total development cost, including land premium, of HK$6 billion.
It is being built by the Macau subsidiary of the Paul Y.
The Macau project is mentioned as one of the new projects with a combined total value of HK$5.27 billion secured by Paul Y during the period under review.
Under the commitments heading of the results, the company said it has expenditure of HK$3.61 billion authorised but not contracted yet for the hotel project.
The company remained bullish on prospects for the construction industry though it noted rising cost pressures stemming from surging labour and other costs which would be offset by increased operational efficiency.