Net profit at building contractor Yau Lee Holdings (0406) jumped by over half despite turnover plunging as a result of being careful in tendering for new projects.
For the year ending 31 March 2013, the company recorded a profit attributable to equity holders of HK$65.3 million, representing a jump of 53.1 percent year-on-year.
Turnover dropped by 21 percent to HK$3.69 billion but gross profit surged by 40.4 percent to HK$349.9 million.
By segment, revenue from building construction and activities such as fitting-out was HK$1.94 billion compared with HK$2.6 billion in 2011 and representing a drop of 25.7 percent.
The company attributed this drop to the time lag in getting results from its tender strategy of winning projects where it could demonstrate its innovative edge and where price inflation adjustment was available in the contract.
“Yet, our strong belief in innovation is proven correct as our innovative and sustainable construction capabilities won for us three major new built projects with reasonable margins in the second half of the year,” the company chairman Wong Ip-kuen said in a stock exchange statement Wednesday.
Wong advised that rising costs were a problem with operating expenses up 38 percent year-on-year to HK$363 million.
“Hefty increases in some expenses were noted,” Wong said referring to items such as distribution costs for supply of building materials, costs incurred in tendering for increasingly large and complex projects and depreciation of the company’s new hotel operation, the Holiday Inn Express Hong Kong Soho.
The company will be looking to expand into the Singapore market after obtaining an A1 contractor licence this year that allows bidding for government projects of unlimited amount.
In Macau, it will focus on construction and fitting out of luxury resort and hotel developments.
Currently it is in a joint venture with Paul Y Construction on the Studio City project in Cotai in Macau for listed casino operator Melco Crown Entertainment (6883).
Apart from construction, Yau Lee is also a major precast concrete unit manufacturer and supplies most of the company’s projects.
The company said its two factories operated at full capacity during the year with segment sales up 50 percent year-on-year to HK$478 million.
The company declared a final dividend of 1.38 HK cents per share to make a total dividend for the year of 2.38 HK cents, representing an increase of 4.38 percent year-on-year.