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SCMP Reporter

FIRST Pacific Davies has been undergoing a major transition, both in terms of its corporate makeup and strategy: it is now a lot more than just a property agency.

  Some complex juggling of group assets has taken place with sister company First Pacific Land to make expansion possible.

  The two have merged and are steering away from property trading, expanding into a more global real estate and financial services operator.

  The plan is to iron out the bumps in profits for their publicly listed parent, First Pacific Co, by becoming more dependent on recurrent income.

  The recent acquisition of security company Guardforce and a foray into facilities management illustrate the change of direction.

   Serco Guardian, a joint venture between First Pacific Davies subsidiary Guardian Property Management and UK-based Serco, took over the day-to-day management of the Lion Rock and Airport tunnels last month.

  Management expects more government services will be put out to private sector management now that Governor Chris Patten is at the helm.

  The group has expressed a keen interest in bidding for contracts to manage car park, tunnel and parking meter operations.

  It has even looked at the possibility of government hospital management.

  The group will continue its property trading side, but it will be more of a boutique nature.

  Mr David Davies, First Pacific Davies chairman, said the change in strategy occurred because, although the company had remained profitable since its inception in 1981, there had been some ''lumpy'' years.

  There were ''some bonanza years and some fallow years'', he said, which he blamed on the erratic nature of the property market.

  First Pacific Land was created as a property fund five years ago by First Pacific Co, in conjunction with a consortium of London institutional investors, to build and trade in properties.

  The pre-set five-year lifespan of the fund comes to an end this year and the overseas investors, which are minority holders, are ready to call it a day after having enjoyed a good return on their money.

  Rather than close down First Pacific Land completely, it was decided that some assets would be liquidated to buy out the London institutions for US$100 million and some cash would be redeployed into more service-orientated assets.

  At the same time, First Pacific Land acquired shares in real estate consultancy First Pacific Davies, technically becoming its parent.

  First Pacific Land was then renamed First Pacific Davies in a final twist that has confused many, because First Pacific Land has re-emerged as a subsidiary.

  The combined company has a much stronger balance sheet, comprising less in terms of fixed assets and more in terms of goodwill.

  It employs 5,500 people and should produce a turnover of $1 billion a year.

  The diversion of money out of First Pacific Land allowed First Pacific Davies to acquire an 80 per cent holding in Guardforce from Allied Industries International last November for $396 million.

  First Pacific Davies is now poised to acquire half of the remaining 20 per cent that remained in management hands.

  Although the company does not publicly announce its results, Mr Davies revealed that profits grew by around 15 per cent last year.

  Profits of subsidiaries Guardforce and Guardian Property Management grew by around 15 and 10 per cent, respectively.

  The group tracked Guardforce for nearly nine months before making its move and then had to fight off competition from two other local and two overseas companies.

  It was a key move in First Pacific Davies' drive to expand the services side of the group.

  Guardforce is much more than just a high-security delivery operation.

  It provides a variety of related services, ranging from car park management to paper-shredding.

  First Pacific Davies managing director Godfrey Blott, a member of the Private Sector Committee on the Environment, has been anxious to expand the ''green'' side of Guardforce, getting it involved in environmental projects such as landfills.

  He also hopes to expand Guardforce into China, initially into Zhuhai through its existing operation in Macau.

  Mr Blott said he expected Guardforce to make a breakthrough on the fire services installation side, where negotiations with the district's public security bureau were under way.

  On the agency and property management side, the group's expansion plans will be focused on China.

   Taiwan is another area where the group foresees considerable growth, particularly on the Guardforce and property management sides.

  While FPD Property Management is targeted at the high end of the market, sister company Guardian is more mass-market driven.

  The financial community has for some while been pushing First Pacific Davies to list on the stock exchange, but management is having nothing of it - for the time being anyway.

  The group may have just gone through a period of high expenditure, but management insists its gearing ratio is still quite modest, making a share issue unnecessary.

  The plan at the moment is to consolidate and expand within the group's existing framework. But Mr Davies would not rule out the prospect of a listing taking place one day.



New horizons for FP Davies after revamp