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Peggy Sito

Debt-laden developer Lai Sun Development (LSD) has unveiled a huge interim loss of $1.36 billion after shedding assets at below cost in an effort to raise cash.

 The loss, which stunned the market, was the consequence of a continued cash-generation programme aimed at reducing heavy debts now running at about $8 billion.

 In the period to January the company, chaired by controlling shareholder Lim Por-yen, sold a large volume of properties and securities investments at below cost.

 It was also hit by provisions for the fall in value of investments during the period.

 The company warned that further provisions or losses from properties could be seen in the second half. However, they were expected to be far smaller than in the interim period.

 'In sympathy with the prevailing economic backdrop, the company continued to adopt a prudent policy with cash flow generation being the priority,' Mr Lim said yesterday.

 'However, given the dearth of market liquidity, it has been difficult to generate cash through asset realisation.'  Mr Lim said the liquidity generation had translated into 'a slight erosion of the company's shareholders' value in the short term', but this 'should prove to be a beneficial move in long run'.

 He said the company would 'flexibly realise its landbank, development projects and non-core commercial properties as and when appropriate'.

 Other companies in the Lai Sun group, also controlled by the Lim family, also posted disappointing financial results yesterday.

 Hit by LSD's disappointing result, parent Lai Sun Garment (International) posted an interim loss of $616.80 million with a loss per share of $1.05.

 Lai Sun Garment's retail arm, Crocodile Garments, posted a net loss of $55.76 million for the six months, against a net loss of $9.95 million previously.

 LSD's mainland property and infrastructure arm, Lai Fung Holdings, posted a 92.6 per cent fall in net profit to $5.8 million.

 The three companies, together with LSD, did not announce dividends for the six months to January.

 LSD's hotel unit, Lai Sun Hotels International, reported a full-year loss of $49.8 million against a profit of $110.148 million in the preceding year to December.

 It was hit by provisions for the fall in value of a residential project in Vancouver. No final dividend was declared.

 During the six-month period to January, LSD suffered an operating loss of $555.94 million, mainly from the disposal of properties including a development site in Cheung Sha Wan and office units in Tsim Sha Tsui, as well as its Tycoon Place residential project in Tai Po.

 LSD executive director Keith Wu said the disposal of properties had led to a loss of more than $350 million.

 Other losses came from operating expenses and interest costs. The company was also hit by a 21 per cent drop in rental income.

 Mr Wu said LSD's exceptional loss during the period was $646.71 million, arising from the disposal, and provision for the fall in value, of securities and trust fund investments. The loss per share was 64.2 cents, against earnings per share of 16.8 cents.

 Mr Wu said the disposal of securities investments and properties had generated about $1.5 billion during the period, which excluded its recent $883 million rights issue.

 It also recently sold the hotel and retail portion of its Furama Hotel redevelopment in Central to Lai Sun Hotels for $1.9 billion.

 The series of sales led LSD's total net debts to about $8 billion, but Mr Wu said gearing remained high at about 50 per cent due to the reduction in shareholders' funds.

 He said the company was considering selling another industrial project in Cheung Sha Wan, that could make some operating losses in the second half.

 Looking ahead, Mr Wu said: 'The profit and loss account [of LSD] may not be promising for the full year but the liquidity generation performance is not bad.' 



Lai Sun plunges to loss of $1.3b