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Amy Chew

A PROFIT gap in the Lai Sun group's property development business wiped out improved performances elsewhere to leave interim profits of the flagship Lai Sun Garment (International) down 2.2 per cent.

  The company yesterday announced profits for the six months ended January 31 for all four of its listed entities, as well as a five-for-one capital consolidation in Lai Sun Garment (International), which will bring its price into line with other Hang SengIndex stocks.

    Lai Sun Garment had an extraordinary gain of $87.8 million from the sale of warrants in Lai Sun Development, the group's property arm, and so increased profit attributable to shareholders by 29.8 per cent to $356.1 million. Dividend will be unchanged at 6.5 cents.

   Lai Sun Development's profit fell 19.3 per cent to $260 million on a turnover nearly halved to $789.3 million, although the dividend has been held at two cents.

  After deducting preference dividends, profit fell 24.5 per cent to $194.9 million.

  Crocodile Garments, the mid-priced fashion clothing business, saw profit rise 20.6 per cent to $44.6 million despite the impact of the sliding yuan on its China ventures.

   Dividend is unchanged at five cents.

   Glynhill International, the hotels business, saw losses mount still further to $17.3 million, sinking down a further 66.6 per cent, which is blamed on problems in North America.

   As in the previous year, no dividend will be paid.

   Mr Brian Oung Park-un, an analyst with Sun Hung Kai Research, said analysts had been expecting the profit shortfall at Lai Sun Development and the results were therefore in line with estimates.

   His full-year profit forecast for the holding company is $518 million, a drop of 11 per cent over the previous year.

   ''The main reason for the drop in net profit is the lesser contribution of Lai Sun Development,'' he said.

   Director Billy Hung Hing-chuen said the core garment business of Lai Sun Garment showed ''very good profit growth'', thanks to last year's cost-cutting and better margins on goods shipped to the United States, although volumes were still stable.

   He said for some categories of garments orders on hand were already enough to last until the end of the year.

  Like the territory's other garment makers, much production remains in Hongkong, and Mr Hung said the company should not be hit too hard by the threats to China's Most-Favoured Nation trading status in the US.

   ''Labour supply from local sources is still rather tight,'' he said, but he expected the problem to slowly ease with a relaxation of labour import controls.

    Lai Sun Development had a bumper year last year, thanks to big developments in Causeway Bay and Yau Yat Tsuen, and analysts expect next year to show an improvement when sales are booked from several big developments, including 37 Repulse Bay Road.

   Crocodile now had 14 franchises in China with more planned, Mr Hung said, adding that the slide in the yuan was not hitting margins but was cutting sales. Franchisees pay for clothes in Hongkong dollars.

  ''The impact may be felt in the second half of the year,'' said Mr Hung. ''During the first quarter sales declined but they have stabilised.''   Mr Oung said the effects of the sliding yuan on Crocodile should be offset by profits from new brands in Hongkong, including the Stefanel brand which it now sells.

  Glynhill's poor results were attributed by Mr Oung to problems in the US.

   ''Their performance is more or less the same as last year. The economy is slow in North America and there is an oversupply of hotels there.

  ''The demand cannot catch up with the supply and the situation is expected to continue for the next two years,'' he said.

  Mr Hung said despite rumours the deal for Lai Sun Development to head a consortium buying the Ritz-Carlton hotel in Central was still on track, with the deal being finalised soon.



Property hurts Lai Sun