GuocoLeisure’s Profit Falls 43%

GuocoLeisure logo Investment holding company GuocoLeisure (SGX: B16) reported its full year results yesterday evening for the financial year (FY) ended June 2013 and posted a 2.8% uptick in annual sales to US$380m compared to a year ago. Meanwhile, profits are down by 43.4% to US$44m.

GuocoLeisure has five business segments: Oil & Gas; Property Development; Hotels; Gaming; and Others.

The Oil & Gas segment derives royalty income from the Bass Strait Oil Trust in Australia. For the FY ended June 2013, GuocoLeisure had seen a year-on-year decrease in royalty income due to lower average crude oil prices. In addition, the segment had a non-recurring one-off boost in the previous FY from a royalty distribution that arose after a royalty entitlement dispute was settled.

GuocoLeisure’s development of land and properties on the Fijian and Hawaiian islands is classified under the Property Development segment and it saw a decrease in both revenue and earnings for the recently completed FY. Management cited lower sales from its development properties in Denarau, Fiji as a reason for the decline in top and bottom-line.

With the Hotels segment, it’s where the company’s Guoman and Thistle brand of hotel chains reside. The hotels are located mainly in England and the city of London, in particular. The segment did well for GuocoLeisure in terms of top-line growth as the hotels reported higher revenue per available room stemming from the likely phenomenon of an influx of tourists due to the 2012 London Summer Olympics.

GuocoLeisure’s casino betting operations in the United Kingdom fall under its Gaming segment and it did not do particularly well. There was a decrease in revenue and earnings “due to lower gaming drops and wins margin.”

Lastly, we come to the Others segment, which mainly concerns the investment operations as well as treasury operations of the company. The segment had reported a loss for the recently completed FY.

The combination of the revenue changes in all the different segments resulted in the afore-mentioned 2.8% growth in top-line to US$380m.

As for the decline in profit, it was mainly due to: higher personnel expenses because of a higher headcount and general labour cost inflation in the UK; and an increase in income taxes from US$1.3m in the FY ended June 2012 to US$15.5m for the FY ended June 2013.

The huge jump in taxes was the result of a tax credit of US$21.2m, coming from deferred tax liabilities, that was written back to the company’s earnings for the FY ended June 2012 (which lowered taxes for said FY) upon an internal restructuring of two UK hotels.

The company has declared a first and final dividend, subject to shareholders’ approval, of S$0.02 per share, unchanged from the previous financial year.

For some outlook, the company is seeing a challenging environment for its hotel business in the UK as hotels in London “are experiencing a drop in demand” in addition to the industry’s “need to absorb a significant increase in new supply” before the Olympics started.

GuocoLeisure’s appointment of a new CEO for its hospitality-related businesses and its rebranding plans for its hotels are expected to help the Hotels segment weather the current difficulties.

The company’s also focused on expanding its player base for its casino, the Clermont Club in Mayfair, London in addition to paying attention to its on-going property-development initiatives in Molokai, Hawaii.

Shares of the company closed at S$0.755 on Thursday evening, carrying a trailing Price-Earnings ratio of around 18 and a dividend yield of 2.6% based on the full-year pay-out of S$0.02 per share.

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