Sharply rising costs hit Laguna profits

PHUKET: Laguna Resorts & Hotels plc (LRH) saw its net profit drop 21% in the first quarter of 2000, compared with the same period of 1999. The drop, management explained, came mainly as the result of sharp increases in hotel operations and sales costs, and administration expenses. LRH made a profit of 143.6 million baht in the period, compared with 182.4 million baht last year. Total revenues over the three-month period rose from 700.8 million baht in 1999 to 781.9 million baht this year, an increase of 11.6%. According to the company’s letter of explanation of changes in profit submitted to the Stock Exchange of Thailand, the increase was due to higher revenue from hotel operations, resulting from a 21% increase in average room charges. Total outgoings, however, rose by 68.1 million baht (15.6%), from 436.6 million baht in 1999 to 504.7 million baht this year. Almost all of the increase came from hotel operating expenses, which rose by 64.2 million baht due to the higher costs of supplies and materials together with previously deferred items of expenditure, such as repairs and maintenance now being performed. Sales and administration costs rose from 15.9 million baht to 40.2 million baht due to a rise in provision for dubious debts on property sales. Total expenses would have been much greater had it not been for reduced losses on foreign exchange and lower interest payments. Seven million baht was saved thanks to lower US dollar loans outstanding and a more stable currency. A further 21 million baht was saved through lower prevailing interest rates and a lower debt principal; at the end of the first quarter of this year, LRH had 538.7 million baht in long-term debt outstanding, compared with 801.8 million baht a year ago. In all, LRH was still able to show a net profit before tax of 280.7 million baht in the first quarter, higher than the 267.8 million baht of the same period last year. Taxes, however, made a big dent in the final earnings – the company paid the taxman 70.5 million baht compared with 30.4 million baht last year. According to the letter to the SET, the 40.1 million baht rise in tax was due to higher taxable incomes in each of the operating units, added to tax losses carried forward from 1999. Lastly, there were payouts totaling 66.6 million baht to minority interests in subsidiaries majority-owned by LRH, indicating that the subsidiaries had a healthy first quarter.