Annual Report 2019

MANAGEMENT DISCUSSION AND ANALYSIS FAR EAST CONSORTIUM INTERNATIONAL LIMITED 34 FINANCIAL REVIEW 1. Profit and loss analysis The Company’s consolidated revenue for FY2019 was approximately HK$6.8 billion, an increase of 17.3% as compared with FY2018, driven primarily by (i) higher revenue from residential sales; (ii) organic growth in hotel revenue; (iii) additional contribution from TWC; and (iv) continual expansion of car park operations. As the higher-than-usual gross margin from our Shanghai project was not repeated during FY2019, gross profit (before depreciation of hotel, car park and gaming assets) came in at HK$3.0 billion representing a gross margin of 43.9%, as compared to 51.0% for FY2018. A breakdown of the Group’s revenue and gross profit is shown below: Property development Hotel operations and management Car park operations and facilities management Gaming operations Others Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 FY2019 Revenue 3,811,217 1,817,622 720,458 259,296 (i) 233,726 6,842,319 Gross profit 1,356,154 781,582 115,712 154,902 201,249 2,609,599 Depreciation – 344,383 34,776 17,916 – 397,075 Adjusted gross profit 1,356,154 1,125,965 150,488 172,818 201,249 3,006,674 Adjusted gross profit margin 35.6% 61.9% 20.9% 66.6% 86.1% 43.9% FY2018 Revenue 3,430,795 1,537,802 666,380 – 196,150 5,831,127 Gross profit 1,705,216 645,152 122,129 – 161,738 2,634,235 Depreciation – 313,609 28,516 – – 342,125 Adjusted gross profit 1,705,216 958,761 150,645 – 161,738 2,976,360 Adjusted gross profit margin 49.7% 62.3% 22.6% – 82.5% 51.0% Note: (i) After deduction of gaming tax amounting to HK$88 million. Revenue from sales of properties amounted to approximately HK$3,811 million in FY2019, increased by 11.1% as compared with FY2018, as there were more project completion during the year. Gross profit of approximately HK$1,356 million for FY2019 was recorded, representing a 20.5% year-on-year drop as revenue recognized during FY2018 were primarily due to our Shanghai project which had a higher-than-usual gross profit margin compared to the Group’s projects elsewhere. Revenue from hotel operations and management amounted to approximately HK$1,818 million in FY2019, an improvement of 18.2% as compared to FY2018. Hotel market, in particular in Hong Kong, continued its strong growth, while the addition of the newly opened Dorsett City in London (fully operated in February 2018) and TWC Hotel Group also contributed to the Group’s hotel revenue during FY2019. Despite the additions of TWC Hotel Group which has lower-than-average gross profit margin, gross profit margin for the Group’s hotel operations (before depreciation and amortisation) was maintained at 61.9% in FY2019, compared to 62.3% in FY2018. Gross profit margin of hotels under Dorsett Group expanded to 63.4% which was driven by better overall hotel average room rate and higher overall occupancy rate. Route 59 Casino, Czech Republic