Property market weakness reflected in Hysan Development's 23pc profit plunge
Hysan Development has reported a worse than expected 23.58 per cent drop in earnings after taking a $242.6 million charge for the fall in value of overseas properties.
The company, one of Hong Kong's biggest property investors, was also hit by increased interest expenses and losses on sales of securities.
Hysan recorded net profit for last year of $900.38 million, well below The Estimate Directory's forecast of $12.26 billion.
Chairman Lee Hon-chiu said he expected conditions to remain difficult this year given the weak economy, with continued pressure on rents.
Hysan cut its total dividend by 62.05 per cent to 37 cents a share from 97.5 cents the previous year.
It said the reduced payout would allow the group to achieve greater progress in reducing debt, thus lowering interest expenses.
Analysts said the larger than expected provisions charge was prudent.
Of the $242.6 million total, they estimated $100 million was for its Peace Garden project in Shanghai and the remainder for property projects in Singapore.
The company also reported a $75.7 million loss from associate companies.
Hysan said an increase in rental income and gains from property sales had been offset by higher interest expenses and losses recorded on the disposal of securities investments.
It said its rental income had been boosted by leasing of The Lee Gardens in Causeway Bay and Entertainment Building in Central.
The group's turnover fell 31.9 per cent to $6.42 billion and operating profit excluding provisions was down 16.18 per cent to $1.41 billion.
Earnings per share were 88 cents, down 22.8 per cent from $1.14 a year ago.
A final dividend of 27 cents a share was declared, down from 53.5 cents previously. The dividend will be payable in cash with a scrip alternative.
The company's net asset value as of December was $18.19 a share, down 46.03 per cent from the previous year.
Mr Lee said demand in the commercial and residential leasing markets was not anticipated to turn around due to the weak economic environment.
'As landlords focus on retaining tenants, pressure on rental rates will persist,' he said.
He said total debt had been reduced significantly last year and a further reduction was expected this year due largely to sale proceeds.
The company's securities holdings had been reduced by more than half at the end of last year, he said.
Analysts said the company had cut its debt to $7.2 billion while its securities portfolio had been reduced to $1 billion in value.
A company spokesman said Hysan had no immediate plans to convert offices at the Entertainment Building into retail space.
The building had secured approval to convert the seventh to 14th office floors, comprising a total gross floor area of about 40,000 square feet, into retail space even before Hysan purchased it, she said.
The company was reported to be considering raising the retail element of the building.