Hongkong Land posts 22.7pc fall in earnings
Central's biggest landlord cites strong rental market for underlying profit
Hongkong Land Holdings, the biggest landlord in Central, posted a 22.7 per cent fall in net profit to US$923.4 million for the six months to June 30 caused by a larger revaluation surplus booked a year earlier.
However, the property unit of Jardine Matheson Holdings said underlying profit - earnings booked before property revaluations which reflect the performance of its operations - increased 11.1 per cent to US$117.1 million from US$105.4 million in the first half of last year.
Chief executive Nicholas Sallnow-Smith said the increase reflected the continuing strength of Hong Kong's central office rental market.
'Rents were still rising but at a slower pace than before - it is not surprising,' Mr Sallnow-Smith said, adding that the company was in a good position to see further improvement in rental revision due to limited new supply in Central.
As of June, the vacancy rate in the group's Hong Kong office portfolio was 4.6 per cent while vacancies in its retail portfolio were just 0.2 per cent.
Rental income will improve when its new office building - York House in Central - is completed in the fourth quarter of this year.
During the period, gross profit rose 15.98 per cent to US$159.6 million but gains from property revaluations were US$914.4 million, 30 per cent less than the US$1.3 billion in the first half of last year.
The overall result also reflected a rise in net financing charges which rose from US$11.5 million in the first half of last year to US$37.4 million as interest rates increased over the period.
Mr Sallnow-Smith said development incomes from its projects in Hong Kong, Singapore and Macau would also help the company's business over the next few years.
With the third phase of the company's residential development The Central Park in Beijing nearing completion, some 90 per cent of the units have been pre-sold and profits will be booked when the units are handed over to buyers in the middle of next year, according to Mr Sallnow-Smith.
He also said that the mainland's tougher restrictions on the real estate sector and the new rules on property buying by foreigners would not affect the company's investment strategy in China.
Mr Sallnow-Smith said regulatory changes were to be expected in a developing economy.
In view of the positive outlook, the company announced an interim dividend of three US cents per share, up 50 per cent from the same period last year.
Underlying earnings per share were 5.26 US cents, up 11 per cent from 4.74 US cents over the same period in 2005.
Earnings per share were 41.49 US cents, down 22.7 per cent from the same period in 2005.