Caution tempers Swire results
In its first profit result since being spun-off by its parent Swire Pacific as a separate listed entity, Swire Properties has reported a big 170.4 per cent jump in underlying annual profit.
The developer said yesterday core earnings for the year to December 31 reached HK$12.93 billion, boosted by a one-off profit of HK$8.61 billion from the sale of its Festival Walk investment property. The group sold its entire interest in Festival Walk for HK$18.8 billion in August.
Turnover rose eight per cent to HK$9.58 billion, from HK$8.87 billion in the year-earlier period.
Swire Properties' investment property portfolio totals 14.2 million square feet in Hong Kong and includes the retail and office complex Pacific Place in Admiralty, and City Plaza and One Island East Island in Quarry Bay. On the mainland it has 4.7 million sq ft of investment properties, including Sanlitun Village in Beijing and Taikoo Hui in Guangzhou.
It also has 500,000 sq ft of investment properties in the US and UK.
Despite the healthy rise in profit, Swire Properties chairman Christopher Pratt sounded a cautious note, saying demand for office space was likely to be affected by continuing market uncertainty.
'The financial services industry is undergoing a period of consolidation. This has affected demand for space in Central,' he said.
'In these challenging conditions, some tenants in Central continue to be interested in taking space in Island East. Low vacancy rates and the fact that supply of new office space will be modest should mitigate the effect on rental income.'
Credit Suisse analyst Joyce Kwock said she expected Hong Kong office rents to fall by 10 to 15 per cent in the first half of this year, before starting to recover in the second half.
'(The) Pacific Place and Island East performance is more resilient than the Central office peers. Despite the distance from the central business district, Pacific Place's spot rent has surpassed Citibank Plaza since 2009,' she said in a report.
Swire Properties chief executive Martin Cubbon said capital spending over the next five years would total HK$17 billion as the company expanded its property investments in Hong Kong and on the mainland.
Separately, the developer's parent, Swire Pacific, reported that underlying profit rose 7.1 per cent to HK$17.29 billion for the year to December 31, powered by strong property income which offset a smaller profit contribution from Cathay Pacific Airways.
Underlying profit from the property division jumped 164 per cent to HK$12.67 billion last year, from HK$4.79 billion in 2010, Swire Pacific said.
Attributable profit from its 44.97 per cent-owned Cathay Pacific was HK$2.99 billion, down from HK$8.9 billion in 2010. On Wednesday, Cathay Pacific said its 2011 earnings fell 61 per cent to HK$5.5 billion.
Swire Properties closed down 3.1 per cent at HK$18.76 and Swire Pacific shares closed down 0.8 per cent at HK$89.35. The benchmark Hang Seng Index gained 0.2 per cent.
Swire-owned Cathay Pacific Airways earned this much in Hong Kong dollars in 2010, its best-ever annual profit