New retail strategies spur 23pc jump in Hysan revenue
Revenue jumps 23pc after the largest landlord in Causeway Bay relies more on base rent for income and changes tenant mix in its portfolio
Hysan Development, the largest landlord in Causeway Bay, said revenues jumped nearly 25 per cent while adopting strategies to strengthen its retail portfolio in order to offset the impact of the slowdown in retail sales growth.
Hysan said turnover grew 23.2 per cent to HK$3.06 billion last year. Excluding the contribution from Hysan Place, turnover from the rest of its retail portfolio rose just 11.4 per cent.
Underlying profit climbed 26 per cent to HK$2.04 billion, but net profit dropped 38.1 per cent to HK$6.16 billion due to a sharp fall in property revaluation gains.
The strong growth in turnover and underlying profit was mainly due to income from the retail sector, which expanded 34.2 per cent to HK$1.68 billion, while income from the office sector rose 19.5 per cent to HK$1.09 billion. The growth in retail income was much lower than the 58.4 per cent expansion in 2012. Turnover rent edged up 1.9 per cent.
"We have changed our strategy [in recent years] as we noticed that the growth in retail sales would normalise," said Hysan's deputy chairman Lau Siu-chuen.
The company has been seeking to maintain a stable rental income stream even in the face of weakening retail sales by relying more on base rent than turnover rent.
"The growth in retail sales has normalised in recent years in the absence of a boom in the property and stock markets. And mainland tourists' consumption pattern has changed. They are now looking for more middle-end products. Thus, we began to change the tenant mix in our retail portfolio two years ago," Lau said.
"We won't focus on a single market. We are trying to attract different shoppers by offering a wide variety of products in different price ranges. For example, only 30 per cent of the retailers in our portfolio are fashion retailers, compared with 60 per cent previously. We have also introduced more flagship stores in our retail portfolio."
He is optimistic about the retail market since the middle class on the mainland is growing and private consumption will be supported by economic growth in Hong Kong.
The retail space achieved an average increase of about 50 per cent in rent for renewals last year.
"The improving global economy and resilient local private consumption should benefit our balanced retail and office portfolio. For 2014, we expect our overall performance to be steady," chairman Irene Lee Yun-lien said.
The company declared a final dividend of 95 HK cents a share, compared with 78 HK cents in 2012.
Shares in Hysan climbed 0.46 per cent to close at HK$32.95 yesterday.