Hutchison Whampoa's first-half earnings beat analyst forecasts
Conglomerate's retail business delivers strong earnings and cash flow in first half of 2014
Recurring earnings before property revaluation and exceptional items for the first half at Hutchison Whampoa grew 13 per cent year on year to HK$13.5 billion, beating analysts' expectations.
Net profit at the retail-to-telecommunications conglomerate grew 1.3 times over the period last year to HK$28.4 billion on the back of gains from the spin-off of Power Assets' Hong Kong electricity business.
Profits on disposal of investments increased four times over the same period last year to HK$14.9 million at the Li Ka-shing-owned company.
"Generally improving trends first noted in the second half of 2013 continued into 2014, leading to a constructive outlook for the group's businesses overall for the second half of 2014," said chairman Li, whose empire spans commercial properties in mainland China to telecommunications in Europe and energy in Canada.
Hutchison declared an interim dividend of 66 HK cents per share, an increase of 10 per cent from the previous year.
The property and hotels arms posted disappointing results, while other divisions performed more in line with consensus.
Property and hotel revenue fell 33 per cent to HK$7.5 billion, and earnings before interest, taxes, depreciation and amortisation (ebitda) fell 35 per cent to HK$3.9 billion, primarily due to lower sales and deferrals of various development projects on the mainland and Singapore to the second half of this year.
"Several markets in which the group operates have seen aggressive discounting from developers driven by tight liquidity constraints and high funding costs," said Li in the statement. "The group has elected not to be a price leader in these markets as it believes better prices for its premium developments can be achieved within a reasonable time frame."
In contrast, the retail business delivered strong earnings and cash flow in the first half. The ebitda of the health and beauty operations in Europe and the mainland grew about 20 per cent. But this was partly offset by the poor performance of the retail business in Hong Kong.
Analysts believe Hutchison is in no urgent need to spin off AS Watson and would not do so unless it gets a good offer. They also expect more merger and acquisition activities from Hutchison, such as a possible merger of wireless assets in Italy.
After selling equity interest in AS Watson to Singapore's Temasek, the company still had a consolidated net debt of HK$108 billion as of June 30 and the net debt to net total capital ratio was 17.1 per cent, slightly lower than that at the end of last year.
Li said he expected economic and political uncertainty to remain a challenge for the rest of the year and that the company would continue to pursue a strategy of "advancing with stability".