New World Development achieves just 28 per cent of its HK$10 billion sales target in first half of financial year
Chairman says it has no plans to speed up sales by dumping flats cheaply
New World Development (NWD) has achieved just 28 per cent of its HK$10 billion sales target for the financial year ending in June as prospective buyers stay on the sidelines amid abundant new supply and a bleak market outlook.
The developer unveiled the slower than expected property sales performance after it reported underlying profit for the second half of last year plunged 25 per cent year on year HK$3.28 billion. The decline was mainly due to the impact of its 70 per cent owned mainland property arm, New World China Land, recording an exchange loss of HK$1.24 billion arising from the devaluation of the yuan currency by 4.4 per cent since June.
Faced with abundant supply and falling home prices, chairman Henry Cheng Kar-shun said it had “no plan to speed up sales by offering our flats at dumping prices”.
He said the firm would come up with a policy aimed at striking a balance between selling prices and sales volume, adding that he expected home prices would stabilise after falling 10 per cent this year.
“It is unlikely to see flat values drop significantly as both construction costs and land value resists such a drop,” he said on Tuesday.
His son, executive vice-chairman Adrian Cheng Chi-kong, said NWD would release projects at a pace in line with market changes.
“Development gross margins has met our target,” he said, reaching 23 per cent in the first half of the financial year.
Adrian Cheng said he expected NWD would launch more than 2,900 units from now to December.
In the company’s interim profit statement, the market outlook section opened with a famous quote by 18th century German writer Johann Wolfgang von Goethe: “Life belongs to the living, and he who lives must be prepared for changes.”
He lived at the time of the French Revolution, which changed the fate of the whole of Europe.
Henry Cheng rejected suggestions the phrase hinted that the firm would undergo a major restructuring in the wake of the dramatic change in market sentiment.
“As a businessman, we have to react according to the market changes,” he said. “In order to survive, we have to change in accordance with market needs, no matter whether the sentiment is good or not.”
New World Development saw its first-half net profit tumble 43.5 per cent year on year to HK$3.3 billion due to a revaluation loss of HK$633.9 million charged for its available-for-sale financial assets and a share of a HK$1.23 billion loss from joint venture and associate firms. Its turnover rose 25 per cent to HK$33.77 billion.
The board recommended an interim dividend of 13 HK cents, up 8 per cent from a year ago.
New World China Land saw its net profit plunge 64.2 per cent to HK$542.21 million for the six months to December.
NWD shares rose 0.94 per cent to HK$6.40 and New World China Land shares edged up 0.134 per cent to close at HK$7.48 after the results were announced.