Towngas posts 58pc increase in net profit

Property gains unlikely to be repeated this year

Hong Kong and China Gas (Towngas) reported a 58 per cent jump in net income for last year, largely from one-time gains, a windfall the company says is unlikely to be repeated this year.

Towngas said profit before non-recurring gains grew a scant 3.2 per cent but still hit a record HK$3.2 billion.

Net income rose to a forecast-beating HK$9.26 billion, including HK$6.47 billion in one-time gains associated largely with property sales and revaluations of investment properties. Gains also included a HK$2.23 billion profit from its controlling stake in smaller rival Panva Gas Holdings, now known as Towngas China, which it acquired last year.

The net profit, which was ahead of a Thomson First Call poll consensus of HK$7.36 billion, was unlikely to recur this year as Towngas chairman Lee Shau-kee said the massive property windfall would dwindle.

Managing director Alfred Chan Wing-kin said about 96 per cent of the apartments at two main projects - Grand Waterfront in Ma Tau Kok and Grand Promenade in Sai Wan Ho - had been sold. The balance would generate about HK$300 million in profit assuming all sold this year.

Sales of Grand Waterfront flats, a redevelopment of a former gasworks site, accounted for the bulk of Towngas' HK$2.27 billion property profit with other income coming from luxury homes at Grand Promenade and King's Park Hill in Ho Man Tin.

'The mainland gas projects will provide the key fuel for growth,' Mr Chan said.

Income from Towngas' portfolio in China - 77 gas-to-water-supply projects in 16 provinces - grew 83 per cent to an after-tax profit of HK$664 million last year, with an internal rate of return of 15 per cent, he said.

The group's core naphtha-gas supply operations in Hong Kong generated a profit of HK$2.8 billion, a 'flat' performance resulting from 'zero growth' in gas consumption, Mr Chan said.

Although hotter weather reduced residential gas consumption by 1.6 per cent in Hong Kong last year, the group's revenue climbed 5.64 per cent to HK$14.22 billion.

The 146-year-old utility is seeking growth across the border as its home market matures and competition intensifies.

Seeking a larger share of the mainland utility market, Towngas aims to conclude talks on eight gas projects this year calling for an investment of HK$1.5 billion.

It was also earmarking HK$2 billion to develop projects using new energy sources, such as coal-based methanol, a fossil fuel alternative, Mr Chan said.

A final dividend of 23 HK cents per share was declared, bringing the full-year payout to 35 HK cents per share.

A bonus share issue was proposed of one new share valued at 25 HK cents each for every 10 existing shares.

Towngas shares slipped 25 HK cents or 1.13 per cent to HK$21.85 before the results announcement yesterday.

One-off result

One-time gains helped Towngas' net income last year surge to, in HK': $9.26b