WHARF Holdings last week attempted to assuage analysts' concerns that its core property business was being neglected while management focused on the wider task of reviving the fortunes of its diverse interests. At an analysts' meeting following the results, which saw full-year attributable profit drop 15.8 per cent to $1.88 billion, management stressed that cash flows were on the increase and that outlays this year would not be as high as some had feared. Some analysts have expressed concern that, despite rental properties and hotels still accounting for some 72 per cent of operating profits, the property business has played second fiddle while the group has poured resources and time into its other arms such as telecoms, cable television and ports. Wharf began its diversification in 1993, when it underwent a restructuring intended to bring it back to its roots as a wide-ranging trading house. New investors were tempted with the lure of earnings from moves into ports, telecoms and television. At the same time, the group also embarked on a property spending spree, acquiring several large development projects at top dollar, including paying $3.5 billion for the San Miguel Brewery site at Sham Tseng in 1994. These projects were all predicted to return fabulous wealth to shareholders within a five- to ten-year time frame. Now into the fifth year, Wharf revealed an $81 million exceptional loss to cover litigation, Modern Terminals posted a $73.1 million one-off loss for staff cuts, and a $100 million provision was made to mark down the value of an industrial-office development bought at land auction in 1994. Wharf told analysts, despite tenant agitation for rental reductions in some of its Tsim Sha Tsui properties in recent months, no rental reductions had been granted, at a cost of slightly increased vacancy. The company said a decrease in overall rental contributions this year was not expected. There is a consensus among analysts that Wharf will eventually bow to pressure to cut rentals or face much higher vacancy rates. Retail rentals in Tsim Sha Tsui have fallen by between 25 and 40 per cent since last summer, reflecting the Asia-wide retail and tourism slowdown. Office rentals across Hong Kong have fallen 30 to 40 per cent and are expected to continue sliding in an avalanche of new supply. Credit Suisse First Boston property analyst Martin Tacon says a pressing concern is how Wharf will find another $1 billion to complete the Gateway II project and up to $10 billion to pay land premium settlements on its Sham Tseng and its MTRC Kowloon Station housing projects. Gateway II, the most significant addition to Wharf's property portfolio, is not expected to begin making full contributions for at least 18 to 24 months. Despite weak rental growth and its lack of a significant war chest, the company remains confident it will post earnings growth this year, analysts who attended the meeting said. Galaxia should return about $1 billion to Wharf once sales are finished and it was willing to sell down or borrow against its $8 billion blue-chip equity portfolio to meet immediate cash needs. The company says its most recent discussions have indicated increasing willingness from the Government to further lower land premiums for the Sham Tseng and Kowloon Station projects. Previous reports suggested a discount of 25 per cent, against Wharf's demand of a 40 per cent cut.